Denmark - Tax Guide for Freelance Contractors
Welcome to our guide to Taxation in Denmark. You will find a wealth of information which will be useful if you plan to work in, or place consultants in, Denmark.
Our tax guides give a general overview of the actual taxation rates and rules at the time of writing. There are of course many ways to legally reduce tax or social security burdens in Denmark. Please contact us for more information or an actual breakdown of your situation, and to find out more about our range of payroll and contact management services in Denmark.
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Danish Income Tax
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Umbrella and Contract Management Services in Denmark
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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,
- fringe benefits,
- certain benefits in kind.
Certain deductions are permissible for 2012 including:
- interest expenses under certain conditions,
- charitable donations between DKK 500 and DKK 14'500 to approved insitutions,
- travelling expenses from home to work, membership fees to professional trade associations and union subscriptions under certain conditions,
- personal allowance of DKK 42'900 or DKK 32'200 for unmarried individuals below the age of 18.
Income tax rates for 2012:
Taxpayers are subject to a national income tax, a municipal tax and church tax as well as a health contribution.
- 25.9% in municipal tax, rates are determined by each county,
- 0.42% - 1.5% church tax, only applicable to members of the Danish State church,
- 7.00% for the health contribution.
National income tax for 2012:
- 4.64% on personal income plus net income from capital,
- 15.00% on personal income exceeding 389'900,
- 27.00% on income from shares not exceeding DKK 48'300,
- 42.00% on income from shares exceeding DKK 48'300,
- 6.00% "compensatory tax" on pension payments exceeding DKK 362'800.
Scientists and foreign employees recruited abroad to work in Denmark may choose a fixed tax rate of 31.92% over a period of five years as an alternative to the ordinary Danish progressive taxes with a marginal tax of up to 51.50%. Only the expatriate's salary is subject to the 31.92% flat rate. All other forms of income are subject to the regular rates.
By 1 May or 1 July of the year following the tax year.