Taxes in Denmark

Taxation in Denmark - introduction

Denmark has arguably been one of the most popular countries in recent years, both for entrepreneurs who have decided to open and run their own business outside their home country and for people who have emigrated in search of better paid jobs or new investments. The main reason for choosing to live in the Kingdom of Denmark is undoubtedly the fact that the country offers its citizens an extremely caring social policy, high salaries, especially for professionals and specialists in various fields, and a progressive tax system, whereby the tax rate increases as the taxpayer's income rises. In addition, Denmark has a liberal economic policy and equal law for OECD and EU members, and all official matters can be dealt with via www.skat.dk. However, the distribution of taxes in Denmark (the relative weight of different taxes) deviates from the OECD average.

In 2016, the Danish tax system stood out with significantly higher income generated from individual income taxes, while, in contrast, no revenue originated from social security contributions. Denmark exhibited a lower share of income derived from corporate income and gains taxes, as well as property taxes, compared to the overall OECD average. However, the proportion stemming from payroll taxes, VAT, and other taxes on goods and services aligned with the OECD average.

Countries generate tax revenue through a combination of individual's income taxes, corporate income taxes, social insurance taxes, taxes on goods and services, and property taxes. The composition of these tax policies can impact the overall distortionary or neutral nature of a tax system. Generally, taxes on income, whether individual or corporate, have the potential to create more economic distortions than taxes on consumption and property. This is due to the fact that danish income taxes can affect incentives to work, invest, and save, influencing economic behavior in ways that may hinder overall efficiency and productivity. In contrast, consumption and property taxes are often considered to be less distortionary and can contribute to a more stable and predictable revenue stream. The design and balance of these tax components play a crucial role in shaping the economic impact of a country's taxation system.

Denmark is consistently ranked among the top two countries in terms of happiness, reflecting a widespread satisfaction with the state's welfare system and its associated benefits. According to the World Happiness Report, there is a correlation between happiness and social equality. The official Denmark website notes that "most Danes will tell you that they are happy to pay taxes because they can see what they get in return," which includes free tuition, healthcare, and social security.

What is worth knowing about the Danish tax system?

Persons who choose to live and work in Denmark have an unlimited tax liability, and thus should submit a tax return to the Danish tax authority every year by 1 May (or 1 July), preferably via the online government portal www.skat.dk, using the pre-ordered 8-digit code TastSelv. In contrast, limited tax liability - begrænset skattepligt - applies to persons working in Denmark but living outside Denmark or employed by a Danish company under a fixed-term employment contract.

Taxes in Denmark apply to both owners of companies (Iværksætterselskab - IVS; Kommanditselskab - K/S; Aktieselskab - A/S; Interesselskab - I/S; Anpartsselskab - ApS, also known as Danish LLC), sole traders (Enkeltmandsvirksmhed), a branch (Filial af udenlandsk selskab) or representative office (Salgskontor) of a foreign company or a cooperative association (Andelsforening/Brugsforening), as well as persons employed under an employment contract, a contract of mandate or even unemployed persons receiving social assistance and benefits from the arbejdsløshedskasse - a-kasse.

In Denmark, taxes are divided into direct and indirect taxes. Indirect taxes are punktafgift (excise duty), environmental taxes, moms (VAT) and customs duties. In Denmark, there are direct taxes, such as ejendomsværdiskat (land tax), employee contributions, kirkeskat (church tax), deductible and non-deductible corporate and personal income tax, ATM (pension contributions), foreign labour hire tax, sundhedsbidrag (health insurance contributions), property value tax, kommuneskat (municipal tax) and ejendomsskat (Municipal Property Tax).

Since the introduction of income tax in Denmark through a significant tax reform in 1903, it has remained a cornerstone of the Danish tax system. Currently, a substantial portion—approximately two-thirds—of the total tax revenues in Denmark is generated from various personal and corporate income taxes. The remaining one-third of tax revenue comes from indirect taxes. Notably, the state personal income tax follows a progressive tax structure, while the municipal income tax is a proportional tax applicable above a specified income threshold. The tax-free rate is set each year, which in 2019 was 10.10 per cent on gross salary (the most DKK 37 200 per year). Income tax percentage rates are also set anew each year, and their value in 2019 was:

1. 8% - income below DKK 50 217.
2. 39.2% - income between DKK 50 217 and DKK 558 043.
3. 56.5% - income above DKK 558 043.

In addition to income tax, a number of other taxes must be paid, such as CIT - a 22 per cent corporate tax; excise duty - an indirect tax levied on selected consumer goods; VAT - a 25 per cent tax on goods and services; other taxes such as: mobile municipality tax paid to the regional authorities, which averages 24.92%; 27% tax on income from shares - from 0 to DKK 54 000; 42% tax on income from shares - above DKK 54 000; voluntary church tax, which averages 0.92%; cadastral tax (1% per year for properties worth less than DKK 3.04 million, and 3% per year for properties worth more than DKK 3.04 million); as well as an 8 per cent labour market contribution (AM-bidrag).

What else is worth knowing about the Danish tax system? Below you will find some relevant facts:

1. Ejendomsskat (Municipal Property Tax) is a land value tax paid twice a year on the base value of the land, taking into account the entire value of the property, after deducting the cost of improvements (or the value of the property for the previous tax year, adjusted for a percentage of increase or decrease).
2. In Denmark, in order to submit the annual tax return via the website www.skat.dk, the 8-digit code TastSelv must be produced in advance, which will be found on the tax cards: Selvangivelse and Forskudsopgorelse. If you are employed in Denmark, it is necessary to apply for a tax card and obtain a personal tax number.
3. Selvangivelse is a pre-filled tax return form sent by SKAT to the address provided when registering a company in Denmark, which must be completed and submitted by 1 July, while after 2 July SKAT issues a print containing the tax decision - Årsopgørelse, which may contain the formula Restskat til betaling - meaning the amount of the surcharge, or Skat til udbetaling - meaning the amount of the tax refund.
4. In Denmark, taxpayers who are self-employed are required to register through the Agency for Enterprise and Trade at the local Customs and Taxation Office.
5. Danish taxpayers are required to pay income tax.
6. In Denmark, companies whose annual revenue exceeds DKK 50 000 are required to register their activities with the Register of Foreign Service Providers (RUT), preferably through the virk.dk website, as a VAT payer (MOMS), the rate of which is 25%. This applies to any type of business regardless of whether it is a sole proprietorship or limited liability company in Denmark. For goods and services that are exported, the rate is 0% (employee leasing, exhibitions, entertainment, cleaning, construction and maintenance work, conferences and sporting events), which means that their sale is not taxed, but when they are purchased, the recipient is entitled to a tax deduction (on the invoice, enter the net value using the Reversed chargé formula, meaning that the buyer should charge and pay MOMS on the service or good in question; the buyer's registration number - SE-number or CVR - should also be entered. In addition, certain services, such as funerals, postal charges, sports and games, medical care, culture, social benefits, the arts, insurance, passenger transport, travel agency services, real estate transactions and financial operations, are exempt from paying MOMS.
7. An individual who is classified as a full tax resident in Denmark will typically be subject to taxation under the standard tax scheme, with the marginal tax rate that cannot exceed 52.07% (or 55.90%, inclusive of AM tax, which is considered income tax for Double Taxation Treaty purposes) in the year 2023. The calculation for the top-bracket tax for a single person is based on the individual's personal income plus positive net capital income.
8. In 2023, the tax rate for net capital income is taxed at a rate up to 42%. The top tax is determined as 15% of the portion of the top tax base that surpasses DKK 568,900 (in 2023), following a deduction of 8 % for the labor market tax. However, various deductions are applicable, resulting in a lower effective tax rate for most individuals in practice. The maintenance of the bottom and top state personal income tax rates, the maximum tax rate ceiling, and the corporate tax rate reflects the stability in the Danish tax policy for that year.
9. If you own a house or an apartment in Denmark, you are required to pay property value tax based on the public assessment of the property. The Danish Tax Agency assesses the property value every other year. It's noteworthy that individuals residing in Denmark must also pay property value tax on any foreign property they own, and conversely, individuals living abroad are obligated to pay property value tax on any property they own in Denmark. This taxation of property values applies to both domestic and foreign real estate assets owned by individuals with ties to Denmark.
10. Approximately 74% of the Danish population are members of the Danish National Evangelical Lutheran Church (Folkekirken), and as members, they pay church tax. The church tax contributes to funding the operation and maintenance of the churches within the municipality. This system helps support the activities and services provided by the church and is a significant source of revenue for the Danish National Evangelical Lutheran Church. Members who are subject to church tax have a portion of their income allocated to sustaining the church and its associated expenses. The church tax varies from municipality to municipality.

Personal taxes vs. corporate taxes

Whether you are a company owner or an employee of a company in Denmark, you are obliged to pay taxes to the treasury. For companies, SKAT issues and sends a pre-filled tax return (Selvangivelse) for the previous year to the address you provided when registering your business, which you must complete, taking into account any allowances and company costs, and submit to the Danish tax authorities by the deadline. If you do not have a physical address, you can utilize a virtual office service to provide a legitimate business address. This not only ensures compliance with Danish regulations but also offers a professional image for your company while managing your business efficiently from any location. After 2 July, you can expect a tax decision document (Årsopgørelse), which is also issued and sent by Skattestyrelsen. In Denmark, taxpayers have three years and four months both to appeal the tax decision and to make corrections to the return or simply to submit an overdue form, but it is worth remembering that SKAT has seven years to verify any documents on the basis of which we deducted costs from tax, and there are heavy financial penalties for providing false information or for not submitting the tax return by the deadline.

Tax formalities in Denmark

In Denmark, every taxpayer should comply with a number of important formalities relating both to documents such as the annual tax return or VAT return (applicable to entrepreneurs) and deadlines that must be observed so as not to incur a financial penalty (a penalty of up to DKK 5 000 may be incurred for failing to settle accounts with the Danish tax authorities), including the following:

1. 1 May - by this date, a simplified tax return should be filed by those who have income from gainful activity or no income at all.
2. 1 July - by this date, the tax return (Selvangivelse) should be filed by those running their own business in Denmark and by individuals (aged 15 and over, as well as younger individuals who are already earning income); to file the tax return at a later date, a postponement must be requested.
3. 2 July - after this date, SKAT starts issuing and sending out tax decision documents.
4. 1 August - a tax return must be filed by this date if the tax year ends between 1 February and 31 March (in this case, the tax should be paid on 20 March - if you make a larger advance payment, you will receive a tax refund with interest higher than in the bank; and on 20 November - then the interest will be lower than in the bank, as the interest rate is reduced by 0.4).
5. 10 days after the end of the quarterly or monthly accounting period, VAT must be paid to SKAT.
6. In the case of local taxes, the deadlines for their payment are set by the municipality responsible.
7. In Denmark, employers are obliged to issue their employees with both weekly or monthly pay slips (Lonseddel) and a document confirming their earnings (Oplysningsseddel - PIT-11).

Remember that in Denmark you have to submit your annual tax return up to 6 months after the end of the 12-month tax year, during which time you can take into account all the tax allowances to which you are entitled, the rates of which are usually set annually, including for: interest expenses on both mortgages and consumer loans, commuting to work, running a dual household, crossing bridges, accommodation, Cross border, as well as food.

Taxes Denmark - summary

To summarise: the Danish tax system is clear and precisely designed, applies to both individuals and natural persons, and includes taxes such as income tax, excise duty CIT, VAT, etc. In Denmark, taxes are progressive and thus the tax threshold depends on the amount of income; besides, when completing the tax return sent by the Danish tax office, you can take into account all the allowances you are entitled to and deduct the costs you incur when running your own business.

Key types of taxes in Denmark (income tax, labour market contributions, VAT, property taxes)

Denmark finances its extensive welfare system mainly through taxes on income and consumption. For anyone working, living or running a business in Denmark, it is crucial to understand the main types of taxes: income tax, the labour market contribution (AM-bidrag), VAT (moms) and property-related taxes.

Income tax in Denmark

Danish income tax is progressive and consists of several components that together determine how much tax you pay on your salary or business income. In practice, most employees pay:

• municipal tax
• health contribution (sundhedsbidrag, integrated into municipal tax)
• state tax (basic and, for higher incomes, top-bracket tax)
• church tax (only if you are a member of the Danish National Church)

Municipal tax is set by each municipality and typically ranges around 24–27% of your taxable income after the labour market contribution and deductions. Church tax, if applicable, usually adds about 0.4–1.3% depending on the municipality.

On top of that, you pay state income tax. The basic state tax applies to most taxable income above the personal allowance. A higher, top-bracket state tax applies only to income above a specific annual threshold. The combined effect is that the marginal tax rate on labour income, including municipal tax and AM-bidrag but excluding church tax, can reach just below 52%. There is also a statutory ceiling (the so‑called “tax ceiling”) that limits the total percentage you can pay in income tax to the state and municipality.

Everyone who is fully tax resident in Denmark is entitled to a personal allowance. This allowance reduces the amount of income on which you pay tax. A separate, lower allowance applies to children and young people with limited income. In addition, you can claim various deductions (for example for commuting, union fees and certain pension contributions), which further reduce your taxable income.

Labour market contribution (AM-bidrag)

The labour market contribution is a mandatory tax that finances the Danish labour market and social security schemes. It is charged at a flat rate of 8% on most types of earned income, including:

• salary and wages
• bonuses and benefits in kind
• self-employment income
• certain taxable allowances

AM-bidrag is calculated before income tax. This means that your taxable income for municipal and state tax is your gross income minus the 8% labour market contribution and minus deductible expenses. For employees, the employer withholds AM-bidrag directly from the salary and reports it to the Danish Tax Agency (Skattestyrelsen). For self-employed persons, the contribution is calculated as part of the annual tax assessment based on business profits.

VAT (moms) in Denmark

Denmark applies a standard VAT rate of 25% to most goods and services. There are no reduced VAT rates, which makes the Danish VAT system relatively simple but also one of the highest in Europe.

