In Denmark, the body responsible for tax collection and administration, called Skattestyrelsen, is the equivalent of the Lietuvos Valstybinės mokescių inspekcija and Polish Tax Administration. In Denmark, taxes can be divided into two categories: direct and indirect. Direct taxes are deducted from personal income, indirect through the purchase of goods and services. In the following section, we will describe in detail the taxes paid in Denmark. Also, the relevant fees are included in our payroll calculator, which allows you to calculate what wages you would get in hand after tax deduction.
DIRECT TAXES
They include taxes deducted by your employer from your salary and property and land taxes.
Direct Pensions Contributions (Pensionsbidrag AMP)
Direct pension contributions represent about 4% of total salary. In addition, the employer pays a pension equal to 8% of your salary.
Contributions to supplementary pension funds (ATP bidrag)
Labor market supplementary pension funds. All employees from the age of 16 to retirement under a certain scheme pay contributions to the labor market supplementary pension fund.This fund is also paid when you use sickness benefits, unemployment benefits (dagpenge) or maternity / paternity benefits and some other social benefits.
Every time your employer pays you a salary, a part of the money goes to the labor market supplementary pension fund. When you work full-time, your fee is 90 DKK per month. The part of your salary paid into this fund is 1/3 of the contribution, the employer pays 2/3 of the contribution, or the additional 180 DKK. When you retire, you will receive your accumulated labor market supplement along with the usual state-funded pension.
Labor market contributions (Arbejdsmarkedsbidrag (AM-bidrag))
All employees must pay contributions to the labor market. This tax accounts for 8% of personal income. It is deducted from the salary by the employer. This tax is levied to enable states to pay sickness benefits, unemployment benefits, maternity/paternity leave, additional training costs etc. The contribution is deducted from the total wage, after deducting the contributions of the supplementary pension funds in the labor market and before deducting other benefits.
All taxes mentioned above are deducted from your total salary, regardless of the tax-free amount that applies to you. The remaining fees are deducted after taking into account your tax-free amount (Skattefradrag).
State Tax (Bundskat)
Part of your income tax is charged by the state. The percentage of state taxes you pay is the same – 6.83%, regardless of where you live, but the specific tax amount depends on the person’s income. The amount of tax paid to the state is determined by the Danish Parliament.
State taxes are divided into:
bottom-bracket tax – a lower tax is charged on certain annual income exceeding a certain amount set by the state (DKK 46 200 in 2019), after deducting contributions to the labor market.
top-bracket tax – higher tax of 15% on the amount exceeding DKK 513.400 (after AM-bidrag) in 2019.
Health Insurance Premiums (Sundhedsbidrag)
From 2019, health insurance contributions are not calculated.
Municipal tax (Kommuneskat)
A certain percentage of personal income is paid as a fee to the municipality in which the person lives. Each municipality sets its own tax rate, so the percentage of tax paid by people living in different municipalities may vary, but on average it is 24.9%. By clicking on this link you can see what the fee is in your municipality
Church fee
Prayer houses in municipal areas are maintained from the collected church tax. In Denmark, around 79% of the population are members of the Danish Evangelical Lutheran Church and all of them pay a church fee.
The municipal tax rates are set by municipalities. They are collected together with other direct taxes.
If you are a member of another church or religious community and you pay contributions to your church or association, your contributions are deducted from the amount of taxable income.
These four above-mentioned taxes are commonly called A-SKAT.
A-SKAT / A-Tax (Income Tax)
The fee is directly deducted from your A-class income. Your employer deducts the income tax you owe on the basis of the deduction rate provided in your primary tax card.
B-SKAT / B Fee (Retrieving Income Not Reported From Card)
The B fee is paid on your B-class income.
Class B income is the income on which no tax or contributions to the labor market were collected before the amount was received. For example, if you work as a freelancer or have received payment for a concert, training or similar activity, you must make sure that taxes and contributions to the labor market will be paid on income B.
In order to avoid tax arrears, it is expedient to obtain a preliminary estimate of your income and taxation in order to obtain a B-class income. (See preliminary earnings estimates and taxation below).
Asset Value Fee, Fee From Asset Value
If you own the property, you have to pay the state a tax calculated on the value of your property – the property value tax. SKAT performs valuation of assets of physical persons in odd years, and assets of business entities in equal years.
The property value tax also applies to property owned abroad by persons residing in Denmark and property in Denmark managed by persons residing abroad. The property value tax is included in the total amount of tax you pay per year. Normally SKAT automatically enters the required information, but requires the person to inform SKAT about his/her property abroad.
Real Estate Tax, Land Value (Land Tax)
If you have real estate or land, you have to pay the municipal property tax calculated on the value of the land – the land tax. Municipalities determine and collect the amount of this type of property tax.
INDIRECT TAXES
Indirect taxes are VAT, customs, green taxes and excise duties. They are included in the prices of goods and services and are paid for by purchasing those goods or services. Sellers and service providers, in turn, are responsible for paying those taxes to the state.
VAT
In Denmark, VAT is included in the prices of almost all goods and services. Its size is 25%.
Green fees
Green taxes are paid for using public resources. Petrol, oil, electricity, water and waste management are examples of resources subject to green taxes.
Excise duties
Excise duty is levied on certain goods imported, produced or sold. Excise duty is included in the price you pay for the goods you buy at stores, for example alcohol, wine, beer, batteries, chocolate or sweets. In addition, registration fees are collected for cars and motorcycles.
Customs
If you purchased goods outside of the EU and brought them to Denmark, you may have to pay customs duties. It depends on what you bought and how much you paid. Special rules apply to alcohol and tobacco products. If you have bought more alcohol and tobacco than a certain non-taxable amount, you have to pay a customs duty.
You must declare the goods and pay customs duties when you arrive in Denmark (at the airport or in the border area).
More information about customs can be found at skat.dk/english.