Denmark - Tax Guide for Freelance Contractors

Tax residents in Denmark:          are liable to pay Danish tax on their worldwide income,
Non tax residents in Denmark:   are liable to pay tax only on their Danish-source income.

Individuals will be regarded as full tax residents:

• if they permanently reside or are present in Denmark for longer than six months,
• if they have an abode in Denmark.

Married persons usually file separate tax returns.

Taxable income includes:

• employment income,
• pensions,
• allowances,
• fringe benefits,
• professional multimedia benefits (internet, computer, telephone), under certain conditions,

Benefits are in principle taxable at their market value, but for certain benefits like personal use of a company car and accommodation there are special calculations.

Certain deductions are permissible for 2010 including:

• travel costs to and from work (capped to DKK 50'000 per year), 
• employment allowance,
• contributions paid to trade unions,
• fees paid to unemployment funds,
• child maintenance,
• premiums to qualified annuity pension schemes (capped to DKK 100'000),
• a tax credit is computed on the basis of a personal allowance of DKK 41’000,
• a green check of DKK 1'300 for each adult and DKK 300 for children under 18 (with a reduction of 7.5% depending on income),
• interest expenses up to DKK 50'000 per year.

Income tax rates for 2010:

Taxpayers are subject to a national income tax, a municipal tax and church tax as well as a labour market contribution. 

Municipal tax for 2010 - the rates are determined by each county:

• 25.5% (in average) 

Labour market contribution for 2010:

•  8%

Church tax for members of the Danish State Church for 2009:

•  0.48% to 1.5%

National income tax for 2010:

•   3.75% basic rate applied on income up to DKK 393'400
• 15.00% top bracket rate applied on income exceeding DKK 393'400
• 27.00% capital gains on shares and dividend for income up to DKK 48'300, (double the amount for married couples),
• 42.00% on share income above DKK 48'300. 

Scientists and foreign employees recruited abroad to work in Denmark may choose between a fixed tax rate of 25% in three years and 33% for five years as an alternative to the ordinary Danish progressive taxes with a marginal tax of up to 51.50%. In principle, the decision between 25% and 33% is final, but there is an option of altering the decision once. This new law is applicable to residents or non-residents taxable in Denmark in connection with recruitment abroad to perform work for a Danish employer or a foreign employer with a permanent establishment in Denmark.

As from January 1st, 2010, the non-residents employees subject to the above flat tax rates, will also be subject to pay the 8% Labor Market tax contribution, even if they contribute to their home country social security regime.

Filing date:

By 1 May or 1 July of the year following the tax year.

MIscelleanous

New Multimedia Tax introduced in 2010

A new multimedia tax has been introduced amounting to a taxable fixed sum of DKK 3'000. The amount is considered as income to be taxed at source. If both spouses in a household are provided with one or more multimedia device, each of them will be taxed on DKK 3'000.