Businesses must register for VAT when their taxable turnover exceeds a certain threshold within a 12‑month period. Once registered, a company must charge 25% VAT on its sales (unless the goods or services are exempt) and can deduct input VAT paid on business purchases.

Common VAT‑exempt areas include:

• most financial services
• healthcare and medical services
• education provided by approved institutions
• certain cultural and social services

VAT‑registered businesses must submit VAT returns and pay VAT to the tax authorities at regular intervals. The reporting frequency depends on the size of the company’s turnover. Smaller businesses typically report VAT quarterly or half‑yearly, while larger companies report monthly. All filing and payments are handled digitally through the Danish tax systems.

Property taxes in Denmark

Owning real estate in Denmark is subject to two main types of property‑related taxes: land tax (grundskyld) and property value tax (ejendomsværdiskat).

Land tax is a municipal tax on the value of the land on which the property is located. Each municipality sets its own rate within limits defined by law. The effective land tax rate usually falls within a band of roughly 1.6–3.4% of the taxable land value per year. The tax is billed by the municipality, often in several instalments during the year.

Property value tax is a state tax on the value of owner‑occupied residential property in Denmark and, in some cases, on Danish property owned by residents living abroad. The tax is calculated as a percentage of the public property valuation. Different rates apply to different value brackets, with a lower rate up to a certain threshold and a higher rate on the part of the value that exceeds this threshold. Various transitional rules and caps may apply, especially for long‑term owners and in connection with changes to the valuation system.

In addition to these taxes, property owners must pay recurring municipal charges, for example for waste collection and water, which are not taxes in the strict sense but are relevant for the overall cost of owning property in Denmark.

Understanding how income tax, the 8% labour market contribution, 25% VAT and property‑related taxes work together is essential for accurate tax planning in Denmark. Correct classification of income, timely VAT registration and awareness of property tax obligations help both individuals and companies avoid unexpected liabilities and penalties.

Tax residency in Denmark and limited vs. full tax liability

Whether you pay tax in Denmark on all your income or only on income from Danish sources depends on your tax residency status. Danish rules distinguish between full tax liability (unlimited tax liability) and limited tax liability (limited to certain Danish-source income). Correctly determining your status is crucial for employees, self-employed persons, students and companies posting staff to Denmark.

When are you tax resident in Denmark?

You are generally considered tax resident in Denmark (subject to full tax liability) if you:

• have a home at your disposal in Denmark (owned or rented) and actually move in, or
• stay in Denmark for at least 6 consecutive months, including short trips abroad (holidays, business trips).

Tax residency usually starts on the day you move into a Danish home or on the day your stay in Denmark effectively becomes long-term. If you only stay in Denmark for a short period without a permanent home available (for example, in a hotel or temporary accommodation) and your stay is clearly temporary, you will often remain non-resident and only have limited tax liability.

Tax residency ends when you both:

• give up your Danish home (terminate rental contract or sell the property), and
• move your centre of life (family, work, economic interests) abroad and no longer have substantial stays in Denmark.

In practice, the Danish Tax Agency (Skattestyrelsen) looks at your overall situation: family ties, place of work, housing, length and pattern of stays in Denmark and abroad.

Full tax liability (unlimited tax liability)

If you are tax resident in Denmark, you are subject to full tax liabilityworldwide income, including:

• salary and benefits from Danish and foreign employers
• self-employment and business income
• pensions and social benefits
• rental income from Danish and foreign properties
• interest, dividends and capital gains

Full tax liability also gives you access to the full range of personal allowances and deductions, such as the personal allowance, employment deductions, commuting deductions, union fees and pension contributions, subject to the general rules.

If you are fully tax liable in Denmark and at the same time considered tax resident in another country, double taxation treaties determine in which country you are treated as resident for treaty purposes. These treaties typically use tie-breaker rules based on permanent home, centre of vital interests, habitual abode and nationality. The treaty residence can affect where certain types of income are taxed and how double taxation is relieved.

Limited tax liability (non-residents with Danish income)

If you are not tax resident in Denmark, you may still have limited tax liability on specific types of income from Danish sources. Typical examples include:

• salary for work physically performed in Denmark
• director’s fees from Danish companies
• income from a permanent establishment or real estate in Denmark
• Danish pensions and certain social benefits
• dividends from Danish companies and some types of interest and royalties

As a non-resident, you are normally taxed only on this Danish-source income. Foreign income that has no connection to Denmark is usually not taxed in Denmark. The tax method depends on the type of income:

• Employment income is often taxed under the ordinary progressive income tax rules, or under special schemes such as the 27% expat tax scheme for certain high-skilled employees (plus 8% labour market contribution).
• Dividends from Danish companies are usually subject to 27% withholding tax at source, which may be reduced (often to 15% or lower) under a double taxation treaty or EU rules.
• Certain pensions and fees may be taxed at fixed withholding rates or under specific regimes.

Non-residents with limited tax liability may have access to some deductions, but the scope is narrower than for fully tax liable residents. In some cases, non-residents can opt to be taxed under rules similar to residents if a large part of their income is taxable in Denmark, which can be beneficial for cross-border commuters.

Cross-border situations and double taxation

Many people work in Denmark but live in another country (for example, in Germany, Sweden or Poland). In these cases, you may be fully tax liable in your home country and have limited tax liability in Denmark on your Danish salary. The interaction between the two systems is governed by double taxation agreements, which typically:

• allocate taxing rights between Denmark and the other country
• define when Denmark may tax employment income (usually where the work is physically performed)
• set maximum withholding tax rates on dividends, interest and royalties
• describe how the home country must give relief for Danish tax (exemption or credit method).

Correctly applying these rules is essential to avoid paying tax twice on the same income. Often you must declare your Danish income in your home country and claim a credit for Danish tax paid.

Change of residency during the year

If you move to or leave Denmark during a tax year, you may be fully tax liable for part of the year and have limited or no tax liability for the rest. In such cases:

• Your income is split into periods before and after the move.
• Some deductions and allowances may be prorated based on the number of months you are fully tax liable.
• You must update your preliminary income assessment (forskudsopgørelse) and file a correct annual tax return (årsopgørelse) reflecting your move.

For individuals with significant shareholdings or unrealised gains, moving out of Denmark can trigger exit tax on certain assets. This is a complex area and usually requires professional advice.

Why correct classification matters

Misunderstanding your tax residency and liability can lead to underpayment of tax, interest and penalties, or to paying more tax than necessary. Correct classification determines:

• whether Denmark can tax your worldwide income or only Danish-source income
• which deductions and allowances you can claim
• how double taxation relief is applied
• whether special regimes (such as the expat tax scheme) are available.

If you are unsure whether you are fully or limited tax liable in Denmark, or how a move to or from Denmark affects your taxes, it is advisable to obtain individual advice and ensure that your status is correctly registered with the Danish Tax Agency.

Progressive income tax rates and municipal vs. state tax components

Denmark is known for its progressive income tax system, which means that the higher your income, the higher the percentage of tax you pay. Danish income tax is made up of several components that together determine your final tax burden: municipal tax, state tax, church tax (for members of the Folkekirken), labour market contribution (AM-bidrag) and, where applicable, top tax. Understanding how these elements interact is essential for both employees and entrepreneurs working or living in Denmark.

The basic distinction is between municipal tax and state tax. Every tax resident in Denmark pays tax to the municipality where they live. Municipal tax is a flat percentage, but the exact rate varies from one municipality to another. In practice, municipal tax rates typically range from about 24% to 27% of your taxable personal income. If you are a member of the Danish National Church, an additional church tax of roughly 0.4–1.3% is added, depending on the municipality.

On top of municipal tax comes state tax, which is progressive and divided into two main levels. First, there is a bottom-bracket state tax that applies to almost all taxable income above the personal allowance. Second, there is a top-bracket state tax that only applies to income above a relatively high threshold. The bottom-bracket state tax is charged at a single rate on most earned income, while the top-bracket tax is charged at an additional rate on the part of your income that exceeds the top-bracket threshold. These thresholds are adjusted regularly, but the structure remains the same: income up to the threshold is taxed at municipal tax plus bottom state tax, and income above the threshold is taxed at municipal tax plus both bottom and top state tax.

When all components are added together, the combined marginal tax rate on labour income (including municipal tax, state tax, church tax where applicable and the mandatory labour market contribution) can reach a level just below 52% for top-bracket taxpayers. This upper limit is the result of a political decision to cap the marginal tax rate, so even if municipal tax rates differ, the overall marginal tax on earned income cannot exceed this ceiling by more than a very small amount.

The progressive structure is balanced by a relatively generous personal allowance, which reduces the tax base for both municipal and state tax. Everyone who is fully tax liable in Denmark is entitled to a basic personal allowance, and married couples can in some situations transfer unused allowance between spouses. The allowance is automatically taken into account by the Danish Tax Agency (Skattestyrelsen) through your tax card, so you do not need to claim it manually, but it is important to check that your preliminary income assessment reflects your expected income correctly.

Another important feature of the Danish system is that different types of income are taxed differently. Personal income (for example salary, business income from self-employment and certain social benefits) is subject to the full progressive structure with municipal and state tax. Capital income (such as interest and certain investment returns) and share income (dividends and capital gains on shares) are taxed under separate rules and brackets, although they still influence your overall tax position and can affect whether you cross the threshold for top-bracket tax. This means that planning the mix of salary, pension contributions and investments can have a real impact on your effective tax rate.

For most employees, the progressive tax and the municipal vs. state components are handled automatically through withholding at source. Your employer uses your electronic tax card to calculate how much A-tax (withholding tax on salary) and AM-bidrag should be paid each month. However, you remain responsible for ensuring that your tax information is correct. If your income changes significantly during the year, updating your preliminary assessment can help you avoid large underpayments or overpayments when the annual tax statement is issued.

For foreign workers and newcomers to Denmark, the progressive system can seem complex, but it also offers predictability and transparency. The combination of municipal and state tax, together with the personal allowance and various deductions (for example for commuting, interest expenses or pension contributions), makes it possible to calculate your approximate net salary and effective tax rate in advance. Using official tax calculators or working with a professional advisor can help you understand how the progressive brackets and local municipal rates apply to your specific situation.

AM-bidrag (labour market contribution) – what it is and how it affects net salary

AM-bidrag is the Danish labour market contribution. It is a mandatory payment of 8% that is deducted from almost all earned income before ordinary income tax is calculated. Understanding how AM-bidrag works is essential if you want to correctly estimate your net salary in Denmark or plan your tax burden as an employee, freelancer or business owner.

What income is subject to AM-bidrag?

AM-bidrag is generally paid on income that is linked to work performed in Denmark. In practice, it is calculated on:

• Salary from employment (A-income)
• Taxable fringe benefits (e.g. company car, free phone, some housing benefits)
• Bonuses, commissions and overtime pay
• Holiday pay and certain severance payments
• Self-employment income and freelance income (B-income), if it is considered personal work income

Some types of income are not subject to AM-bidrag, for example most capital income (interest, dividends, capital gains) and certain social benefits. These are taxed under other rules and do not affect the calculation of the labour market contribution.

How AM-bidrag is calculated

The rate of AM-bidrag is a flat 8% of your gross AM-eligible income. The contribution is calculated before any personal allowances or deductions are applied and before ordinary income tax (municipal, state and church tax) is calculated.

For employees, the employer is responsible for calculating and withholding AM-bidrag together with A-tax (withholding tax on income). For self-employed persons, AM-bidrag is calculated as part of the annual tax assessment based on reported business income.

AM-bidrag and the tax base – why it matters for your net salary

AM-bidrag directly reduces the income that is used as the basis for your ordinary income tax. The sequence is important:

1. Your gross salary and other AM-eligible income are added up.
2. 8% AM-bidrag is deducted from this amount.
3. The remaining 92% is your personal income for tax purposes.
4. Municipal tax, state tax and church tax (if applicable) are calculated on this reduced amount, after taking into account your personal allowance and other deductions.

This means that AM-bidrag has a double effect on your net salary: you pay the 8% contribution itself, and you also pay ordinary income tax on a lower base. When you compare gross and net salary offers in Denmark, you should always remember that the first 8% goes to AM-bidrag before any other tax is calculated.

Example: impact of AM-bidrag on a monthly salary

Assume an employee has a monthly gross salary of DKK 40,000 and is fully tax resident in Denmark. Ignoring specific deductions and using only the basic personal allowance, the calculation looks roughly as follows:

• Gross salary: DKK 40,000
• AM-bidrag (8% of 40,000): DKK 3,200
• Taxable personal income after AM-bidrag: DKK 36,800

Municipal and state income taxes are then calculated on the DKK 36,800 (minus a monthly share of the personal allowance and any other deductions). The final net salary will therefore be significantly lower than the original DKK 40,000, and AM-bidrag is the first mandatory deduction in this chain.

AM-bidrag for employees vs. self-employed

For employees, AM-bidrag is automatically withheld by the employer together with A-tax and reported to the Danish Tax Agency (Skattestyrelsen). It appears on the payslip as a separate line, usually labelled “AM-bidrag 8%”. Employees do not pay AM-bidrag separately; it is included in the monthly payroll process.

For self-employed persons and freelancers, AM-bidrag is calculated on the part of business income that is considered personal work income. It is included in the preliminary income assessment and the annual tax return. The self-employed person pays AM-bidrag via on-account payments or as part of the final tax settlement. Proper classification of income and expenses in the accounts is crucial to ensure that AM-bidrag is calculated correctly.

Foreign workers and AM-bidrag

Foreign employees working in Denmark are usually subject to AM-bidrag on the same terms as Danish residents if their salary is taxable in Denmark. This includes most cross-border commuters and posted workers with Danish-source employment income.

There are, however, special schemes and exceptions, for example:

• Certain researchers and highly paid employees on the special expatriate tax scheme (27% or 32% flat tax) still pay AM-bidrag in addition to the special tax.
• Some foreign employees covered by specific international agreements or social security rules may have different obligations.

