Working and living in Denmark - Deloitte
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Working and living in Denmark Tax 2020 Tax
2 | Working and living in Denmark
1. Introduction 2. Individual taxation
This booklet contains brief Taxation in Denmark consists of various kinds Taxable income
of taxes; direct tax (e.g. income tax, AM-tax Income is divided into three categories:
information about the and social security contributions), indirect tax
main aspects of individual (e.g. VAT and duties on goods and services)
1. Personal income (salary and employment
benefits, self-employment, income, profit
and property tax. This Danish guide focuses
taxation, social security, on direct tax for residents.
from renting out real estate, etc.).
2. Income from capital (interest income,
immigration and etc.).
Tax residency
employment law as of 1 Individuals qualifying for Danish tax residency
3. Share income (dividend, profit/loss from
shares, etc.).
January 2020. are subject to unlimited tax liability
in Denmark, i.e. they are tax liable of their
It is written as a quick guide for employers worldwide income from employment, Most personal income is subject to AM-tax of
considering sending an employee to business income, share income, etc. 8%. This tax is deducted from the income
Denmark and for employees, who are before the other taxes are calculated. The
contemplating a work assignment to A person qualifies for the Danish tax residency income tax rates are progressive and
Denmark. The booklet only presents a if: comprise state, municipality and church
broad overview, and simplifications have taxes. The lowest tax rate is approx. 36% up
• He/she is resident in Denmark, or to a marginal income tax rate of 51%
been made for readability. It does not
provide in-depth answers to specific • He/she stays in Denmark (without exclusive of church tax. Including AM tax, the
questions. establishing a residence) for a consecutive rates are approx. 41% and 55-56%.
period of six months or more. This is not
Because of the complexity of the various particularly limited to a calendar year. Any Share income is taxed according to special
laws and on-going legislative changes, none given six-month period may trigger tax rules, and tax rates are progressive at 27% or
of the information contained in this booklet liability under this rule. 42%.
may be relied upon for specific planning.
Rather, we encourage the reader to contact Non-residents may be limited tax liable to
our Global Employer Services specialists to Denmark, if they have income from Danish
obtain detailed and up-to-date answers to sources, e.g. work in Denmark, have other
questions. business income from Denmark, dividend
income, board member fees, own property
etc.3 | Working and living in Denmark
• Charity contributions. tax on gifts up to DKK 67,100. the latest. Filing beyond this date will cause
Most benefits are taxable. penalties.
• Travel expenses connected to work and not
The taxable value of covered by employer (maximum DKK 28,600).
Gifts exceeding this amount are taxed by 15%
or 36.25%. Gift tax between spouses does not Tax assessments and filing of a tax return
benefits is either based on apply. are done electronically in Denmark.
Property taxes
market value or on an Property tax is levied on properties in
For individuals falling outside the category, e.g. Preliminary taxes will be included in the
assessed value, which does Denmark. Property value tax is levied on
siblings and non-family, gifts may be con- annual tax assessment, and this will result in
properties both in Denmark and abroad. The
not necessarily equal the property value tax is 1% of the publicly
sidered ordinary taxable income and taxed by either tax refund, tax due or equal balance.
rates up to 51%.
costs for the employer. assessed value for Danish properties up to
Married couples are taxed jointly, however,
DKK 3,040,000 (EUR 408,000) and 3% of the
Tax administration they have to prepare separate tax returns.
exceeding amount.
Allowances and deductions A tax year in Denmark corresponds to the Filing date of spousal tax returns is the same,
Individuals are entitled to an annual personal calendar year. Individuals must annually the latest date applies.
For foreign properties the market value must
allowance of DKK 46,500, i.e. the first DKK inform the tax authorities of expected income
be used as basis for the property value tax.
46,500 of taxable income (after payment of and deductions for the year (preliminary tax Expat scheme
Property rented out is not subject to
8% AM-tax) is tax free. Unused personal assessment). The preliminary tax assessment A special expat scheme exists in Denmark.
property value tax. New rules will apply
allowance is transferable between spouses. includes a tax card, which the employer uses
during 2020-2021 but are not fixed yet.
for withholding taxes. If no tax card is available, The expat scheme means that employment
Most common deductions are: the employer has an obligation to withhold income, cash allowances, value of free
Gain from sale of property is taxable.
55% tax in addition to the 8% AM-tax. company car and value of free phone are
• Employee contributions to approved Danish However, if the property has been used as
taxed by a flat rate of 27% for up to 7 years.
(and in some cases EU) pension schemes. private residence, taxation may be avoided.
