Taxes in Denmark

The Danish social security system is financed mainly through revenue coming from taxes. Employees and employers make minimal contributions to social security. Employer contributions to a full-time employee in Denmark are between DKK 8,000 – 10,000 a year.

Social Security encompasses the following contributions:

• ATP: Pension contributions made by the employer. DKK 2,673 per year
• AUB: Contributions from employers that fund apprenticeships and vocational training, also known as Reimbursement System. DKK 2,821 per year
• AES: Contributions from employers towards occupational injury and disease. DKK 215-5.157 per year, depending on the type of work and risk to the employee
• FIB: Financing of ATP contribution for those without a job due to sickness, maternity leave, or unemployment. DKK 328 per year
• Maternity leave fund: employers are obligated to contribute to the maternity fund. DKK 2,200 per year
• Payment during holidays or holiday allowance (in Danish: “Feriepenge”): hourly paid employees are entitled to holiday allowance paid into FerieKonto (monthly for hourly-paid employees). 12.5% of the employee’s salary.

The insurance costs vary between DKK 1,176 and DKK 24,441 depending on the field of work that the insured employee is employed within, the number of employees that the employer intends to insure and the specific insurance company. The insurance must be made with a private insurance company.

The Danish social security system is financed mainly through revenue coming from taxes. Employees and employers make minimal contributions to social security. The social security contributions that employees pay are deducted by their employer from their gross earnings, before deducting income tax. Employees make the following contributions to social security:

• ATP: Pension contributions. DKK 1,135.80 per year.
• Labour Market Contributions: Also known as AM-bidrag, it covers employees in the event of unemployment, sickness, and expenses for training and activation. The contribution is 8% of the employee’s salary. This tax is deducted from their gross salary before any other taxes are calculated. The employer is responsible for withholding and paying the amount on behalf of the employee.

The income tax rate is progressive and includes state, municipality and church taxes.

Municipal tax rates vary, but the average tax rate for 2023 is over 25%.

The state tax increases according to the level of income as follows:

• Bottom-bracket tax: for amounts above the basic deduction of DKK 54,100, the rate is 12.01%
• Top-bracket tax: for amounts above DKK 777,900 (after AM-bidrag), rate is 7.5%.
• Middle-bracket tax: for amounts above approximately DKK 641,200 (after AM-bidrag), the rate is 7.5%.

The Church tax, which is not mandatory, is a flat rate, which varies for each municipality. The country average is around 0.7%. Municipalities impose it and only charge members of the Danish Lutheran Church. When registering in Denmark, all individuals should explicitly state if they will fall under this rule.

The tax for share income (up to DKK 79,400 for individuals and DKK 158,800 for married couples) is 27%. For any sums beyond that threshold, the tax is 42%.

Benefits in kind extended to employees are taxed at market value as income. That is, however, generally only if the combined value exceeds DKK 1,300 (trivial fringe benefits) and DKK 6,700 (work-related benefits).

Typical benefits provided in Denmark include:

• Free internet and telephone (taxable value: DKK 3,200)
• Housing
• Free car
• Credit card
• Meal voucher
• Transport allowance

Work-related benefits are taxed when the combined value during one income year exceeds DKK 6,700. Examples are:

• Vaccines
• Newspaper

Denmark offers a special expatriate tax regime to high-level foreign earners (scientists, specialists and researchers). The tax rate is 27% plus labour market contributions, for a total of 32.84% gross tax on their cash remuneration, as well as the taxable value of a company car, a company-paid telephone and health care insurance. All other income, including additional benefits, is taxed at ordinary tax rates, and no tax deductions are in place.

Expats can avail of this expat tax regime for up to seven years in total. Some of the requirements to fall under this tax regime include:

• The employee earns at least DKK 65,400 monthly after ATP and pension deductions
• The employee is employed by a Danish taxable entity (company or permanent establishment)
• The employee cannot have been obliged to pay tax in Denmark in 10 years before entering this agreement

Individuals with one or more children residing in Denmark are entitled to a family allowance. Also known as Child and Youth benefit, Danish residents do not need to apply for it, and the government automatically pays it. However, individuals who are EU/EEA citizens and working in Denmark are not entered into the system automatically and have to apply for the benefit.

To receive the benefit, the individual must:

• Live in Denmark
• Be fully liable for tax in Denmark
• Have a child under the age of 18 years
• Have a child who is a resident of Denmark

In addition, the child should not be supported by the public or be married.

The amount received depends on the child’s age:

• Age 0-2: DKK 5,370 per quarter
• Age 3-6: DKK 4,248 per quarter
• Age 7-14: DKK 3,342 per quarter
• Age 15-17: DKK 1,114 per quarter

The amount of your child and youth benefit depends on your income. If your income base is above DKK 961,100 in 2026, your child and youth benefit will be reduced.

Employed individuals are entitled to an annual personal allowance of DKK 54,100 that is tax-free after paying the 8% AM-ta. The unused personal allowance is transferable between spouses.

Every person who earns a salary subject to labour market contributions or who has a business profit automatically receives an employment allowance. The current rate of the allowance is 12.75% of the person’s salary and cannot exceed DKK 63,300.

Employees who travel more than 24 km round trip to their workplace and do not have a company car are eligible to claim tax deductions. The exact amount is calculated by taking the number of workdays and the distance travelled. The individual has to make the calculation and include it on their income tax return.

The deduction is DKK 2.28 for 25 to 120 km and DKK 1.14 per km exceeding 120 km. For individuals that live in certain outskirts, the allowance is still DKK 2.28 even for distances beyond 120 km.

Employees are entitled to extra mileage allowance for using the Øresund connection (the bridge and tunnel between Denmark and Sweden) and the Storebælts link (the bridge and tunnel between Funen and Sealand). The allowance amount, in this case, depends on the means of transport.

Employees can deduct travel expenses related to work trips in two different ways:

• Claim costs as a business expense and get it reimbursed by the employer
• Make deductions when determining taxable income

The maximum allowance is DKK 34,400 per year. It applies to both the deduction of standard rate and actual expenses. However, it does not affect an employer’s ability to pay tax-free allowances, reimburse the employee’s costs, or provide them with food and lodging.

Allowances or deductions can either be based on actual documented expenses or the standard rate per day for meals and other miscellaneous costs (DKK 625) and lodging (DKK 268).

• Trade union membership fees (maximum DKK 6,000 per year)
• Child maintenance
• Private pension contributions
• Contributions to unemployment insurance

Under certain circumstances, expenses related to work performance, such as work clothes, may be deductible from taxable income if they exceed the basic amount of DKK 7,600.

Donations to certain approved charities, foundations, and institutions are tax deductible, up to DKK 20,000 a year, regardless of whether the contributions are to one charity or spread among several.

Interest expenses are deductible from capital gains income, generally deducted in the year they fall due. However, penalty interest paid in connection with late taxes is non-deductible.