Whether you are fully or limited tax liable in Denmark, AM-bidrag will normally apply to your Danish employment income if it is subject to Danish income tax. It is therefore important to check your tax card and employment contract to understand how AM-bidrag is handled.

AM-bidrag on payslips and in tax cards

Your Danish tax card (skattekort) and preliminary income assessment take AM-bidrag into account. Employers use the information from your tax card to withhold both AM-bidrag and A-tax correctly. On your payslip you will typically see:

• Gross salary and taxable benefits
• AM-bidrag (8%) as a separate deduction
• Taxable income after AM-bidrag
• A-tax (withholding income tax) calculated on this reduced amount

If your AM-bidrag or A-tax has been calculated incorrectly during the year, the difference will be settled in your annual tax assessment (årsopgørelse). Keeping your preliminary income assessment up to date helps avoid large underpayments or refunds.

Why AM-bidrag is important for tax planning

Because AM-bidrag is always calculated before other taxes and before most deductions, it plays a central role in Danish tax planning. When you negotiate a salary, consider a bonus scheme, or choose between employment and self-employment, you should always factor in:

• That 8% AM-bidrag is deducted from almost all work-related income
• That your ordinary income tax is calculated on the income after AM-bidrag
• That some deductions (for example commuting costs or pension contributions) reduce the income taxed after AM-bidrag, but do not reduce the AM-bidrag itself

Professional accounting and payroll support can help ensure that AM-bidrag is calculated correctly, optimised within the legal framework and properly reflected in your net salary or business cash flow.

Taxation of foreign workers and cross-border commuters in Denmark

Foreign employees and cross-border commuters working in Denmark are generally subject to Danish tax on income earned from Danish sources. The exact rules depend on your tax residency status, the length and nature of your stay, and whether a double taxation agreement (DTA) applies between Denmark and your home country.

Tax residency and limited vs. full tax liability

You are normally considered fully tax liable in Denmark if you take up residence in Denmark or stay in the country for at least 6 consecutive months (short holiday trips abroad do not break this period). Full tax liability means that Denmark can tax your worldwide income, subject to relief under applicable DTAs.

If you do not become tax resident, you may have limited tax liability in Denmark. In that case, Denmark taxes only specific Danish-source income, mainly:

• Salary for work physically performed in Denmark
• Board fees and directors’ remuneration from Danish companies
• Certain pensions and social security benefits from Denmark
• Income from Danish real estate and permanent establishments

Whether you are fully or limited tax liable has a direct impact on the tax rates, deductions and reporting obligations that apply to you.

Standard taxation of foreign employees

Foreign workers who are taxed under the ordinary Danish rules are subject to the same progressive income tax system as Danish residents. This typically includes:

• 8% labour market contribution (AM-bidrag) on gross salary before other taxes
• Municipal and church tax (if applicable), usually in the range of about 24–27% combined
• State tax, with a bottom-bracket tax on most income and a top-bracket tax on income above a specific annual threshold

In addition, mandatory contributions such as ATP (Danish labour market supplementary pension) and holiday pay may apply, depending on your employment contract and collective agreements.

Under the ordinary rules, you can generally claim standard deductions, for example:

• Personal allowance (basic tax-free amount)
• Deduction for commuting between home and workplace, based on distance and number of days
• Deduction for union fees and unemployment insurance contributions (A-kasse)
• Approved pension contributions and certain interest expenses

These deductions reduce your taxable income and therefore your final tax burden.

Special expat tax scheme (27% scheme)

Denmark offers a special expat tax regime for certain highly paid foreign employees and researchers recruited from abroad. Under this scheme, qualifying employees can choose to pay a flat tax of 27% on cash salary and certain benefits, plus 8% AM-bidrag, for up to 7 years. This corresponds to an effective tax rate of just under 33% on the covered income.

Key conditions typically include:

• Minimum monthly or annual salary threshold (excluding pension contributions), adjusted regularly
• You must be recruited from abroad by a Danish employer or a foreign employer with a Danish permanent establishment
• You must not have been fully tax resident in Denmark or subject to Danish taxation on certain income types in a defined period before starting under the scheme
• You cannot own a controlling interest in the employer company

Under the expat scheme, you do not receive the normal personal allowance and many standard deductions are not available. The choice between the expat scheme and ordinary taxation should be based on a detailed calculation of your expected income, benefits and deductions over the entire employment period.

Short-term assignments and 183-day rule

Many double taxation agreements between Denmark and other countries contain a 183-day rule for employment income. In general, salary may remain taxable only in your home country if:

• You stay in Denmark for no more than 183 days within a relevant 12‑month or calendar-year period (depending on the treaty)
• Your salary is paid by an employer who is not resident in Denmark
• The salary is not borne by a permanent establishment or fixed base that the employer has in Denmark

If any of these conditions are not met, Denmark typically has the right to tax the salary for work performed in Denmark. It is important to track the number of days spent in Denmark and the structure of your employment contract to determine the correct tax treatment.

Cross-border commuters (e.g. Sweden, Germany)

Many people live in a neighbouring country and commute to work in Denmark, especially between Denmark and Sweden or Germany. As a rule, employment income is taxed in the country where the work is physically performed, unless a specific DTA rule provides otherwise.

For cross-border commuters, this usually means:

• Salary for workdays in Denmark is taxable in Denmark
• Salary for workdays physically performed in your home country may be taxable there
• Remote work from home (for a foreign employer in Denmark) can affect the allocation of taxing rights and, in some cases, the existence of a permanent establishment

Some DTAs include special cross-border worker provisions or simplified methods for allocating income between countries. You may need to keep a detailed log of workdays in each country to document the correct split of income.

Double taxation relief

If both Denmark and your home country tax the same income, double taxation is usually relieved either by:

• The exemption method – one country exempts the income that has already been taxed in the other country, or
• The credit method – your home country taxes your worldwide income but grants a credit for Danish tax paid on the same income, up to certain limits

The exact method and calculation rules depend on the specific DTA. To benefit from treaty protection, you may need to provide a certificate of tax residency from your home country and submit additional documentation to the Danish Tax Agency (Skattestyrelsen).

Social security and A-tax withholding

In addition to income tax, foreign workers may be subject to Danish social security contributions, unless covered by the social security system of another EU/EEA country or a country with a social security agreement with Denmark. An A1 certificate (for EU/EEA) or equivalent documentation is often required to remain under the foreign system.

Employers in Denmark must normally withhold A-tax (pay-as-you-earn income tax) and AM-bidrag from your salary each month and report it electronically to the Danish tax authorities. If you are a foreign employer with no permanent establishment in Denmark, you may still have Danish payroll obligations if your employees work in Denmark.

Registration, tax card and annual tax return

When you start working in Denmark, you must usually:

• Obtain a Danish CPR number (civil registration number), if eligible
• Register with the Danish Tax Agency and obtain a tax card (skattekort)
• Ensure your preliminary income assessment reflects your expected salary and deductions

At the end of the income year, the tax authorities issue an annual tax assessment (årsopgørelse). You should check that your income, deductions and foreign tax credits are correctly reported and make any necessary corrections within the applicable deadlines. If you have income from more than one country, you may be required to file additional information or a full tax return.

Why professional assistance is important

The taxation of foreign workers and cross-border commuters in Denmark is complex and depends on many factors: residence, length of stay, work pattern, employer structure, treaty rules and social security coverage. Errors can lead to double taxation, unexpected tax bills or penalties.

Specialist tax advice helps you:

• Determine your tax residency and applicable DTA rules
• Choose between the expat tax scheme and ordinary taxation
• Allocate income correctly between countries and avoid double taxation
• Comply with Danish registration, payroll and reporting obligations

For employers and employees alike, early planning before starting work in Denmark is the most effective way to optimise the tax position and ensure full compliance with Danish tax law.

Taxation of self-employed persons and freelancers in Denmark

Running a business as a self-employed person or freelancer in Denmark gives you a lot of flexibility, but it also means you are personally responsible for handling your own taxes and social contributions. Understanding how Danish tax rules apply to sole traders, one-person companies and independent contractors is essential to avoid unexpected tax bills and penalties.

Who is considered self-employed in Denmark?

You are normally treated as self-employed (sole proprietor) if you run your own business at your own risk and for your own account, have several clients, use your own tools or equipment and decide how and when the work is carried out. If you work mainly for one client, follow their instructions and use their tools, SKAT may reclassify the relationship as employment, which changes the tax treatment (A-tax instead of business income).

Freelancers in Denmark can be taxed either as employees (with A-income) or as self-employed (with B-income or business income), depending on how the cooperation is structured. It is important to set up contracts and invoicing correctly so that the tax status reflects the real situation.

Business forms for self-employed and freelancers

The two most common forms for one-person businesses are:

• Sole proprietorship (enkeltmandsvirksomhed) – no legal separation between you and the business. Profits are taxed as your personal income. Simple and cheap to start, no minimum capital requirement.
• One-person company (ApS or A/S owned by one person) – the company is a separate legal entity. Profits are first taxed with Danish corporate tax and then again when paid out as salary or dividends. Requires share capital (at least DKK 40,000 for an ApS).

Many freelancers start as a sole proprietorship and later convert to an ApS once profits grow and there is a need for better liability protection or more flexible tax planning.

Registration of a self-employed business

Before you start invoicing clients, you normally need to register your business with the Danish Business Authority (Erhvervsstyrelsen) via Virk.dk and obtain a CVR number. At the same time you indicate whether you expect to be VAT liable and what your expected annual turnover and profit will be.

As a rule, you must register for VAT (moms) if your taxable turnover exceeds DKK 50,000 over a 12‑month period. Below this threshold, registration is voluntary, but many freelancers still choose to register to be able to deduct input VAT on business expenses.

Taxation of business income

Income from a sole proprietorship is taxed as personal income. The taxable profit is calculated as business revenue minus deductible business expenses, depreciation and any approved allowances. This profit is then included in your personal tax calculation together with other income (for example salary, unemployment benefits or pension).

Denmark uses a progressive tax system. Your business profit is subject to:

• 8% labour market contribution (AM-bidrag) on the business income before other income taxes
• Municipal and church tax, depending on where you live
• Basic state tax and, if your income exceeds the applicable threshold, top-bracket state tax

Because the tax is progressive, a high business profit can push you into the top tax bracket. In some situations, it may be more tax-efficient to operate via a company (ApS), where profits are first taxed at the corporate tax rate and you can decide how much to pay out as salary or dividends.

Business schemes: business taxation vs. capital taxation

Danish rules offer different schemes for taxing business income from sole proprietorships. The two main options are:

• Business taxation scheme (virksomhedsordningen) – allows you to separate business and private finances, deduct interest expenses in the business and defer tax by retaining profits in the business at a lower provisional tax rate. This scheme is often attractive for profitable businesses and those with loans or significant investments.
• Capital taxation scheme (kapitalafkastordningen) – simpler than the full business scheme. Part of the profit is treated as capital income (with different tax rates), while the rest is taxed as personal income. Suitable for smaller businesses that want some flexibility without the full complexity of virksomhedsordningen.

Choosing the right scheme has a direct impact on your tax bill and cash flow. The choice is usually made in connection with your annual tax return and must be applied consistently for the whole income year.

AM-bidrag and income tax for self-employed

Self-employed persons pay the same 8% labour market contribution (AM-bidrag) as employees, but it is calculated on their business income instead of salary. After AM-bidrag is deducted, the remaining amount is subject to municipal and state income tax according to the general Danish tax rules.

Unlike employees, self-employed persons do not have an employer withholding A-tax on a monthly basis. Instead, you pay tax on account (B-tax) based on your preliminary income assessment. If your actual profit turns out higher or lower, the final settlement is made after the annual tax return.

VAT (moms) for freelancers and self-employed

If you are VAT registered, you must charge 25% VAT on your invoices for most services and goods, unless a specific exemption applies (for example certain financial, health or educational services). You can deduct input VAT on business-related purchases, such as equipment, software, office rent and professional services.

VAT reporting frequency depends on your turnover:

• Smaller businesses usually report VAT quarterly
• Larger businesses may have to report monthly

VAT returns and payments are submitted digitally via TastSelv Erhverv. Late filing or payment can result in interest and surcharges, so it is important to monitor deadlines carefully.

Deductible expenses for self-employed

As a self-employed person or freelancer, you can deduct expenses that are directly related to earning your business income. Typical deductible costs include:

• Office rent or a proportion of home office costs, if specific conditions are met
• Computer equipment, phones, software licences and internet used for business
• Professional insurance, accounting and legal fees
• Marketing, website hosting, domain names and advertising
• Business travel, transport to clients and certain subsistence expenses
• Continuing education and professional courses relevant to your business

Some assets must be depreciated over several years instead of being deducted in full in the year of purchase. There are also specific rules and limits for deducting car expenses, representation and mixed private/business costs. Proper documentation and bookkeeping are essential to support your deductions in case of a tax audit.

Social security and pension for self-employed

Self-employed persons in Denmark are not automatically covered by the same employer-funded schemes as employees. You are responsible for:

• Arranging your own pension savings, for example through private pension schemes that may be tax-deductible within certain limits
• Ensuring adequate insurance coverage, such as occupational injury insurance, health insurance or loss-of-earnings insurance

You may still be covered by the general Danish social security system for healthcare and certain benefits if you are resident and pay taxes in Denmark, but you do not have an employer paying ATP contributions or other employment-related benefits on your behalf.

Tax prepayments, B-tax and reporting obligations

When you start your business, you must estimate your expected annual profit in your preliminary income assessment. Based on this, SKAT calculates your B-tax (on-account tax) and B‑AM-bidrag, which you pay in instalments during the year.

If your income changes significantly, you should update your preliminary assessment so that your instalments reflect your actual situation as closely as possible. This helps avoid large underpayments and interest when the final tax is calculated.

