Taxes in Denmark

If you already live in Denmark, than you will know that the taxes in Denmark are one of the highest in the world and if you do not know it, be prepared to hand over a large portion of your salary to the government. It is a fact of life, which you may not like, but there is very little you can do to change it. Either learn to live with or find another country to work in, because no matter how much you complain you will still pay high taxes.

Taxes pay for the Danish welfare system including child care, education, medical services, elderly care and much more, which in turn will benefit you at some time in your life.  As a citizen and taxpayer the government provides things they deem necessary for all people to live a good and safe life.

Taxes in Denmark are handled by your local tax office called the skattecentre. Every person earning money in Denmark must have a skattekort or tax card issued at the skattecentre by SKAT, the Danish Tax Authority.

When you apply for a tax card, it is necessary to give the authorities as much information on your earnings so that they take out the right amount of tax. Your skattekort will reflect your tax rate.  Each year the tax office will send you an årsopgørelse, which shows you what you earned and owe in taxes. You can dajust this during the year, if you have changes in your finances on your forskudsopgørelsen.

Each month or biweekly, depending on how often you get paid, the deductions are taken out from your paycheck.

Your first paycheck will be a shock for most people, since they expect to have a lot more in their paypacket than their is in reality.

You must get a skattekort in order for your employer to give you a paycheck.   This is now done online by your employer in most cases. If it is your first time getting a card, it should be done in person at your local tax office. Just go to your local skattecentre and give them your information including your approximate salary. The card will be issued immediately, which you than hand over to your employer. Simple as that.

Later on if your situation changes you can have your employer download a new card over the internet. Everything is going electronic in Denmark, so the next time you need to update your card you can just go online and get one issued.

Taxes in Denmark and Tax Rates

Now there are some benefits that come with paying taxes in Denmark. The high tax rate gives you access to many social services that include the public health care system, education, child care, security, support for those in need and many other social services.

Figuring out the taxes in Denmark is very complicated with lots of exceptions, deductions and tax breaks. Since I am not a tax expert nor an accountant, I will not be giving you advice on how to calculate your taxes. I will give you a run down of what taxes you can expect to pay and where to find more help and information.

What Taxes do I have to pay:

Remember, that no matter where you earned your income, you will be taxed in Denmark if that is your residence. Denmark has a double taxation law, so consider that too. You can learn more about double taxation.

Below are the standard taxes in Denmark that most people will be paying.

You may be excluded from some and may have others which are not listed here, depending on your situation.

1. AM bidragspligtig which is 8% of your income.

2. Sundhedsbidrag which is 8% of your income.

3. Kommuneskat which is usually between 24% to 26%, which does not include your church taxes. You can check out your kommuneskat rate at Kommune Tax Rate.

4. Church tax is about 1% of your income. Now you can opt out of paying for the Folkekirken Skat. Most Danes pay for it, since the money goes to help preserve many of the historic churches around the country.

Tax Rates: The tax rate is based on your salary and from 46,200, it is taxed at 12.6% and when it goes above 513,400 , you will be taxed at 15%. So you see how your tax can easily take more than ½ your salary or more. 

Deductions:

There are few standard deductions that most people can take.

1. The first one that applies to most people is the transportation allowance or befordringsfradrag, which entitles anyone traveling more than 24 kilometers round trip to work to deduct part of the travel costs. This is regardless of the mode of travel: car, bus, bicycle or walking. You get about 1,98 per kilometer over 24 km and  ,99 kroner for those km over 120. The nice thing is that even if you travel in a car pool or for free, you can still get the deduction per person.

2. Personal allowance or personfradrag. Every taxpayer get a personal allowance of 46,200 kroner per year, which is tax free.

3. Beskæftigelsefradrag, which is daily allowance which is non taxed. So the first few hundred kroner earned each day is usually not taxed. Again depends on your tax bracket and salary on how much is non-taxed. You can see that when you get your tax card. It will say the "fradrag" amount on the card.

4. If you are paying into an A Kasse (umeployment insurance fund), you can deduct those fees and also any union fees you may pay.

5. Things like interest on mortgages and other loans can also be deducted, but again here it is best to get professional advice. Many of these deductions are automatically applied when you get your tax return in March, since the banks and mortgage companies send all that information to the tax office. Since you have a CPR number, your finances and other information is collected by the tax office. Being a tax cheat is hard and not worth the trouble. You will be caught.

Paying taxes in Denmark:

Everything in the Danish system has pretty much gone digital or online.

1. During the month of November, the tax office (Skat) will do a tax assessment of your income and forthcoming income. You should check this on their homepage using your digital signature to access your files. If everything looks okay, do nothing. If you have gotten a raise or lost a job or expect that something major will happen, you need to contact SKAT and update the file or do it online.

2. In February, SKAT will have done your return or "selvangivelsen" and it can be viewed online. This is the time to check and see if all the information is correct, put in any missing information like your travel allowance. If you are unsure about the deductions, either contact SKAT by phone or in person or contact a "revisor", which is an accountant who can assist.

3. At the end of April, you must have made all the corrections to your taxes, because it is at that time that SKAT will either issue a refund or a bill to pay any outstanding taxes. If you do find any mistakes after the årsopgørelsen is given, you need to contact SKAT asap!  You get a discount for payng overdue taxes quickly.

Remember not to wait until the last minute to contact www.SKAT.dk, since their offices get quite busy during March and April and waiting times can be long. Most of tax enquiries on done online or by phone. You need to call for an appointment if you need one on one in person consultations.

You can learn more about taxes in Denmark, the tax system and how it is calculated by going to the main SKAT website. They have english translations of most documents or you can use the google translate function to translate into English or your chosen language.  A good guide to understanding more is found at Taxes in Denmark.

FYI: In Danish the word "skat" has two meaning, which are quite opposite. The first meaning is "tax", while the other meaning is more endearing, because it mean "dear" or "loved one". Do not know anyone who considers the tax office as a loved one!

Check out www.SKAT.dk for a list of translated documents

You can also find more information about taxes in Denmark here.   I do not know if this is an official government site, so may be best to double check with the SKAT office before making any changes. Continue with your life in Denmark and hope this helps you get started on the right foot as an expat.

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