26/09/2025
Danish tax system
In the Kingdom of Denmark, taxes are characterized by their high level and ability to progressively adjust to the income of subjects, both legal and physical. It is possible to deduct various expenses, such as pension or insurance premiums, alimony, food expenses or commuting costs from home to work. It is important to note that the Danish Tax Authority (SKAT) has up to seven years to audit and verify the compliance of these expenses.
Tax rates in Denmark vary depending on the role of the subject - employee of a Danish company, sole proprietor, company president or shareholder.
Highlights of taxation in Denmark:
1. Income taxes, for 2019, are as follows:
- 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 558,043.
2. The scope of the laws that regulate Dansk taxation are:
- Personskatteloven - personal income tax,
- Skattekontrolloven - tax control regulations,
- Kildeskatteloven - source tax regulations,
- Ligningsloven - tax assessment regulations.
3. Taxable income includes state tax, city tax, health insurance premiums (sundhedsbidrag) and labor market contributions (arbejdmarkedsbidrag, or AM-bidrag). It is worth mentioning that the voluntary church tax accounts for about 0.92%.
4. In addition, the Danish municipal tax, payable to regional governments, averages 24.92%.
5. The procedure for registration with the regional Customs and Tax Administration is through the Agency for Enterprise and Trade.
6. Taxation related to share income is 27% (up to DKK 54,000) or 42% (above DKK 54,000).
7. When a company operates in Denmark, corporate tax is 22% CIT. However, if its annual turnover is above DKK 50,000, it becomes liable for 25% VAT.
8. For exports of goods and services, the VAT rate is 0%, but purchasers have the option to deduct the tax on their purchase.
9. The accounting period in Denmark follows the calendar, i.e. income for the previous calendar year (or other 12-month period) is taxable.
10. Employees of Danish companies are subject to full or limited tax liability (begrænset skattepligt), depending on their contract and place of residence.
11. The obligation to file a tax return with the Danish Tax Authority (SKAT) is three years.
12. In 2019, the tax-free limit was DKK 46,630. This means that those whose Danish income was below this amount were exempt from taxation.
13. A tax return in Denmark must be filed via the website within 6 months of the end of the tax year. When the year ends between February 1 and March 31, the return must be filed by August 1, and tax must be paid by March 20 and November 20.
14. The taxation system in Denmark includes:
- church tax (kirkeskat),
- municipal tax (kommuneskat),
- pension contributions (ATM),
- employee contributions,
- health insurance premiums (sundhedsbidrag),
- land tax (on real estate) - Ejendomsværdiskat, applicable to all residents of Denmark. Covers real estate, regardless of location. Rates are 1% for values below DKK 3.04 million and 3% above that amount,
- a tax on the value of real estate, assessed through a public valuation process,
- a tax on the hiring of foreign workers, imposed on Danish companies employing workers from outside the country, amounting to 38% - 35.6% net, including an 8% contribution to the employment fund and a 30% tax on the hiring of labor, paid to the Danish Tax Office,
- tax on income in both individuals and legal entities,
- source tax, deducted from income,
- and indirect taxes: customs duties, environmental taxes, excise taxes (punktafgift), VAT (moms).
The Danish tax system is complicated, so it's worth exploring the regulations, rates, documents and deadlines related to taxation before starting a business or working in Denmark.
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