At the end of the year, you submit your annual tax return, including the business accounts and any chosen business scheme. SKAT then issues your final tax assessment, showing whether you have overpaid (and will receive a refund) or underpaid (and must pay the remaining amount plus any interest).

Foreign freelancers and cross-border self-employment

Foreign freelancers working in Denmark, or Danish residents working for foreign clients, must pay particular attention to tax residency rules and double taxation agreements. Depending on where you are tax resident and where the work is physically performed, your business income may be taxable in Denmark, in another country or in both, with relief under a tax treaty.

Foreign self-employed persons may also create a permanent establishment in Denmark if they have a fixed place of business or habitually carry out activities here. In such cases, Danish tax and VAT registration may be required, even if the business is formally based abroad.

Because the Danish rules for self-employed persons and freelancers are detailed and the financial consequences of mistakes can be significant, many entrepreneurs choose to work with a professional accountant who understands both Danish tax law and the specific needs of small businesses and independent contractors.

Corporate tax rate in Denmark and main rules for company taxation

The standard corporate income tax rate in Denmark is 22%. This flat rate applies to the taxable profits of most Danish companies, including ApS (private limited companies) and A/S (public limited companies), as well as to foreign companies with a taxable presence in Denmark. The rate is the same regardless of the size of the company or the level of profit.

Corporate tax is generally levied on the worldwide income of companies that are tax resident in Denmark. A company is typically considered tax resident if it is incorporated in Denmark or if its place of effective management is in Denmark. Non-resident companies are taxed only on income sourced in Denmark, for example from a permanent establishment, real estate or certain types of Danish-source income.

Taxable income is based on the accounting profit, adjusted for tax purposes. In principle, all income is taxable unless specifically exempt, and all expenses incurred to earn, secure and maintain taxable income are deductible unless expressly disallowed. Depreciation of fixed assets follows specific tax rules and may differ from accounting depreciation. Losses can normally be carried forward without time limitation, but the use of large loss carryforwards can be restricted above certain profit thresholds.

Denmark operates a group taxation regime. Danish companies that are part of the same group can opt for national joint taxation, and in some cases international joint taxation. Under joint taxation, the taxable results of group companies are combined, allowing losses in one company to offset profits in another. The administrative company in the group is responsible for filing the consolidated tax return and paying the corporate tax on behalf of the group.

Dividends and capital gains on shares may be exempt from corporate tax if certain participation conditions are met, for example when the Danish company holds a qualifying shareholding in a subsidiary and specific ownership and holding period requirements are satisfied. Otherwise, dividends and gains are generally taxable at the standard 22% rate. Interest income is normally taxable, while interest expenses are deductible, subject to thin capitalisation and earnings-stripping rules that can limit the deductibility of net financing costs.

Corporate tax is calculated on an annual basis, but companies must pay tax on account during the income year. Typically, two on-account payments are due, with the option to make voluntary additional payments to avoid interest and surcharges. After the end of the income year, the company files a corporate tax return, and the final tax is assessed. Any difference between the on-account payments and the final tax liability results in either a refund or an additional payment, potentially with interest.

Companies operating in Denmark must also comply with transfer pricing rules when transacting with related parties. Prices and terms must be set at arm’s length, and larger groups are required to prepare and maintain transfer pricing documentation. Failure to comply can lead to adjustments of taxable income and penalties. In addition, Denmark has implemented anti-avoidance rules, including controlled foreign company (CFC) rules and a general anti-abuse rule, which can affect the taxation of international structures.

Foreign companies with activities in Denmark need to assess whether they create a permanent establishment, for example through a fixed place of business or dependent agent. If a permanent establishment exists, the profits attributable to it are subject to Danish corporate tax at 22%. Foreign companies that employ staff in Denmark may also have payroll withholding and reporting obligations, even if they are not fully tax resident in Denmark.

Overall, the Danish corporate tax system combines a relatively moderate flat rate with detailed rules on deductions, group taxation, financing and cross-border transactions. Proper planning and timely compliance with filing and payment deadlines are essential to avoid penalties and to make full use of available deductions and reliefs.

Withholding tax on dividends, interest and royalties in Denmark

Denmark levies withholding tax on certain types of passive income paid to individuals and companies, especially when the recipient is not fully tax resident in Denmark. The main categories are dividends, interest and royalties. Understanding these rules is crucial for foreign investors, cross-border group structures and Danish companies making outbound payments.

Withholding tax on dividends in Denmark

Dividends from Danish companies are generally subject to Danish withholding tax when paid to shareholders. The standard withholding tax rate on dividends is 27%. For individuals and companies fully liable to tax in Denmark, this withholding is usually treated as an advance payment and is reconciled in the annual tax assessment.

For non-resident shareholders, the 27% rate can often be reduced under:

• an applicable double taxation treaty (DTT) between Denmark and the shareholder’s country of residence, or
• the EU Parent-Subsidiary Directive and corresponding Danish participation exemption rules for qualifying corporate shareholders.

In many tax treaties, the dividend withholding tax rate is reduced to 15% or lower, provided that the beneficial owner is a resident of the treaty country and meets any ownership or holding-period requirements. Under Danish participation exemption rules, dividends to a foreign parent company may be exempt from withholding tax if, among other conditions, the parent holds at least 10% of the share capital and is tax resident in the EU/EEA or a treaty country, and is the beneficial owner of the dividend.

If too much tax has been withheld, a foreign shareholder can usually apply for a refund from the Danish tax authorities (Skattestyrelsen). The refund process typically requires documentation of tax residence, beneficial ownership and the applicable treaty article.

Withholding tax on interest

As a general rule, Denmark does not impose withholding tax on interest paid to unrelated foreign lenders. However, withholding tax may apply in certain cases, particularly where the interest is paid:

• to a foreign group-related company, and
• the interest is not effectively connected with a permanent establishment in Denmark, and
• the recipient is resident in a jurisdiction that does not have an applicable tax treaty or information exchange agreement with Denmark, or is otherwise considered low-taxed.

In such situations, interest may be subject to Danish withholding tax at a rate of 22%, corresponding to the Danish corporate income tax rate. The detailed application of these rules is complex and interacts with Denmark’s anti-avoidance rules, including the interest limitation rules, thin capitalisation and controlled foreign company (CFC) provisions.

Where a double taxation treaty applies, it will often limit or eliminate Danish withholding tax on interest, provided the foreign recipient is the beneficial owner and meets any substance and anti-abuse conditions in the treaty and Danish law.

Withholding tax on royalties

Royalties arising in Denmark and paid to non-resident recipients are generally subject to Danish withholding tax. Royalties include payments for the use of, or the right to use, intellectual property such as patents, trademarks, know-how and certain copyrights.

The standard withholding tax rate on royalties paid to non-residents is 22%. This rate may be reduced or eliminated under a double taxation treaty if the recipient is resident in a treaty country and qualifies as the beneficial owner of the royalties. Many of Denmark’s treaties either reduce the rate (for example to 0–10%) or allocate exclusive taxing rights to the state of residence, resulting in no Danish withholding tax.

If the royalty is effectively connected with a permanent establishment or fixed base in Denmark, the income is typically taxed as business profits instead of via withholding, and the Danish payer may not need to withhold tax at source.

Relief under double taxation treaties and EU law

Denmark has an extensive network of double taxation treaties that can provide relief from or reductions in withholding tax on dividends, interest and royalties. To benefit from treaty relief, the foreign recipient must usually:

• be a tax resident of the treaty partner country
• be the beneficial owner of the income
• comply with any limitation on benefits or anti-abuse provisions
• provide appropriate documentation (for example, a certificate of residence).

For EU-resident corporate shareholders, the EU Parent-Subsidiary Directive and Danish participation exemption rules may allow dividend payments to be made without withholding tax, subject to ownership thresholds and anti-avoidance rules. Similarly, some EU directives can affect the treatment of interest and royalties between associated companies in different EU Member States, although Denmark applies its own anti-abuse and substance requirements.

Practical obligations for Danish payers

Danish companies and other payers are responsible for correctly withholding and reporting tax on outbound payments when required. Key practical points include:

• identifying whether the recipient is resident in Denmark or abroad
• checking whether a double taxation treaty or EU directive applies
• withholding tax at the correct rate (27% on dividends, 22% on certain interest and royalties, or a reduced treaty rate)
• reporting and paying the withheld tax to the Danish tax authorities within the applicable deadlines
• issuing documentation to the recipient showing the gross amount and tax withheld, which is necessary for claiming foreign tax credit or refunds.

Failure to withhold or report correctly can result in the Danish payer being held liable for the unpaid tax, together with interest and potential penalties. For this reason, Danish businesses making cross-border payments should review their contracts, group structures and payment flows to ensure compliance with Danish withholding tax rules.

VAT (moms) in Denmark – rates, registration thresholds and reporting obligations

VAT in Denmark (in Danish: moms) is a general consumption tax charged on most goods and services. Understanding when you must register, what rate to apply and how to report VAT to the Danish Tax Agency (Skattestyrelsen) is crucial for both Danish and foreign businesses operating in Denmark.

Standard VAT rate and scope of VAT in Denmark

Denmark applies a single, standard VAT rate of 25%. There are no reduced VAT rates (for example for food or transport) and no super-reduced rates. This makes the Danish VAT system relatively simple in terms of rates, but the rules on exemptions and place of supply still require attention.

VAT at 25% is generally charged on:

• Sales of goods and services in Denmark
• Imports of goods from outside the EU
• Intra‑EU acquisitions of goods by VAT‑registered businesses
• Certain cross‑border services, depending on the place‑of‑supply rules

Some activities are exempt from VAT, such as many financial and insurance services, most health and medical services, certain educational services and some cultural activities. Exempt activities do not charge VAT on their sales and usually cannot deduct input VAT on related purchases, which has a direct impact on costs and pricing.

Who must register for VAT in Denmark?

Businesses and self‑employed individuals must register for Danish VAT when they carry out taxable activities in Denmark and exceed the registration threshold. The main threshold for compulsory VAT registration is a taxable turnover of DKK 50,000 within a 12‑month period.

Key points on VAT registration:

• If you expect to exceed DKK 50,000 in taxable turnover within 12 months, you must register before you start charging VAT.
• You may also choose to register voluntarily below the threshold, for example to recover input VAT on start‑up costs.
• Registration is done digitally via the Danish Business Authority (Erhvervsstyrelsen) and the tax self‑service system TastSelv Erhverv.
• Once registered, you receive a Danish CVR number (business ID) which also serves as your VAT number (DK + CVR).

VAT registration for foreign companies

Foreign businesses supplying goods or services in Denmark may also be required to register for Danish VAT, even without a permanent establishment. Typical situations include:

• Distance sales of goods to Danish private customers, where EU‑wide e‑commerce rules and the One Stop Shop (OSS) scheme may apply
• Installation or assembly of goods in Denmark
• Organisation of events, fairs or conferences in Denmark
• Local supplies to Danish customers where the reverse‑charge mechanism does not apply

In some cases, foreign companies must appoint a Danish VAT representative, although this requirement is usually limited to businesses established outside the EU or in certain high‑risk situations.

VAT returns and reporting obligations

Once registered, you must charge VAT on your taxable supplies, issue proper invoices and report VAT to the Danish Tax Agency. VAT is reported electronically via TastSelv Erhverv.

The reporting frequency depends on your annual turnover:

• Quarterly VAT returns – for most small and medium‑sized businesses with lower turnover
• Monthly VAT returns – for larger businesses above a certain turnover level
• Half‑yearly VAT returns – for very small businesses under a low turnover threshold, if allowed by Skattestyrelsen

For each VAT period you must report:

• Total output VAT (VAT on your sales)
• Total input VAT (VAT on your purchases and expenses, where deductible)
• Net VAT payable to or refundable from Skattestyrelsen

VAT returns and payments must be submitted and paid no later than the statutory deadline for the relevant period. Deadlines differ for monthly, quarterly and half‑yearly filers and are set as a specific number of days after the end of the VAT period. Late filing or late payment leads to interest and possible surcharges.

Input VAT deduction and partial exemption

VAT‑registered businesses can normally deduct input VAT on goods and services used for their taxable activities. This includes, for example, VAT on office rent, equipment, professional services and many operating costs.

However, there are important limitations:

• No deduction for VAT on expenses that are not business‑related
• Restrictions on VAT deduction for certain costs, such as representation and entertainment
• Partial deduction where the business carries out both taxable and VAT‑exempt activities (partial exemption / pro‑rata)

In a partial exemption situation, the business must calculate the proportion of input VAT that relates to taxable activities and can be deducted, and the part that relates to exempt activities and must be borne as a cost.

Invoicing and record‑keeping requirements

VAT‑registered businesses must issue invoices that comply with Danish VAT rules. A valid VAT invoice typically includes:

• Name, address and CVR/VAT number of the supplier
• Name and address of the customer
• Invoice date and a unique invoice number
• Description of goods or services supplied
• Quantity and price, excluding VAT
• Applicable VAT rate and the amount of VAT charged
• Total amount including VAT

Businesses must keep accounting records, invoices and documentation for a number of years, in line with Danish bookkeeping rules. These records must be available for inspection by Skattestyrelsen in case of audit.

Digital tools and compliance support

Denmark is highly digitalised in the area of tax administration. VAT registration, changes to registration, VAT returns and payments are all handled online. Communication with the authorities takes place mainly through TastSelv and e‑Boks.

Because VAT rules are closely linked to other tax and accounting obligations, many companies choose to work with a local accounting firm in Denmark. Professional support helps ensure correct VAT registration, accurate classification of transactions, timely reporting and minimisation of compliance risks.

Tax deductions and allowances for individuals (commuting, union fees, pension, etc.)

Denmark offers a wide range of tax deductions and allowances for individuals that can significantly reduce your taxable income and increase your net salary. Knowing what you can deduct – and under which conditions – is essential whether you are an employee, cross-border worker or temporarily working in Denmark.