The tax authorities automatically issue a tax Including the AM-tax of 8% the effective tax
• Travel between home and work. assessment in March the year after the income rate is 32.84%. Under the expat scheme
Inheritance and gift tax
year. The taxpayer should review the assess- there are no deduction opportunities.
• Unemployment insurance and union There is no inheritance tax between spouses.
ment and correct any mistake and add any
membership subscription. Amounts up to DKK 301,900 are tax-free.
missing items before 1 May. Other benefits such as free accommodation
Inheritance exceeding DKK 301,900 is taxed
• Interest expenses (on mortgage and other and other private income are taxed
by 15% or 36.25%.
debt). In the case of income not automatically according to the ordinary tax system.
reported by employer, banks etc. (e.g. foreign
• Double household. Between close family members there is no
income), a tax return must be filed by 1 July at4 | Working and living in Denmark
3. Social security
To be able to apply for the expat scheme, the The taxpayer has to notify the tax authorities, Employee and employer contributions Danish unemployment fund (“A-kasse”). The
following conditions must be met: if he/she opts to use the tax regime. Employees and employers are liable to unemployment funds are private associa-
pay contribution to supplementary old-age tions, very often connected to trade unions
1. Minimum salary – the salary before AM-tax pension (“ATP”). This contribution is a fixed and other professional organizations.
including the value of free company car and monthly amount of DKK 284, and is paid one
value of free phone must constitute at least third by the employee (DKK 94.65) and two Unemployment fund membership is volun-
DKK 68,195 each month (2020) as an
When the seven-year thirds by the employer (DKK 189.35). tary and contribution is tax deductible. The
average within a calendar year. period under the tax annual contribution varies from one unem-
Besides ATP, the employer has to make AER, ployment fund to another, but is most
regime expires, all AES, maternity and finance contributions. common in the range of DKK 5,000-7,000 p.a.
The salary requirement is normally adjusted
every 1 January. income is taxed Employers must take out an insurance policy After one year’s membership a member is
for the employees covering accidents and entitled to receive unemployment benefit. For
according to the short-term damaging exposure. Contributions a person moving within the EU community
2. Danish employer – the taxpayer has to be
employed by a Danish employer, who has ordinary tax system. to AER, AES, maternity and finance contribu- it is possible to avoid the quarantine of one
the withholding responsibility etc. and who tions and insurance for accidents etc. depend year, if the person can provide documentation
bears the salary cost. on the number of employees and working of membership of a foreign unemployment
hours, industry, etc. fund (form U1/E301).
3. Tax liability – no tax liability in Denmark for
10 years before using the tax regime is Costs of social security and occupational The benefit is equal to 90% of average
allowed. insurance are in average approx. DKK earnings of the previous 12 weeks, however,
10,000-12,000 p.a. per employee. maximized at DKK 19,083 per month. It is
4. Work in Denmark – in some situations there possible for individuals to take out extra
is a limit as to how much work the taxpayer Social security administration insurance against unemployment (in addition
can physically carry out in other countries Employee ATP contribution is withheld by the to unemployment fund). Normally one can
whilst using the tax regime. If the individual employer at payroll processing and is take out an insurance policy that covers
is fully tax liable in Denmark, and another deductible for tax purposes. up to 80-90% (inclusive of benefit from the
country gets the right to tax his/her income, unemployment fund) of the previous salary
then the taxpayer will not be permitted to Unemployment benefits income after deduction of AM-tax.
use the tax regime any longer. A minimum Unlike other countries, there is no mandatory
rule of 30 days apply. unemployment insurance in Denmark. An
employee can take out an insurance at a5 | Working and living in Denmark
4.Immigration
Pension Pension entitlement to ATP (supplementary Full allowance Individuals entering, residing and working in
The Danish pension system consists of old-age pension) depends on the individual’s Individuals are entitled to full child allowance, if Denmark are subject to various immigration
three main pillars: contribution record. one of the parents has been fully tax liable to rules and regulations. Generally, these rules vary
Denmark or working in Denmark for at least 6 depending on the country of citizenship of an
1. National public pension – financed through
Normally both employees and employers years within the last 10 years before receiving individual. Accordingly, individuals can be
taxes, etc.
contribute to a company pension scheme, the child allowance. divided into the following groups:
2. Labour market pension and company-paid but there is no legal obligation. Furthermore,
Reduced allowance • Citizens of the Nordic countries.
pension – on a voluntary basis. people often choose to contribute to a
private pension scheme by themselves. If not entitled to full allowance, individuals will • Citizens of other EU countries.
3. Individual pension plan – on a voluntary receive an allowance increasing progressively
basis. over a 6-year period starting after 6 months in • Citizens of non-EU countries.
