Tax In Denmark

A Contractor's Guide to Taxes : 

One of the most consistently challenging aspects of contracting in Denmark is complying with the country’s tax system. As well as paying tax in Denmark, you might also still be eligible to pay some tax in your home country, and understanding the legislation behind this can be a challenge. 

How do I calculate my taxable income: 

If you’re working in Denmark under a permanent contract, many employers will handle your tax under the PAYE (pay-as-you-earn) system. This means that they calculate and process your taxes in Denmark for you and then send you a net wage. Your income tax, social security, labour market contribution and other deductions will all be covered by this payment. This is the easiest way to handle your income tax in Denmark. However, individuals who become a taxable during the calendar year must first fill out a preliminary tax assessment in order to attain a tax card which specifies the tax rate that your employer will withhold. Without obtaining this card, you will be subject to a flat tax rate of 55% on your income. 

Also, many contractors may not be offered this PAYE service because of their short stay with each employer. Anybody who can’t pay their tax in Denmark through PAYE is left with the prospect of doing everything themselves.

Do you know much about Denmark Tax Law? Does Denmark have a tax treaty with your home country? You will need to find out or find someone who can help! Income tax in Denmark varies between different municipalities and can range from 8 to 56 percent (inclusive of the 8% labour market tax rate), and you need to be sure you are placed in the correct tax brackets.

Tax Calculator: 

If you are a contractor and want a calculation on your tax and net retention in Denmark, we can supply it to you free of charge. 

Using an Umbrella Company for Income Tax : 

Contractors in Denmark are faced with masses of paperwork and numerous wasted hours filing a tax return unless they find an alternative option. A Danish umbrella company can act as your employer during your stay in the country whilst still allowing you the freedom of a contractor. The only difference is that you submit your timesheets to them; they’ll calculate and pay your taxes as you earn, and then you receive a net wage (as well as documentation for your records).

The companies are experts in Danish taxation, and they’ll ensure that you keep the largest proportion of your earnings whilst complying with local laws. They can deal with any issues with the Danish tax office or tax department directly including processing your tax refund if you are eligible.

How We Can Help You with Tax: 

We work with numerous umbrella companies in Denmark, many of whom are experts in tax and immigration laws. If you have any questions about tax in Denmark, we’ll get the answers from them directly so you can rest assured you’ll be getting accurate information. We have comprehensive knowledge of the different services they provide, and can help you find the right company to handle your income tax. We help oil and gas workers, software developers, IT project managers, testers, business analysts and telecommunications contractors get tax efficient payments and sponsorship for their Danish work permit.

Our advice is 100 percent free, and comes with no obligations. You will be paying taxes in Denmark but without the overhead of directly dealing with the Danish tax authorities. Get in touch with us today for some reliable advice on tax in Denmark!

 

When Do You Need to Lodge Your Tax Return?: 
The tax year ends on December 31. A tax return must be filed after receiving a tax assessment notice from the SKAT in early March.
Tax Filing Deadline : 
May 1
Can you file it online? : 
Yes, by logging into e-Tax (TastSelv) on the SKAT website using a NemID. https://www.tastselv.skat.dk/
Currency: 
Danish Krone (DKK)
Tax-free Threshold in: 
No tax-free threshold due to the 8% mandatory labour market tax rate.
Grossed Income: 
Up to 48,913
Tax Rate: 
8%
Grossed Income: 
Between 48,913 and 521,304
Tax Rate: 
41%
Grossed Income: 
Above 521,304
Tax Rate: 
55%
How long does it take to set up: 
4 days
How much does it cost: 
670 DKK
Is it easy? : 
Starting a Business Rank: 34. High ranking means that starting a business in Denmark is easy.
How to File Taxes in: 

Note: All individuals working in Denmark must first apply for a tax card at the Danish Customs and Tax Administration (SKAT) by filing a preliminary tax assessment for the remaining part of the year.

Foreign workers filing taxes in Denmark:

Step 1: When filing the preliminary income assessment, have available the following information:

  • Anticipated salary for the following financial year.
  • Any pension and early retirement benefits.
  • Interest income and expenses
  • Documentation of any buying or selling of property
  • Any other deductions.

Step 2: Correct the preliminary income assessment if there are any changes in income or deductions and allowances during the year.

Step 3: In mid-March, a tax assessment notice will be made available in E-Tax. See step 5 if this is not available.

Step 4: Change the tax assessment notice if any information is incorrect or any deductions have not been included.

Step 5: If a tax-assessment notice is not available, you will need to file a tax return online by filling out information about your income and tax-free deductions and allowances.

Step 6: Once all information is correct, your tax assessment notice will show whether you have overpaid taxes or paid too little taxes and their amounts.

Step 7:Approximately 1 month following the issue of the tax assessment notice, any tax refunds will be paid along with a non-taxable interest of 0.5%. 

Notes: 

An 8% mandatory labour market tax is imposed on all salary income. Income taxes are calculated on the income after labour market tax. The table above includes the labour market tax rate.

  • Income tax rates vary between different municipalities. The above table reflects the average municipality tax rates.
  • An additional church tax also applies which averages 0.9% across the various municipalities.

A special tax regime applies to expatriates employed by a Danish resident employer. Salary is taxed at a flat rate of 31.92%, including the 8% labour market tax for any period up to 5 years.

Does the 183 day rule apply in: 

Yes. An individual who stays in Denmark for a continuous period of 6 months at any time will be considered a tax resident. 

When do you become a tax resident in: 
  • Individual has stayed in Denmark for more than 6 consecutive months. When determining this 6 month period, short stays outside Denmark due to holidays are included.
  • Individual acquires or rents a home in Denmark and stays in Denmark for other purposes than short stays for a vacation.
Am I taxed on my global income in: 

Yes, if you are resident. Non-residents are taxed on Danish-source income. 

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