General rules for deductions in Denmark

Most deductions are granted automatically based on information reported to the Danish Tax Agency (Skattestyrelsen) by employers, banks and pension providers. However, you are responsible for checking and correcting your preliminary income assessment and annual tax return. Many deductions must be actively entered or adjusted in TastSelv (SKAT’s online system), especially commuting, foreign income, some pension contributions and special expenses.

In Denmark, deductions generally reduce your taxable income for both municipal and state tax, and in many cases also the labour market contribution (AM-bidrag) base. Some deductions have fixed annual amounts, others are percentage-based or subject to minimum thresholds and maximum caps.

Commuting deduction (befordringsfradrag)

The commuting deduction is one of the most important tax benefits for employees. You can claim it if you travel more than 24 km per day (round trip) between your home and your regular workplace.

The deduction is calculated per kilometre and per working day, based on the distance between your home and workplace. The rates are progressive – the rate per kilometre is higher for the first part of the distance and lower for very long commutes. The deduction is available regardless of the means of transport (car, train, bus, bicycle), as long as the distance and number of working days are correct.

Key points:

• Only the distance above 24 km per day (round trip) qualifies for deduction
• You must adjust the number of commuting days if you work part-time, from home or have longer absences
• Carpooling does not affect the deduction – each person can claim their own commuting distance
• Free employer-paid transport (e.g. company bus) normally excludes the deduction for that route

The commuting deduction is not granted automatically based on your address and workplace. You must enter or update your commuting details in your preliminary income assessment and check them again in your annual tax return.

Union fees and unemployment insurance (A-kasse)

Membership fees to approved trade unions and unemployment insurance funds (A-kasse) are generally deductible.

For union fees:

• Deductions are allowed for membership in recognised Danish trade unions
• There is an annual maximum amount that can be deducted per person
• Any part of the fee that relates to special services (e.g. legal assistance outside normal union work) may not be fully deductible

For unemployment insurance (A-kasse):

• Contributions to an approved Danish A-kasse are usually fully deductible
• Supplementary insurance for higher benefits may also be deductible, subject to specific rules

Most unions and A-kasser report your contributions directly to Skattestyrelsen, so the deduction appears automatically in your tax assessment. You should still verify that the amounts are correct and complete.

Pension contributions

Pension savings are strongly supported by the Danish tax system. The tax treatment depends on the type of pension scheme and how contributions are paid.

Main categories:

• Employer-administered pension schemes – contributions are often paid directly from your gross salary. In many cases, these are deducted before tax and AM-bidrag, so you receive an immediate tax benefit. The contributions and scheme details are reported automatically to Skattestyrelsen.
• Private pension schemes – if you pay contributions yourself (e.g. to a private ratepension or livrente), you may be entitled to a tax deduction up to an annual limit. Different limits apply depending on whether the pension is a lifelong annuity or a time-limited pension.

Important aspects:

• There are annual maximum amounts for deductible contributions to certain pension types
• Exceeding the limits can result in non-deductible contributions or additional tax
• Some pension products do not give a deduction when you pay in, but are instead taxed more favourably when paid out

Always check the type of pension product you have and how contributions are reported. If you pay private contributions, you may need to enter or adjust them in TastSelv.

Work-related expenses and tools

Denmark allows deductions for certain work-related expenses that are necessary to earn your income and are not reimbursed by your employer. However, these deductions are subject to strict conditions and minimum thresholds.

Examples of potentially deductible expenses:

• Professional literature directly related to your job
• Special tools or equipment required for your work, if you pay for them yourself
• Certain professional courses and continuing education directly linked to your current job

In many cases, only the part of your total work-related expenses that exceeds a minimum annual threshold is deductible. You must be able to document the expenses with invoices or receipts, and you should keep this documentation for several years in case of a tax audit.

Double household and travel allowances

If you work in Denmark but maintain your main home in another location (for example, in another EU country) and have to keep a second home near your Danish workplace, you may qualify for deductions related to double household and travel.

Possible deductions include:

• Rent or housing costs for a second home near your workplace, under specific conditions
• Travel expenses between your main home and your workplace in Denmark, if they meet the criteria for temporary work assignments

The rules in this area are complex and depend on the duration of your stay, your family situation, the nature of your employment and whether your stay is considered temporary or permanent. Documentation of contracts, travel and housing costs is essential.

Cross-border workers and foreign employees

Foreign workers in Denmark can often use the same deductions as Danish residents, such as commuting, union fees and certain pension contributions, provided they are fully tax liable in Denmark or meet the conditions for special cross-border rules.

Key aspects for foreign workers:

• If you are fully tax resident in Denmark, you generally have access to the full range of personal deductions
• If you are only limited tax liable, your deductions may be restricted to expenses directly connected with your Danish income
• Under the cross-border worker scheme, individuals who earn most of their income in Denmark but live in another EU/EEA country may qualify for broader deductions similar to Danish residents, if specific income thresholds are met

Foreign employees should pay particular attention to correct registration of their tax card, address, commuting distance and any pension agreements, as these factors directly influence the deductions granted.

Other common personal deductions

In addition to the major categories above, individuals in Denmark may benefit from several other deductions and allowances, for example:

• Contributions to approved charitable organisations, up to an annual maximum amount
• Interest expenses on loans and mortgages, which are reported automatically by banks and mortgage institutions
• Child support payments (under specific conditions), which can give the payer a deduction and may be taxable for the recipient

Many of these deductions are reported automatically, but you should always check your preliminary income assessment and annual tax return to ensure that all relevant deductions are included and correctly calculated.

How to claim and optimise your deductions

To make full use of tax deductions and allowances in Denmark, you should:

• Log in to TastSelv and review your preliminary income assessment at least once a year or when your situation changes
• Enter or update your commuting distance, number of working days and any double household or travel arrangements
• Check that union fees, A-kasse contributions, pension contributions and interest expenses are correctly reported
• Keep documentation for all expenses you claim as deductions

Correct use of deductions can significantly reduce your effective tax rate. For many employees and foreign workers, a careful review of commuting, pension and union-related deductions is one of the simplest ways to optimise their tax position in Denmark.

Tax incentives for businesses (R&D deductions, innovation schemes and start-up reliefs)

Denmark offers a range of tax incentives designed to support research and development (R&D), innovation and early-stage businesses. Understanding these schemes can significantly reduce your effective tax burden and improve cash flow, especially in the start-up phase.

R&D deductions and cash refund of tax losses

Companies that carry out qualifying R&D activities in Denmark can benefit from enhanced tax treatment of their R&D costs. As a rule, R&D expenses are fully deductible as operating costs when calculating taxable income. In addition, Danish rules allow certain loss-making companies to receive a cash refund of the tax value of part of their R&D-related tax loss.

The key features are:

• R&D costs can be deducted at up to 103% of the actual expense for corporate tax purposes, effectively giving an extra 3% deduction on top of the normal 100% deduction.
• If the company has a tax loss that is attributable to R&D expenditure, it can apply for a cash payment of the tax value of the loss instead of carrying it forward.
• The refund is calculated using the standard Danish corporate tax rate of 22%, and is subject to an annual cap on the amount of loss that can be converted into a cash payment.

To benefit, the company must be tax resident in Denmark or have a permanent establishment in Denmark, and the activities must qualify as R&D under Danish tax rules (for example, systematic work to obtain new knowledge, develop new products, processes or services, or significantly improve existing ones). Routine adaptations or purely commercial activities generally do not qualify.

Innovation schemes and support for development activities

Beyond the basic R&D deduction, Denmark operates several innovation-oriented schemes that can indirectly provide tax advantages or improve the financial position of innovative businesses.

Key aspects include:

• Favourable treatment of development costs – many development expenses can be deducted immediately rather than capitalised and depreciated over time, improving the company’s taxable result and cash flow.
• Public innovation grants and subsidies – while not a tax incentive in the strict sense, grants from Danish innovation funds and programmes often reduce the net cost of R&D. Tax treatment of grants must be assessed carefully, as some may be taxable income while the related costs remain deductible.
• Collaboration projects – companies participating in approved innovation or research collaborations with universities or research institutions can usually deduct their own costs in full, even if part of the project is publicly funded.

When planning innovation projects, it is important to structure contracts, funding and intellectual property rights in a way that preserves eligibility for R&D deductions and avoids unintended tax consequences.

Tax reliefs and incentives for start-ups

Start-ups and early-stage companies in Denmark can benefit from several tax-related advantages that help manage cash flow and support growth.

Important elements include:

• Use of tax losses – tax losses can generally be carried forward without time limitation and used to offset future taxable profits. This is particularly relevant for start-ups that incur losses in the first years due to development and market entry costs.
• R&D loss refund for small and young companies – early-stage companies with significant R&D activities can apply for the cash refund of the tax value of R&D-related losses, which can be a crucial source of liquidity.
• Flexible choice of business form – entrepreneurs can choose between operating as self-employed (personligt ejet virksomhed) or through a company (ApS, A/S). Each form has different tax implications, including how losses are used and how profits are taxed, which can be optimised depending on the start-up’s expected development.

In addition, Denmark has various schemes outside pure tax law that support start-ups, such as innovation vouchers, soft loans and public co-financing programmes. These often interact with tax rules, for example in the way subsidies and equity investments are treated for tax purposes.

Why professional advice matters

Danish tax incentives for R&D, innovation and start-ups can be financially attractive, but they are also subject to detailed conditions and documentation requirements. It is essential to:

• identify which activities qualify as R&D under Danish rules
• separate R&D costs from other operating expenses in your accounting
• assess whether your company can benefit from the cash refund of R&D-related losses
• choose the most suitable legal and tax structure for your start-up

Working with a Danish accounting firm familiar with local tax practice helps ensure that you use all available incentives correctly, comply with SKAT’s requirements and avoid disputes or corrections in later tax audits.

Double taxation agreements and avoiding double taxation when working abroad

Denmark has an extensive network of double taxation agreements (DTAs) that are designed to ensure that the same income is not taxed twice – once in Denmark and once in another country. These treaties are especially important for employees, freelancers and business owners who live in Denmark and work abroad, or who live abroad and have income from Denmark.

How double taxation arises

Double taxation typically occurs when:

• you are tax resident in Denmark and earn income abroad (salary, business income, pension, rental income, dividends or interest), or
• you are tax resident abroad but have Danish-source income that is taxable in Denmark.

Denmark taxes residents on their worldwide income. At the same time, the country where the work is performed or where the income arises often has the right to tax that income as well. DTAs and Danish domestic rules determine how this conflict is resolved.

Tax residency and its impact on double taxation

Whether you are fully or limited tax liable in Denmark is crucial for avoiding double taxation. You are normally considered fully tax liable (tax resident) in Denmark if you have a home available here and stay in Denmark for at least 6 consecutive months (short trips abroad do not break the period). Tax residents are taxed on worldwide income, but can claim relief for foreign tax under DTAs or Danish rules.

If you are only limited tax liable, Denmark usually taxes only specific Danish-source income (for example salary for work performed in Denmark, Danish pensions, or income from Danish real estate). In that case, the risk of double taxation is lower, but you still need to check the relevant treaty to see which country has the primary right to tax.

Key methods for avoiding double taxation in Denmark

DTAs use two main methods to avoid double taxation, which are also reflected in Danish domestic law:

• Exemption method – Denmark exempts foreign income from Danish tax, but may take it into account when determining the tax rate on your Danish income (exemption with progression). This method is often used for employment income when you work abroad for a longer period and certain conditions are met.
• Credit method – Denmark taxes the foreign income, but you receive a credit for the tax paid abroad, up to the amount of Danish tax on the same income. This method is common for investment income, pensions and some types of business income.

The applicable method depends on the specific DTA and the type of income. If no DTA exists with a particular country, Denmark may still grant unilateral relief under domestic rules, but the protection is usually less favourable than under a treaty.

Working abroad as a Danish tax resident

If you live in Denmark and work abroad, you usually remain tax resident in Denmark unless you move your home and centre of vital interests abroad. In practice, this means:

• your foreign salary is generally taxable in the country where you physically perform the work, and
• Denmark taxes your worldwide income, but provides relief under the relevant DTA.

Many DTAs follow the OECD model and give the work country the primary right to tax employment income if you stay there for more than 183 days in a 12‑month period or if your employer is resident there. If you work abroad for a shorter period and specific conditions are met, the income may remain taxable only in Denmark.

In Denmark, the foreign salary is reported in your annual tax return and is either exempted (with progression) or taxed with a credit for foreign tax. You must be able to document foreign tax paid (for example with payslips or foreign tax assessments).

Special Danish rules for foreign work income

In addition to DTAs, Denmark has special regimes that can reduce Danish tax on foreign work income in specific situations. One important example is the so‑called “expat tax regime” for highly paid foreign specialists working in Denmark, which applies different rules but is not itself a double taxation agreement. For Danish residents working abroad, there are also specific relief rules for certain types of foreign employment, seafarers and cross‑border commuters, depending on the country and the DTA.

Cross-border commuters and remote work

Cross-border situations have become more complex with remote work. If you live in Denmark and work partly from home for a foreign employer, the following issues may arise:

• the foreign country may tax the part of your salary related to work physically performed there,
• Denmark may tax your full salary as a resident, and
• the foreign employer may create a permanent establishment in Denmark if your home office is considered a fixed place of business.

DTAs determine how to allocate taxing rights and how to avoid double taxation, but they do not always fully address modern remote work patterns. It is therefore important to clarify your tax position in both countries in advance and to ensure correct reporting and withholding.

Investment income, pensions and property abroad

Double taxation can also affect:

• Dividends and interest – the source country often withholds tax at a treaty-reduced rate (for example 15% instead of a higher domestic rate). Denmark then taxes the income and grants a credit for the foreign withholding tax, up to the Danish tax on that income.
• Foreign pensions – depending on the DTA, pensions may be taxed either in the country of residence, the source country, or both with a credit method.
• Rental income and capital gains from foreign property – usually taxable in the country where the property is located, while Denmark may exempt the income with progression or apply a credit, depending on the treaty.