Employee contributions to private plans are
Denmark. After 6 months individuals will receive
Pension age is currently 65 in Denmark but as a main rule tax deductible, whereas
8.3% of the child allowance, which will then Visa requirements
will be increased to age 68 over a transitional contributions to employer administered
increase every 6 months by another 8.3%. After At the official portal (www.nyidanmark.dk)
period. plans are as a main rule tax exempted at
3 years in Denmark individuals receive 50% of it is possible to find out, if a foreign citizen
payroll.
the child allowance and so on. requires a visa to enter Denmark or not.
Between the age of 15 and pension age
(varies between 65 and 68), employees earn Company pension schemes and private However, EU citizens and EEA citizens, who
the right to a full national public pension, if pension schemes are mainly divided into A visa to enter Denmark is not required, if
have been fully tax liable to another EU country
they have been covered by Danish social three types: lump sum plans, pension a foreign citizen has a visa-free passport or
or EEA country or been working in another EU
security for at least 90% of the earning scheme with instalments or life-time annuity has been provided with a certain type of
country or EEA country for at least 6 years
period. The full amount is reduced corre- – all payable at retirement age. residence permit in another Schengen
within the last 10 years are entitled to receive
spondingly, if less than 90% of the earning full child allowance from day one. country.
period is spent under Danish social security. Family (child) allowance
Individuals covered by Danish social security The allowance is reduced, if the individual's A visa is intended to allow foreign citizens to
It consists of a basic amount and an income- are entitled to child allowance for every child personal income exceeds DKK 869.674 (2020) visit Denmark and/or the other countries of
related pension supplement. The total younger than the age of 18. The basic annual before AM-tax (800,100 after 8% AM-tax). The the Schengen zone for a short period of
pension depends on the pensioner’s present allowance is DKK 18,384 per child up to the reduction amounts to 2% of the income time.
exceeding the limit. The official limit is DKK
income and marital status, but assets have age of 3, DKK 14,556 per child aged 3 to 6,
800.100 (after 8% AM-tax), and if the income is A visa allows spending a maximum of 90 days
no effect. Basic pension amount is DKK and DKK 11,448 per child aged 7 to 17.
e.g. DKK 900.100 (after 8% AM-tax) the in the Schengen area within a period of 6
77,028 p.a. per 1 January 2020.
allowance is reduced with (100.000 * 2%) or months. A visa does not allow working in
Rates and brackets for 2020 are used.
DKK 2.000 per year.6 | Working and living in Denmark
Denmark. However, certain work-related Most visa applications are processed and EU dependants to wait for an application process to be fully
activities are allowed during visits of less decided on by Danish diplomatic missions The spouse and children must each submit finalized. Specific conditions apply.
than 90 days. Such activities include abroad. These cases will usually be decided their own application form and be able to
teaching, attending a course, participating in within a few days. In accordance with the document relation with main applicant (i.e. The following documents are required for the
meetings, negotiations, briefings and Schengen rules, decisions about visa birth/marriage certificate. residence and work application in Denmark:
training. If the purpose of the visit is to create applications should be made within 15 days,
a product or add value to a company, the if possible. • Completed application form.
Residence and work application for non-
individual needs a residence and work EU citizens • Copy of passport.
permit. Immigration authorities A number of schemes have been designed in
The Danish Agency for International • Employment contract or short-term
order to make it easier for highly qualified
assignment letter.
Visa administration Recruitment and Integration (SIRI) is professionals to get a residence and work
The following documents are generally responsible for issuing residence and work permit in Denmark. The most commonly used • Documentation of education.
required for the visa application: permits and EU registration certificates for are: • Documentation of paid immigration fee.
• A signed, completed application form/ both EU and non-EU citizens.
invitation letter. The Positive List is a list of the professions and An applicant must appear in person to have
Citizens of Nordic countries who want to fields currently experiencing a shortage of biometric features (signature, photo and
• A passport or other valid travel document. reside and work in Denmark do not need qualified professionals in Denmark. fingerprints) recorded when submitting an
The passport/travel document must be to apply for an EU registration certificate. Individuals who have been offered a job in application for residence at a Danish embassy
valid for at least three months after the one of these professions or fields have easier or consulate, a Danish police station, at the
planned departure date. The passport/ Residence application for EU citizens access to the Danish labour market. Danish Immigration Service or at a Danish
travel document must have been issued An EU citizen may freely enter Denmark and visa center abroad.
within the past ten years and must have at work. If the employee is to be registered in The Pay Limit Scheme gives individuals,
least two blank pages. Denmark with a CPR-number, an EU who have been offered a job with a gross Citizens of non-EU countries will be issued
• A passport photo. residence certificate must be applied for. annual pay of no less than DKK 436,000 a biometric residence cards, which include the
year, paid into a Danish bank account, holder’s facial image and fingerprints stored
• Payment of visa processing fee. The following documents are required for
particularly easy access to the Danish labour on a microchip embedded in the card.
