Danish Income Tax

Individuals who permanently reside or are present in Denmark for longer than six months or in certain circumstances have an abode in Denmark, are deemed to be resident for tax purposes. Residents are taxed on their worldwide income. Non-resident individuals are taxed on their Danish-source income.  Taxpayers are subject to a national income tax, a national surtax (health contribution) and a municipal tax. Employment income is subject to income tax as personal income. It consists of salaries, pensions, allowances and fringe benefits. 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. Employees may deduct travel costs to and from work, contributions paid to trade unions and unemployment insurance as well as other allowable expenses which exceed DKK 5’400 from their taxable income. Premiums to qualified annuity pension schemes are fully deductible, contributions to capital pension schemes are only deductible up to a maximum of DKK 44’500 per year. A special employment deduction of 4% applies for employees and self-employed persons, but this is limited to DKK 12’300. There is a personal tax credit of 5.48% of the personal allowance of DKK 41’000 which can be offset against the national income tax liability. Tax returns must be filed by 1 May of the year following the tax year. Married persons file separate tax returns. National income tax liability is the aggregate of taxes levied on six different tax bases: the basic rate of 5.48% applies to total income less deductions up to DKK 279’800, the 6% medium rate applies on income over DKK 279’800. A 15% higher rate is calculated on the part of taxable income adding back certain pension contributions that exceed DKK 335’800. Shares are taxed at 28% up to DKK 46’700 (double the amount for married couples), 43% on income not exceeding DKK 102’600 and 45% on any excess. If the aggregate of the national and local income taxes exceeds 59%, the 15% national tax rate is reduced by the excess. The rate of the national surtax called health contribution is 8% calculated on the taxable income.  The municipal income tax rates vary between 20.14% and 26.71% (24% in Copenhagen).

Foreigners employed by a Danish-resident employer may qualify for a special expatriate tax regime if they are resident in Denmark and earn at least DKK 60’700 per month after deduction of social security contributions. Their employment income is taxed at a flat rate of 25%, usually for a maximum of 36 months.