Correct classification of income and knowledge of the relevant DTA articles are essential to ensure that you do not pay more tax than necessary.

Practical steps to avoid double taxation

To make effective use of double taxation agreements and Danish relief rules, you should:

1. Determine your tax residency status in Denmark and in the other country.
2. Identify which DTA applies and which articles cover your type of income (employment, business, pension, dividends, interest, royalties, property).
3. Check whether the exemption or credit method is used for your income.
4. Ensure correct withholding of tax in the work or source country (for example by providing residency certificates or DTA forms if required).
5. Report all foreign income in your Danish preliminary assessment and annual tax return, and keep documentation of foreign tax paid.

In many cases, you must actively claim treaty benefits in the foreign country or in Denmark. Without proper documentation and timely filing, you risk paying too much tax or facing penalties for incorrect reporting.

Why professional support is important

Double taxation agreements significantly reduce the risk of paying tax twice on the same income, but the rules are complex and differ from country to country. Small changes in your work pattern, residency status or contract structure can have a major impact on where and how your income is taxed. Professional tax advice helps you interpret the relevant DTA, choose the most favourable relief method available under Danish law, and ensure that all reporting and documentation requirements are met both in Denmark and abroad.

Tax cards (skattekort), preliminary income assessment and annual tax return (årsopgørelse)

In Denmark, the tax system for individuals is built around three key elements: the tax card (skattekort), the preliminary income assessment (forskudsopgørelse) and the annual tax return and final tax assessment (årsopgørelse). Understanding how these work and how they interact is essential to avoid underpayment, unexpected back taxes and penalties.

Tax card (skattekort) – how it works

Every person who earns taxable income in Denmark must have a tax card issued by the Danish Tax Agency (Skattestyrelsen). The tax card tells your employer or other payer how much tax to withhold from your salary or other income.

The tax card is fully digital and is sent directly to your employer via the SKAT system. You normally do not receive a physical card. There are three main types of tax cards:

• Main tax card (hovedkort) – used by your primary employer. It includes your personal allowance and the tax percentage calculated by SKAT.
• Secondary tax card (bikort) – used by secondary employers. It applies a fixed tax percentage without using your personal allowance.
• Tax exemption card (frikort) – used when your annual income is below the personal allowance. Income up to this limit is paid out without withholding A-tax, but AM-bidrag (labour market contribution) is still normally deducted.

Your tax card is based on the information in your preliminary income assessment. If your income or deductions change during the year and you do not update your preliminary assessment, your tax card will be wrong and you may end up with underpaid tax.

Preliminary income assessment (forskudsopgørelse)

The preliminary income assessment is SKAT’s forecast of your income, deductions and tax for the current income year. It is used to calculate your withholding tax rate and your tax card.

The assessment includes, among other things:

• Expected salary and other A-income (e.g. pensions, unemployment benefits)
• Expected B-income (e.g. some freelance income, fees, certain self-employed income)
• Expected interest income and interest expenses
• Expected deductions, such as commuting deduction, union fees, unemployment fund contributions and certain pension contributions
• Mortgage interest and other deductible costs reported by banks and financial institutions

SKAT normally issues the preliminary income assessment for the coming year towards the end of the preceding year. You can access and change it online via TastSelv. It is your responsibility to ensure that the information is correct and updated if your situation changes, for example if you:

• Start or stop a job, or change employer
• Receive a significant salary increase or decrease
• Move and your commuting distance changes
• Take or repay a mortgage or other large loan
• Start or stop self-employment or side business

If you do not update your preliminary assessment, SKAT will continue to withhold tax based on outdated figures. This can lead to a large amount of tax to be paid when the annual assessment is made, or to an overpayment that you only get back after the end of the year.

Annual tax return and final assessment (årsopgørelse)

After the end of the income year, SKAT prepares the annual tax return and final tax assessment, called årsopgørelse. This document shows your actual income, deductions, tax paid and whether you have overpaid or underpaid tax.

For most employees, the årsopgørelse is generated automatically based on information reported directly to SKAT by employers, banks, pension providers, unemployment funds and other institutions. You must then log in to TastSelv, review the information and correct or add any missing items, for example:

• Commuting deductions if they are not correct
• Deductible union fees and unemployment fund contributions if not fully reported
• Foreign income and foreign tax paid
• Income from self-employment or freelance work that has not been reported as A-income
• Rental income or other side income

When you approve or correct your årsopgørelse, SKAT calculates your final tax for the year. If you have paid too much tax, you will receive a refund, usually paid directly to your bank account. If you have paid too little, you must pay the outstanding amount within the deadlines set by SKAT. Larger underpayments can be split into instalments, but interest and possibly a surcharge may apply.

Deadlines and corrections

The Danish tax year follows the calendar year. The preliminary income assessment for a given year can normally be adjusted throughout that year. The årsopgørelse is made available by SKAT after the end of the year, and you have a set period to review and correct it.

If you discover errors in your årsopgørelse after you have approved it, you can still correct it for a number of previous years via TastSelv, as long as you are within the statutory correction period. Corrections that reduce your tax may lead to a refund, while corrections that increase your tax will result in an additional payment with interest from the original due date.

Practical tips for employees and foreign workers

For both Danish residents and foreign workers in Denmark, correct handling of the tax card, preliminary assessment and annual return is crucial:

• Always ensure that your main employer uses your main tax card and any secondary employer uses your secondary card.
• Update your preliminary income assessment promptly when your income or deductions change significantly.
• Check your årsopgørelse carefully each year, especially if you have multiple income sources or cross-border income.
• Keep documentation for deductions and foreign tax paid in case SKAT requests evidence.

A professional accounting partner familiar with Danish tax rules can help you set up and adjust your tax card, optimise your preliminary assessment and ensure that your annual tax return is correct and complete, reducing the risk of unexpected tax bills and penalties.

Deadlines, penalties and interest for late tax payments in Denmark

In Denmark, tax deadlines are strictly enforced and the Danish Tax Agency (Skattestyrelsen) applies automatic interest and surcharges if you pay late or report too late. Understanding the key dates and the financial consequences of delays helps you avoid unnecessary costs and problems with SKAT.

Main tax deadlines for individuals

Most employees and many self-employed individuals receive a pre-completed annual tax assessment (årsopgørelse). You are responsible for checking that it is correct and for paying any outstanding tax on time.

• Preliminary income assessment (forskudsopgørelse) – usually available for the following income year in the last quarter of the current year. You should update it whenever your income, deductions or personal situation change.
• Annual tax assessment (årsopgørelse) – normally issued in the first half of the year following the income year. If you owe tax, the assessment shows how much and by when you must pay.
• Deadline to correct årsopgørelse – you can usually correct information for the previous income year until 1 May of the following year without penalties, as long as you act on your own initiative.
• Payment of underpaid tax up to a certain limit – if your outstanding tax for the previous year does not exceed a specific threshold, SKAT will often collect it automatically via an increase in your A-tax (withholding tax) in the following year.
• Voluntary early payment – if you see that you will owe tax for the previous year, you can make a voluntary payment before the annual deadline to reduce or avoid interest and surcharges.

Self-employed persons and individuals with significant income not subject to withholding (for example, rental income or foreign income) must pay particular attention to updating their preliminary assessment and to the deadlines for paying B-tax (on-account tax instalments).

Deadlines for companies

Danish companies pay corporate income tax in instalments based on expected profit. The exact dates can vary slightly from year to year, but the structure is stable:

• Corporate tax instalments – normally two mandatory instalments during the income year, with the option to make voluntary additional payments.
• Final corporate tax settlement – after the company has filed its corporate tax return, SKAT calculates the final tax. Any underpaid tax must be paid by the deadline stated in the assessment; any overpaid tax is refunded with or without interest, depending on timing.
• Corporate tax return – must generally be filed within 6 months after the end of the income year, and no later than a fixed national deadline in the following year (for example, companies with calendar year must file in the autumn of the following year).

Late filing of the corporate tax return can lead to estimated assessments by SKAT and daily penalties until the correct return is submitted.

VAT (moms) deadlines

VAT-registered businesses must report and pay VAT regularly. The frequency depends on the size of the business:

• Small businesses – typically report VAT quarterly.
• Medium-sized businesses – often report VAT every month.
• Very small or new businesses – may in some cases report VAT half-yearly, depending on turnover and SKAT’s classification.

Each VAT period has a fixed deadline for submitting the VAT return and paying the VAT due, usually within one month and a few days after the end of the period. If you submit or pay VAT late, SKAT charges interest and may impose surcharges.

Interest on late tax payments

Denmark applies statutory interest on late tax payments. The interest rate is set by law and adjusted periodically. It is calculated as a percentage per year and typically applied on a daily basis from the day after the payment deadline until the day the tax is paid.

Key points about interest:

• Interest is non-deductible for individuals for most types of late payment interest.
• For companies, some interest and surcharges may be treated differently for tax purposes, depending on their legal classification.
• Interest is usually calculated automatically by SKAT and added to your outstanding balance.
• For underpaid tax from previous years, different interest rules may apply depending on whether the underpayment is discovered by you (and paid voluntarily) or by SKAT.

Surcharges and penalties

In addition to interest, SKAT can impose surcharges and penalties for late or incorrect tax handling. The exact amounts and percentages are defined in Danish tax legislation and can change over time, but the main categories are:

• Fixed surcharges for late filing – if you submit your tax return (individual or corporate) after the deadline, you may receive a fixed monetary surcharge. The amount can increase if the delay is significant.
• Percentage-based surcharges – in some cases, a percentage surcharge is calculated on the unpaid tax when payment is late beyond a certain grace period.
• Penalties for missing or incorrect reporting – if you fail to report income, VAT or payroll taxes, or if you provide incorrect information, SKAT can impose fines. The size of the fine depends on the seriousness of the error, the amount involved and whether the mistake was intentional or due to gross negligence.
• Estimated assessments – if you do not file a tax return, SKAT can issue an estimated assessment that is often higher than your expected actual tax. You must then provide correct information to have the assessment adjusted, and you may still have to pay interest and surcharges.

Deadlines and penalties for payroll taxes

Employers in Denmark must withhold A-tax and AM-bidrag from employees’ salaries and report and pay these amounts to SKAT on time.

• Monthly reporting – salary information must be reported electronically via the eIncome system (eIndkomst) each month.
• Payment deadlines – withheld A-tax and AM-bidrag must be paid to SKAT shortly after the end of the month in which the salary was paid. The exact date is fixed in the official payment calendar.
• Late payment – leads to interest and surcharges on the unpaid payroll taxes.
• Missing reporting – can result in fines and, in serious cases, criminal liability for the company’s management.

How to avoid interest and penalties

To minimise the risk of extra costs, it is important to organise your tax affairs proactively:

• Keep your preliminary income assessment up to date so that your withholding tax matches your actual income.
• Monitor your årsopgørelse and pay any outstanding tax as early as possible if you see that you will owe money.
• Use TastSelv and e-Boks to track deadlines, messages and payment information from SKAT.
• For businesses, maintain a clear calendar of VAT, payroll and corporate tax deadlines and reconcile your accounts regularly.
• Contact SKAT or a professional adviser early if you expect difficulties in paying on time; in some cases, payment arrangements can be made, which may reduce the risk of severe penalties.

By understanding the Danish rules on deadlines, interest and penalties, both individuals and companies can plan their cash flow better, avoid unnecessary costs and maintain a good relationship with the Danish Tax Agency.

Digital tax tools in Denmark: TastSelv, e-Boks and communication with SKAT

Denmark has one of the most digitalised tax administrations in the world. Almost all contact with the Danish Tax Agency (Skattestyrelsen, often still called SKAT) takes place online via secure platforms. Understanding how TastSelv, e‑Boks and other digital tools work is essential for employees, self‑employed persons and companies operating in Denmark.

TastSelv – your online self‑service tax account

TastSelv is the main online self‑service portal of the Danish Tax Agency. It is available in a browser and as a mobile app. Through TastSelv you can manage almost all tax matters without visiting an office.

Access to TastSelv is normally via MitID (the Danish digital ID). Foreigners who do not yet have MitID can in many cases log in using a TastSelv‑kode (personal TastSelv code) issued by the tax authority.

For individuals, TastSelv allows you to:

• view and update your preliminary income assessment (forskudsopgørelse) for the current year, including expected salary, deductions and allowances
• download and change your tax card (skattekort) used by your employer to withhold A‑tax and AM‑bidrag
• check your annual tax assessment (årsopgørelse) and see whether you have tax to pay or a refund
• enter or correct information about commuting deductions, interest expenses, union fees, unemployment insurance contributions, pension contributions and other tax‑relevant items
• register as self‑employed or close a business
• update your address, bank account for tax refunds and contact details

For businesses, TastSelv Erhverv (business version) is used to:

• register for and manage VAT (moms) and payroll taxes
• file VAT returns and pay VAT, typically monthly, quarterly or half‑yearly depending on turnover
• report and pay A‑tax and labour market contributions (AM‑bidrag) for employees
• submit corporate tax returns and view tax account balances
• manage import and export duties and excise taxes where relevant

Deadlines and payment information are clearly shown in TastSelv. If tax is not paid on time, interest and possible surcharges are calculated automatically and displayed in the system.

e‑Boks – secure digital mailbox for tax and public authorities

e‑Boks is a secure digital mailbox used by public authorities and many private companies in Denmark. Most residents and registered businesses are required to use e‑Boks and check it regularly.

The Danish Tax Agency sends important documents to e‑Boks, such as:

• notifications about your preliminary income assessment and annual tax return
• information on tax refunds or outstanding tax payments, including payment deadlines
• letters about tax audits, documentation requests or changes to your tax situation
• reminders and warnings regarding missing filings or late payments

Documents in e‑Boks are legally equivalent to paper letters. If you miss a deadline because you did not read a message in e‑Boks, the tax authority will normally still treat the letter as delivered. It is therefore important to keep your e‑Boks access active, especially if you move abroad but still have tax obligations in Denmark.