the residence application in Denmark:
• Relevant documentation, such as market.
information about the reason for the trip, • Completed application form, passport,
proof of available accommodation, proof of passport photo, employment contract The Fast Track Scheme enables certified
sufficient means to cover the living and/or employer statement or sufficient companies to hire highly qualified foreign
expenses as well as the return travel. funds. nationals on short notice without having
• Proof of travel insurance.7 | Working and living in Denmark
Appendix 1 - Income table for 2020
Non-EU dependants Taxation of earned income salary, company car (restricted stock units, stock options etc.)
The spouse and children must each submit
Taxable base DKK Tax rate %
their own application form and be able to
document their relation to main applicant 0 – 50,543 8
(i.e. birth/marriage certificate). 50,543 – 577,174 411
The residence and work permit automatically >577,174 55-561
grants the spouse permission to work. Tax rate varies due to different municipality tax rates. The rate shown applies to Copenhagen. Marginal tax rate exclusive of church tax is limited at 55.90% (all municipalities).
1
Civil registration number (CPR-number) Please note that personal allowance of DKK 46,500 only applies once.
In order to apply for a CPR-number you must
Taxation of unearned income (pension, capital income, certain benefits etc.)
meet in person at the local municipality. You
will need to first send an online application Taxable base DKK Tax rate %
and upload: 0 – 46,500 0
• Valid EU registration certificate (EU citizens).
46,500 – 531,000 361
• Copy of your residence and work permit
(non-EU citizens). > 531,000 511
1
Tax rate varies due to different municipality tax rates. The rate shown applies to Copenhagen. Marginal tax rate exclusive of church tax is limited at 52.06% (all municipalities).
• National ID number (Nordic citizens).
Please note that personal allowance of DKK 46,500 only applies once. Capital income is taxed at a maximum of approx. 42%.
• Signed and active lease contract.
• Passport. Social security table
• Marriage/birth certificates, translated may Employee Employer
be needed.
ATP contribution fixed amount DKK ATP contribution fixed amount DKK Other costs per employee approx. DKK
The CPR-number will be issued, and the
1,136 p.a. 2,272 p.a. 10 - 12,000 p.a.
individual will be enrolled in the national
healthcare system.
Taxation of share income
NemID
Your online contact with the public Share income DKK Tax rate %
authorities can be obtained either via 0 – 55,300 27
your Danish bank or when you have
> 55,300 42
received your Danish CPR-number/yellow
health insurance card.8 | Working and living in Denmark
Net income table
Income tax and AM-tax exclusive of social security contribution (ATP)
Gross income Total tax incl. AM- Net income Gross income Total tax incl. AM- Net income Average tax
(DKK) tax (DKK) (DKK) (EUR) tax (EUR) (EUR) (Percentage)
75,000 12,212 62,788 10,038 1,635 8,404 16.3
150,000 41,137 108,863 20,077 5,506 14,571 27.4
250,000 79,122 170,878 33,461 10,590 22,871 31.6
400,000 137,551 262,449 53,538 18,411 35,128 34.4
750,000 305,128 444,872 100,384 40,840 59,544 40.7
1,000,000 442,290 557,710 133,846 59,199 74,647 44.2
1,250,000 579,452 670,548 167,307 77,557 89,750 46.4
1,500,000 716,614 783,386 200,768 95,916 104,853 47.8
3,000,000 1,539,586 1,460,414 401,537 206,067 195,470 51.3Offices in Denmark Aalborg Kolding Silkeborg Østre Havnepromenade 26, 4. sal Egtved Allé 4 Papirfabrikken 26 9000 Aalborg 6000 Kolding 8600 Silkeborg Tel. +45 98 79 60 00 Tel. +45 75 53 00 00 Tel. +45 89 20 70 00 aalborg@deloitte.dk kolding@deloitte.dk silkeborg@deloitte.dk Aarhus København Nuuk City Tower Weidekampsgade 6 Imaneq 33, 6.-7. etage Værkmestergade 2, 18.-21. etage 2300 København S 3900 Nuuk 8000 Aarhus C Tel. +45 36 10 20 30 Tel. +299 32 15 11 Tel. +45 89 41 41 41 koebenhavn@deloitte.dk nuuk@deloitte.dk aarhus@deloitte.dk Esbjerg Odense Dokken 8 Tværkajen 5 6700 Esbjerg 5100 Odense C Tel. +45 79 12 84 44 Tel. +45 63 14 66 00 esbjerg@deloitte.dk odense@deloitte.dk
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