Communication with SKAT / Skattestyrelsen

Most communication with the Danish Tax Agency is handled digitally. In many cases you are expected to use TastSelv or e‑Boks instead of phone or physical meetings.

The main channels are:

• TastSelv messages and forms – for submitting information, uploading documentation and correcting tax data
• e‑Boks letters – for receiving official decisions, reminders and guidance
• Telephone and call‑back service – for complex or urgent questions; you can often book a call‑back time via the website
• Physical meetings – possible in special situations, usually after prior arrangement

When you contact the tax authority, you should have your CPR or CVR number ready and, where relevant, access to TastSelv so that you can review information together with the caseworker. For non‑Danish speakers, English‑language assistance is generally available, but written communication and system interfaces are primarily in Danish.

Digital tools for foreign workers and companies

Foreign employees and businesses often need to set up digital access shortly after arriving or starting activities in Denmark. Typical steps include:

• obtaining a CPR number (for individuals) or CVR number (for companies)
• registering for MitID or requesting a TastSelv code if MitID is not yet available
• activating e‑Boks to receive letters from the tax authority and other public bodies
• logging into TastSelv to request a tax card, check withholding and register for VAT or payroll reporting if you run a business

Without proper digital access, it is easy to miss deadlines for filing tax returns, VAT or payroll reports, which can lead to penalties and interest. For this reason, many foreign workers and entrepreneurs choose to work with a local accountant who can help set up and manage TastSelv and e‑Boks on their behalf, based on a power of attorney.

Efficient use of Denmark’s digital tax tools makes it easier to stay compliant, optimise your tax position and avoid unnecessary costs. For both individuals and companies, regular logins to TastSelv and e‑Boks should be part of standard financial routines.

Tax obligations for foreign companies operating in Denmark (permanent establishment, payroll)

Foreign companies doing business in Denmark must carefully assess whether their activities create a tax presence and what reporting obligations follow. Danish tax rules are strict, but the system is transparent and highly digitalised, which makes ongoing compliance easier once the correct setup is in place.

When does a foreign company have a permanent establishment in Denmark?

A key concept for foreign businesses is the permanent establishment (PE). If your company has a PE in Denmark, it becomes subject to Danish corporate income tax on the profits attributable to that PE.

In general, a PE exists when a foreign company has a fixed place of business in Denmark through which it carries out its activities, for example:

• a branch office or regional office
• a workshop, factory or warehouse used for own business
• a construction or installation site that lasts longer than the period specified in the relevant double tax treaty (often 6–12 months)
• an employee or agent in Denmark who habitually concludes contracts on behalf of the foreign company

Preparatory or auxiliary activities (such as pure storage or marketing support) may, in some cases, be excluded from PE status, but the exact assessment always depends on the nature and scope of the activities and on the applicable double tax treaty between Denmark and the company’s country of residence.

If a PE is created, the foreign company must register with the Danish Business Authority and the Danish Tax Agency (Skattestyrelsen), keep Danish accounting records for the PE and file annual corporate tax returns in Denmark.

Corporate tax obligations for foreign companies

Profits attributable to a Danish permanent establishment are subject to Danish corporate income tax at a flat rate of 22%. Taxable income is calculated according to Danish tax rules, including rules on depreciation, interest limitation, thin capitalisation and transfer pricing.

Foreign companies with a PE in Denmark must:

• obtain a Danish CVR number (business registration number)
• register for corporate tax and, if relevant, VAT and payroll taxes
• keep books and documentation in accordance with Danish accounting and tax rules
• file an annual corporate tax return (typically within 6 months after the end of the income year, subject to specific deadlines set by Skattestyrelsen)
• pay corporate tax in instalments and settle any remaining tax after assessment

Transfer pricing documentation is required when the foreign company has transactions with related parties. Denmark follows OECD guidelines and can impose penalties if adequate documentation is not available.

VAT (moms) registration for foreign businesses

Denmark applies a standard VAT rate of 25% on most goods and services. A foreign company must register for Danish VAT if it carries out taxable supplies in Denmark and is liable to charge Danish VAT.

Typical situations where VAT registration is required include:

• selling goods from a warehouse located in Denmark
• providing services with a place of supply in Denmark to private customers (B2C)
• operating a Danish branch or PE that sells goods or services locally

For distance sales of goods to Danish consumers from another EU country, special EU rules and thresholds apply. For many cross-border B2B services, the reverse charge mechanism shifts the VAT liability to the Danish business customer, which may remove the need for local VAT registration, but this must be analysed case by case.

Payroll obligations: when foreign companies hire employees in Denmark

Foreign employers with staff working in Denmark usually have withholding and reporting obligations, even if they do not have a permanent establishment. In most cases, the foreign company must register as an employer in Denmark and operate Danish payroll.

Key elements of Danish payroll for foreign companies include:

• A-tax (income tax withholding) – the employer withholds personal income tax from the employee’s salary based on the employee’s tax card issued by Skattestyrelsen.
• AM-bidrag (labour market contribution) – an 8% contribution withheld from the employee’s gross salary before income tax is calculated.
• ATP (Labour Market Supplementary Pension) – a statutory pension contribution, where the employer pays the main share and the employee a smaller part; rates are fixed amounts per hour or month, depending on working time.
• Holiday pay and other statutory benefits – depending on the employment contract and applicable collective agreements, the employer must ensure correct calculation and reporting of holiday entitlement and related payments.

Foreign employers must report salary, tax and social contributions electronically via the Danish eIncome system (eIndkomst) and pay withheld amounts to Skattestyrelsen within the statutory deadlines, typically on a monthly basis.

Social security and cross-border workers

Whether Danish or foreign social security rules apply depends on EU regulations and bilateral agreements. In many cases, employees temporarily posted to Denmark can remain covered by their home country’s social security system if they hold an A1 certificate. Without such documentation, Danish social security contributions and schemes may become mandatory.

Registration process and digital communication

Foreign companies must complete registration with the Danish Business Authority and Skattestyrelsen before starting taxable activities or paying salaries in Denmark. Once registered, the company receives access to digital self-service solutions such as TastSelv Erhverv, which are used for filing tax returns, VAT returns and payroll reports.

Official correspondence from Danish authorities is generally delivered via secure digital mail (e-Boks or similar solutions). It is therefore important to appoint a responsible person or advisor who monitors these communications and ensures that deadlines are met.

Consequences of non-compliance

Failure to register, withhold tax or file returns correctly can lead to:

• assessments of unpaid tax and VAT based on estimates
• interest on late payments
• administrative fines and, in serious cases, criminal penalties

Foreign companies are encouraged to clarify their Danish tax position at an early stage, especially regarding permanent establishment risk and payroll obligations. Professional advice can help structure activities in a compliant and tax-efficient way, reduce the risk of double taxation and ensure smooth cooperation with the Danish Tax Agency.

Tax aspects of hiring employees in Denmark (A-tax, ATP, holiday pay and reporting)

Hiring employees in Denmark comes with a number of specific tax and social security obligations. As an employer you are responsible for registering with the Danish tax authorities, withholding and paying A-tax (income tax at source), labour market contributions, ATP contributions and handling holiday pay and statutory reporting. Failing to comply can lead to penalties and interest, so it is crucial to understand the basic rules before you start employing staff.

Registering as an employer and getting a SE/CVR number

Before you can hire employees in Denmark, your business must have a Danish identification number:

• CVR number – for companies established in Denmark
• SE number – for foreign companies with tax obligations in Denmark

Registration is done with the Danish Business Authority and the Danish Tax Agency (Skattestyrelsen). When you register as an employer, you are set up for payroll reporting (eIndkomst) and payment of withheld taxes and contributions.

A-tax – withholding income tax from salary

A-tax is the Danish withholding tax on employment income. As an employer you must deduct A-tax from the employee’s gross salary every time you pay wages and transfer it to Skattestyrelsen.

The amount of A-tax to be withheld is not chosen by the employer. It is calculated on the basis of the employee’s electronic tax card (skattekort), which shows:

• the employee’s personal tax allowance (fradrag)
• the percentage rate to be used for withholding

You must always use the latest tax card available in the system. If an employee has not provided a tax card, you are normally required to withhold tax at a high default rate with no allowance, which significantly reduces the net salary.

Withheld A-tax must be reported and paid monthly. For most employers, the payment deadline is on the 10th or 17th of the following month, depending on the size of the payroll. Late payment triggers interest and possible surcharges.

AM-bidrag and ATP – mandatory contributions on top of A-tax

In addition to A-tax, employers must handle two key statutory contributions: the labour market contribution (AM-bidrag) and the ATP pension scheme.

Labour market contribution (AM-bidrag)

AM-bidrag is an 8% contribution calculated on the employee’s gross salary before A-tax. It is withheld together with A-tax and paid to Skattestyrelsen via the same monthly payroll reporting. The sequence is:

1. Calculate 8% AM-bidrag on gross salary
2. Subtract AM-bidrag from gross salary
3. Calculate A-tax on the remaining amount according to the tax card

All employees who are fully tax liable in Denmark and most employees with limited tax liability on Danish salary are subject to AM-bidrag, unless a specific exemption applies under a tax treaty or social security agreement.

ATP – Danish labour market supplementary pension

ATP (Arbejdsmarkedets Tillægspension) is a statutory pension scheme financed jointly by employer and employee. For standard full-time employees, ATP contributions are fixed amounts per month, not percentages of salary. The exact rates depend on the number of working hours and the type of employment, but the general structure is:

• the employer pays approximately two-thirds of the ATP contribution
• the employee pays approximately one-third, which you withhold from salary

ATP contributions are reported and paid together with other labour market contributions, typically via the same digital systems used for payroll reporting. Even part-time employees may be covered if they work above a minimum number of hours per month.

Holiday pay and holiday allowance in Denmark

Denmark has a statutory holiday system that employers must comply with. Employees earn 2.08 days of paid holiday for each month of employment, corresponding to 25 days per year. Under the current concurrent holiday system, holiday is accrued and can generally be taken in the same holiday year.

How you handle holiday pay depends on the type of employment and whether the employee receives paid holiday or holiday allowance:

• Employees with paid holiday – the employee receives normal salary during holiday. You continue to pay salary as usual when the employee takes leave, and no separate holiday pay is transferred to a holiday fund.
• Employees with holiday allowance (feriegodtgørelse) – typically hourly paid workers. You must set aside 12.5% of the employee’s holiday-qualifying salary as holiday allowance. This amount is usually reported and paid to FerieKonto or another approved holiday scheme.

Holiday pay and holiday allowance are subject to AM-bidrag and A-tax when they are paid out. You must also ensure correct reporting of accrued and used holiday in your payroll system and in the reports sent to the authorities.

Mandatory payroll reporting – eIndkomst and digital systems

All employers in Denmark must report salary information digitally through the eIndkomst system. Each pay period you must submit:

• gross salary and taxable benefits
• withheld A-tax and AM-bidrag
• ATP contributions and other statutory contributions
• holiday pay or holiday allowance accrued and paid

Reporting is done electronically, either directly from your payroll software or via Skattestyrelsen’s online solutions. The reporting deadline is closely linked to the payment deadline for A-tax and AM-bidrag, and late or incorrect reporting can result in penalties.

Other employer obligations: social contributions and insurances

Compared to many other countries, Denmark has relatively few separate social security contributions for employers, but there are still several mandatory schemes you must be aware of, such as:

• contributions to labour market funds (for example maternity and industrial injury schemes)
• mandatory industrial injury insurance for employees
• possible contributions to collective schemes if you are covered by a collective agreement

These costs are in addition to gross salary, A-tax, AM-bidrag and ATP, and should be included in your total employment cost calculations.

Foreign employers and cross-border situations

Foreign companies hiring employees who work in Denmark often have the same obligations as Danish employers. If the employee’s work creates a permanent establishment or a payroll obligation in Denmark, the foreign company must:

• register for a SE or CVR number
• withhold A-tax and AM-bidrag on Danish-source salary
• pay ATP and other mandatory contributions, if applicable
• report payroll via eIndkomst

In cross-border situations, EU social security rules and double taxation treaties may influence where social security contributions and income tax are paid. It is important to analyse each case individually to avoid double contributions or non-compliance.

How a Danish accounting firm can help employers

Because the Danish payroll and tax system is highly digitalised and rule-based, even small mistakes in A-tax, AM-bidrag, ATP or holiday pay can quickly lead to corrections and additional costs. A specialised accounting firm in Denmark can assist with:

• employer registration and setup in Danish systems
• ongoing payroll calculation and eIndkomst reporting
• correct handling of holiday pay and holiday allowance
• advice on tax treatment of benefits, bonuses and allowances
• compliance for foreign employers and cross-border employees

Outsourcing payroll and tax compliance helps ensure that your company meets all Danish employer obligations while you focus on running your business.

Exit tax and tax implications of moving to or leaving Denmark

Moving to or from Denmark can have significant tax consequences for both individuals and companies. Danish rules on tax residency, exit tax and limited vs. full tax liability determine where and to what extent your income and assets are taxed. Proper planning before a move is essential to avoid unexpected tax bills and double taxation.

Tax residency when moving to or leaving Denmark

In Denmark, your tax position depends primarily on whether you are considered tax resident or limited tax liable.

You are normally treated as tax resident in Denmark if:

• You have a home (permanent dwelling) at your disposal in Denmark, and
• You stay in Denmark for at least 6 consecutive months (short holidays abroad do not break the period).

Tax residency usually starts on the day you move into a permanent home in Denmark. It normally ends when you give up your Danish home and move abroad with the intention of settling there. From that moment, you are typically subject only to limited tax liability in Denmark on certain Danish-source income (for example salary for work performed in Denmark, Danish rental income or dividends from Danish companies).

Exit tax on shares and certain financial assets

When you cease to be fully tax resident in Denmark, you may be subject to exit tax on unrealised capital gains on shares and some financial instruments. The idea is that Denmark taxes the increase in value that accrued while you were resident, even if you have not yet sold the assets.

Exit tax can apply, for example, to:

• Listed and unlisted shares
• Share options and certain employee share schemes
• Some investment certificates and similar securities

There is a threshold for individuals: if the total value of your share portfolio is below approximately DKK 100,000 at the time you leave Denmark, exit tax will normally not be triggered. If the value exceeds this amount, Denmark calculates a deemed sale at market value on the day before you become non-resident.

The deemed gain is taxed as capital income or share income according to the general Danish rules. For individuals, share income is taxed at progressive rates: 27% up to a certain annual amount (for most taxpayers around DKK 61,000) and 42% on amounts above this threshold. Married couples can usually pool their thresholds.

Deferral and payment of Danish exit tax

In many cases, you do not have to pay the full exit tax immediately when you move. Denmark allows deferral of payment under specific conditions, especially if you move to another EU/EEA country.

Key points regarding deferral:

• If you move to another EU/EEA country, you can normally obtain an automatic deferral of the exit tax without providing bank guarantees, as long as you continue to meet the conditions and report to the Danish Tax Agency.
• If you move to a non-EU/EEA country, deferral may still be possible, but the tax authorities can require security (for example a bank guarantee) for the deferred tax.
• The deferred tax becomes payable if you actually sell the shares, transfer them out of the EU/EEA, or in some cases if you die or move again.

Interest may accrue on deferred amounts. It is therefore important to calculate whether deferral or voluntary payment is more advantageous in your situation.

Other tax implications of leaving Denmark

When you move out of Denmark, several other tax aspects should be reviewed:

• Final Danish tax return – you must file a final tax return including income up to the date you become non-resident. This includes salary, business income, pensions, capital income and any capital gains realised before departure.
• Tax cards and withholding – your Danish tax card (skattekort) and preliminary income assessment must be updated. If you continue to receive Danish income (for example pension or rental income), the withholding tax rate may change.
• Pension schemes – Danish pension payouts are often taxable in Denmark even after you move abroad, depending on the applicable double tax treaty. Early withdrawal of pension savings can trigger significant Danish tax (often up to around 60% on certain schemes).
• Real estate in Denmark – if you keep a property in Denmark and rent it out or later sell it, you may be subject to Danish tax on rental income and capital gains. The Danish property value tax (ejendomsværdiskat) may also apply if the property is considered at your disposal.
• Business and permanent establishment – if you own a Danish company or operate a business with a permanent establishment in Denmark, Danish corporate or business tax may continue to apply even after you move.

Tax implications of moving to Denmark

When you move to Denmark, you typically become fully tax liable on your worldwide income from the date you acquire a permanent home or meet the 6‑month stay rule. This means:

• Your salary, business income, pensions, rental income and most capital income from both Danish and foreign sources may be taxed in Denmark.
• You must obtain a Danish CPR number and register with the Danish Tax Agency to receive a tax card.
• Special expat tax schemes may be available for certain highly paid employees and researchers, allowing a flat tax rate of 27% plus 8% labour market contribution (AM-bidrag) for a limited period, subject to strict conditions on salary level and employment.

Foreign assets such as shares and property are generally not subject to Danish exit tax when you move into Denmark, but future gains accrued while you are resident can become taxable in Denmark. It is therefore important to document the value of your assets at the time you become tax resident.

Double taxation agreements and cross-border moves

Denmark has an extensive network of double taxation agreements (DTAs) that coordinate taxing rights between Denmark and other countries. These treaties are crucial when you move across borders, as they help determine:

• In which country you are considered tax resident under treaty tie-breaker rules
• Which country has the primary right to tax salary, pensions, dividends, interest and capital gains
• How double taxation is eliminated (credit method or exemption method)

Even if Denmark imposes exit tax or continues to tax certain income after you move, a DTA may allow a credit for foreign tax or limit Danish taxing rights. A detailed review of the relevant treaty is therefore essential in any relocation planning.

How professional support can help

Exit tax rules and cross-border tax issues are complex and depend on your personal situation, the composition of your assets and the country you are moving to or from. Professional advice can help you:

• Determine the exact date your Danish tax residency starts or ends
• Calculate potential exit tax on shares and other assets
• Apply for deferral of exit tax and choose the most tax-efficient strategy
• Coordinate Danish rules with foreign tax law and applicable double tax treaties
• Prepare and file all required Danish tax returns and notifications on time

Careful planning before you move can significantly reduce your overall tax burden and ensure full compliance with Danish tax regulations.

FAQ

1. What taxes do I have to pay when deciding to live and work in Denmark?
   When you decide to live and work in Denmark, you have to pay a number of taxes, the type and amount of which depend both on your income and whether you run your own sole proprietorship or company, whether you are an employee of a Danish company with an employment contract for an indefinite or fixed term, or whether you are an unemployed person drawing benefits from a-kasse.
   
   In Denmark we have taxes such as:
   • income tax (3 thresholds: basic, middle and highest),
   • Church tax,
   • VAT,
   • CIT,
   • excise duties,
   • environmental taxes
   • land tax,
   • tax on the value of real estate assessed at public valuation,
   • city tax,
   • tax on hiring foreign labour to work in Denmark,
   • pension and health insurance contributions,
   • customs duty.
2. What is the tax-free amount in Denmark?
   The tax-free amount is determined in Denmark every year and in 2019 has been set at 10.10 per cent of gross salary - no more than DKK 37,200 per year.
3. What are the tax thresholds in Denmark?
   There are 3 income tax thresholds in Denmark: basic, middle and highest. The amount of income tax is determined each year and in 2019 its percentage rates have been set at:
   • 8% for income below DKK 50 217,
   • 39.2% for income between DKK 50,217 and DKK 558,043,
   • 56.5% for income above DKK 556,043.
4. By when do I have to submit my tax return when running a business in Denmark?
   In Denmark, Skattestyrelsen sends out a pre-filled tax return form - Selvangivelse - which must be completed and corrected and then submitted via www.skat.dk by 1 July.
5. When will I receive my tax refund when I run my own business in Denmark?
   If you run your own business in Denmark, expect to receive a tax decision document - Årsopgørelse - after 2 July, with the refund amount (Skat til udbetaling) marked in green or the surcharge amount (Restskat til betaling) marked in red. This document is issued and sent, to the address given when registering the company, by SKAT. If you wish to check the tax decision, you can also click on Se årsopgørelsen on your individual skat.dk account, and you can make corrections to the form by clicking on Ret årsopgørelsen/oplysningsskemaet.
6. What laws apply to income tax in Denmark?
   In Denmark, the laws relating to income tax are:
   • Kildeskatteloven - Withholding tax act,
   • Ligningsloven - The Tax Assessment Act,
   • Skattekontrolloven - The Tax Audit Act,
   • Personskatteloven - Income Tax Act.
7. Who is subject to limited tax liability in Denmark?
   In Denmark, limited tax liability - begrænset skattepligt - applies to persons working in Denmark but living outside Denmark or employed by a Danish company under a fixed-term employment contract.
8. What is a double taxation treaty?
   A double taxation agreement is designed to protect taxpayers from double taxation. The bilateral tax treaties between Denmark and other countries say that:
   • income that is earned in the country of employment will only be taxed once (where it is earned), and exempt from tax in the country of residence or domicile (taxpayers are required to pay tax in the country with the higher tax rate),
   • taxes paid in the country of employment will be deducted from the taxes to be paid in the country of residence or domicile.
9. What does Danish excise duty cover?
   Punktafgift, or Danish excise duty, which is levied on goods, according to EU directives, and covers, for example, chocolate, snuff, tea, wines, fruit wines, confectionery, cigars, cigarillos, natural gas, Hawaiian cigars, chocolate, chewing tobacco, beer, liquid gas, cigarettes, pipe tobacco, cigarette papers, electricity, car tyres, alcohol and coffee.
   
   Differentiated excise duty covers: fuels, disposable packaging, ice cream, coffee, light bulbs, video cassettes, tobacco products, spirits, beer, chocolate products, wine, tea, cars. It is worth remembering that Denmark has also introduced its excise taxes, which you should be aware of when running a business in the country.
10. What tax reliefs am I entitled to when living and working in Denmark?
    If you live and work in Denmark, you are entitled to tax relief, the rates of which are usually set each year, for e.g:
    • commuting to work, which is affected by the number of commutes and the distance travelled. All employees of companies in Denmark whose journey from their place of residence to their place of work, irrespective of the means of transport, is 24 kilometres in both directions are eligible for this tax relief, which also applies to commuting from their country of origin to work in Denmark. If you want to benefit from this relief, you will need to present e.g.: bus tickets, ferry tickets, fuel receipts, Danish public transport tickets or airline tickets (DKK 1.94 per 1 km, round trip distance from 25 km to 120; and DKK 0.97 per 1 km for distances above 120 km round trip - 2018 data),
    • accommodation, which can be used by temporary workers if they present the rental agreement for the premises and accommodation receipts or bank statements for rent and utilities. It is also necessary to present pay slips for the period in question, in case the employer has deducted a percentage of the costs from the employee's salary (in 2018, it was DKK 214 per day).
    • Interest expenses on mortgages and consumer loans, which can be used by taxpayers who are paying such a loan and who receive a minimum of 75 per cent of their annual income from work in Denmark. If you are married, you must also take your spouse's income into account. If you want to take advantage of this tax relief, you must provide an English or Danish-translated certificate in your annual tax return with details such as the amount of interest paid, the name of the bank and the type of loan, and a certificate from the bank confirming the amount of interest paid in the year. With a mortgage you must also deduct 1% of the value of the property,
    • Bridge crossing, for taxpayers who have to cross a toll bridge to get to work,
    • Cross border, for taxpayers with a minimum of 75% of their annual income from work in Denmark. For married couples, you must include your spouse's income in your joint annual tax return (your spouse's domestic income should not exceed DKK 42,000). If you wish to take advantage of this relief, you must provide both a marriage certificate, translated by a sworn translator into English or Danish (the marriage certificate may be on an EU form), and a certificate from the tax office stating your spouse's and your own income,
    • running a dual household, for taxpayers running a second household in their place of residence. If you wish to take advantage of this allowance, you must present both your marriage certificate (which may be on an EU form) and a certificate from your municipality stating that you and your spouse have a joint place of residence (all documents should be translated into English or Danish by a sworn translator),
    • board, for temporary employees (in 2018, this allowance was DKK 498 per day).
    • Under the special expatriate tax regime in Denmark, individuals employed in the country, including scientists assigned to Denmark, may have the opportunity to request a flat rate taxed at 27 % on their gross salary. This favorable tax rate can be applicable for a duration of up to 84 months.
11. What is a-kasse?
    A-kasse (arbejdsløshedskasse) - is a Danish organisation that offers voluntary unemployment insurance. The cost of such insurance starts at DKK 479 per month if you have a full-time job.
12. When am I entitled to Feriepenge and Personfradrag?
    Feriepenge, or holiday pay for those working legally in Denmark (2.08 days of holiday for each month worked - 5 weeks; a minimum of 3 weeks of this holiday must be taken during the holiday period, i.e. between 1 May and 30 September. You can also apply for Feriepenge up to 6 months after you have left your job in Denmark, if you register at the Folkeregister municipal office before you leave Denmark. Holiday pay is paid into your NemKonto for up to three months, for the previous tax year (which runs from 1 January to 31 December), and can only be used in the following holiday year (between 1 May and 30 April).
    Personfradrag, on the other hand, is a personal tax credit for all Danish residents who have worked in Denmark for 12 months.
13. What is the Danish cadastral tax?
    The cadastral tax in Denmark, or ejendomsværdiskat, is a state tax on the value of real estate. Who can be exempted from this tax?
    • taxpayers who have moved out of the property before the sale,
    • taxpayers who own a property in another country and pay the tax there (proof of payment must be provided),
    • taxpayers who rent out the property can apply for total exemption (when renting out the entire property) or partial exemption (when renting out part of the property); then, unfortunately, you have to pay more than the cadastral tax on the rent,
    • taxpayers who move can be exempted from paying this tax for the duration of the move, for a maximum period of a few months, between the purchase of the property and the move into the property; a longer period involves a tax surcharge from the moment the property sale contract is signed,
    • in the event that the property is uninhabitable because it has been damaged by forces beyond our control,
    • relief for persons over 65 years of age - 0.4 %, with a maximum of DKK 6 000 for year-round houses and DKK 2 000 for holiday homes,
    • where the property is jointly owned, it is sufficient for one person to be over 65,
    • the relief granted is retained by persons before the age of 65 whose deceased spouse was over 65,
    • if the property was purchased before 1 July 1998, the tax rate can be reduced by 0.2%,
    • if the person has not lived in the property for a year, the tax rate may be reduced by 0.4% (not more than DKK 1 200).
14. Where can I obtain CPR?
    The Personnummer, or CPR (personal taxpayer identification number), is issued by SKAT (the Tax and Customs Administration). The CPR is needed to settle both VAT and income tax in Denmark. In Denmark, the entity that issues taxpayers with a tax identification number - CPR (Central Person Register), is Folkeregistret (Citizens Service Office or, based in Aalborg, Copenhagen and Aarhus, the Foreigners Service Office), With a CPR, you have the right to free health care in Denmark (to obtain a CPR, you need an employment contract, proof of identity and a tenancy agreement).
15. What is Arbejdmarkedsbidrag and Sundhedsbidrag?
    Arbejdsmarkedsbidrag (AM-bidrag) is an 8 per cent contribution to the labour fund in Denmark. Arbejdsmarkedsbidrag is a gross tax, as all income from employment or self-employment is taxed at 8 per cent before tax.
    Sundhedsbidrag, on the other hand, is the 8% health insurance contribution in Denmark.
16. What are indirect taxes?
    Indirect taxes encompass levies and charges settled through the purchase of goods and services. Each time you acquire an item or, for instance, turn on your water faucet, you pay indirect taxes to the state. These taxes are embedded in the overall cost of the goods or services you purchase