Private tax settlement in Denmark

Private tax settlement in Denmark

Tax settlement in Denmark is the responsibility of every tax resident and those working in the country. The process may seem complicated, but with proper preparation and knowledge of the rules, it can be done efficiently. If you are planning to travel to Denmark for work, be prepared to deal with tax issues. It is important to be able to correctly fill out all the necessary documents, whether you are self-employed or intend to work under a contract of employment.

What is worth knowing about Danish taxes?

There are two types of tax law in Denmark: full and limited. Full tax law applies to Danish citizens, who must pay and account for all taxes in the country. Limited tax law applies to those who work in Denmark but live outside the country, including those on permanent employment contracts. Such individuals must pay taxes in Denmark only on income earned in Denmark, while they settle the remaining taxes in their country of residence.

Danish income taxes are the main source of funding for the country’s welfare system. Denmark’s social security system provides coverage for sick benefits, health insurance, maternity and paternity leave, family benefits, injury insurance, and pensions.

The tax year in Denmark runs from January 1 to December 31, just like the calendar year. You can settle up to three years back with the Danish Tax Authority. The tax return must be filed by May 1 or July 1, depending on your individual tax liability, which is specified in the return sent by the office.

Important documents for tax return:

  • Selvangivelse: a tax return form issued by the office and sent to the taxpayer’s registered address in their country or Denmark.
  • Arsopgorelse: an annual return sent by the Danish tax authority that shows the income and taxes withheld for the year. It contains information about the amount of tax refund from Denmark or any surcharge.
  • Oplysningsseddel: a document attached to the last check, received from the employer at the end of work or at the end of the tax year, showing income and taxes paid.
  • Lonseddel: monthly or weekly pay stubs.

If a person stays and works in Denmark for at least six months, they are required to settle taxes. However, before making the appropriate application to SKAT (Danish Tax Authority), they should:

  • Obtain a CPR number, which is also needed to run errands at the bank and make doctor’s appointments.
  • Register with the Danish tax system at SKAT.
  • Obtain a TASTSELV code through www.skat.dk, which will be used to settle taxes online.

To obtain a TASTSELV code, you only need the CPR number mentioned earlier. All settlements are carried out on the SKAT website, and the settlement decision is issued immediately. If you fail to obtain a TASTSELV code, the tax return can be sent by registered mail, which extends the settlement time to 2-3 months.

Tax-free amount in Denmark
Denmark has a high tax-free amount, which in 2024 is DKK 49,700. This means that many people with the lowest incomes will not have to pay tax and will have a chance to receive a higher tax refund from Denmark.

Tax audit process
Tax administration in Denmark is generally managed by the Danish tax authorities. The collection of taxes relies partly on reports from the taxpayer and partly on mandatory reporting from employers, banks, financial institutions, and other entities.

Each taxpayer is responsible for verifying that the correct tax amount has been paid. On the tax authorities’ website, every individual with a Danish civil registration (CPR) number has access to their own electronic tax file, which contains all information (in Danish) about paid taxes, withholdings, and more. A code to access this file can be requested through the tax authorities’ homepage.

Tax liability
Tax liability refers to the responsibility of an individual or business to pay taxes on their income. There are two types of tax liability: full and limited.

Please note that regardless of whether you have limited or full tax liability, you must pay an 8% labour market contribution (am-bidrag). Your employer deducts this contribution from your gross pay after subtracting labour market supplementary pension fund contributions and your own pension contributions.

Your tax liability depends on various factors, including whether you maintain a residence in your home country, which determines the deductions you are eligible for. If you are a foreigner working and living in Denmark for a certain period, a specific tax regime might apply. There are four categories of tax liabilities for non-Danish employees, including those pertaining to Danish taxes:

  1. Full Tax Liability
    • Employed in Denmark
    • Residing in Denmark or staying for more than 6 months
    • Having economic and personal interests in Denmark
    • Having a spouse or partner living in Denmark
  1. Limited Tax Liability
    • Employed in Denmark
    • Residing in your home country but frequently traveling between Denmark and your home country
    • Having economic and personal interests in your home country
    • Having a spouse or partner living in your home country
  1. Dual Residency, with Your Home Country as Your Primary Residence
    • Employed in Denmark
    • Living both in Denmark and your home country
    • Having economic and personal interests in your home country
    • Having a spouse or partner living in your home country
  1. Dual Residency, with Denmark as Your Primary Residence
    • Employed in Denmark
    • Living both in Denmark and your home country
    • Having economic and personal interests in Denmark
    • Having a spouse or partner living in Denmark

What do you need when you just start working in Denmark?
When you arrive in Denmark, you need to obtain:

  • A personal tax number or a CPR number (civil registration number) if you stay for 3 months or longer (6 months if you are a citizen of the EU, EEA countries, or Switzerland)
  • A tax card
  • A NemKonto
  • MitID

When you start working in Denmark, you need to:

  • Register work-related deductions
  • Declare any non-Danish income
  • Review your tax assessment notice

Are you working in Denmark as a non-resident? If so, understanding the local tax system is essential, even though it may not be your top priority. Like in other countries, Denmark’s tax legislation is complex and includes numerous regulations and laws.

How to settle tax in Denmark?

In Denmark, the majority of taxpayers do not need to submit a tax return because the required information is automatically provided to the authorities. In March, you will receive an annual statement that includes information gathered by the Danish tax authorities from employers, banks, pension funds, and other sources. You only need to make changes to this tax assessment notice if any information is incorrect.

A private annual tax return is based on information provided by your employer, bank, unemployment fund and other sources. It is important that you add information on your own about the tax benefits you are entitled to. We do not act as an intermediary for employees’ annual tax returns, but recommend using experienced tax consultants. SKAT sends your refund to your NemKonto bank account, regardless of whether it is a Foreign or Danish account.

Money earned in Denmark must be settled with SKAT’s Danish tax office. By March 15 of the following year, SKAT will prepare a preliminary settlement of your tax, and your job is only to make any adjustments.

You must make the corrections by May 1 of the year following the year in which you earned income. You can submit any corrections to your returns until July 1. Failure to file a correct return may result in a tax surcharge. Every employee, regardless of the amount of income earned, is required to settle the SKAT. The office may impose fines of up to DKK 5,000 for failure to do so.

Where on SKAT is the tax return information?
To check your settlement, click on „Se årsopgørelsen.” The amount highlighted in green indicates a tax refund, and red indicates an underpayment. To make changes, including tax credits, click „Ret årsopgørelsen / oplysningsskemaet.”

You can submit your tax return by mail or electronically using TastSelv/NemId codes. Once the tax return has been verified, the tax office sends a final settlement, which includes information about the refund of overpaid tax or the need for a surcharge, along with the deadline for payment and the office’s account number. The overpaid tax will be transferred to the client’s NemKonto, an account designated for payments from Danish public institutions.

The Danish tax system allows you to take advantage of a number of deductions for your annual tax return. You can deduct expenses related to commuting to work, housing, running a double farm and even food. These deductions will reduce the amount of tax and give you a more favorable refund.

When You Quit Your Job in Denmark
When you end your employment and/or leave Denmark, you must inform the Danish tax agency to assist in calculating your tax liability. Check the Danish tax authorities’ website for the necessary forms to complete. Additionally, if you have been registered, you will need to deregister from the Danish National Register at the local Citizen Service Centre when you leave the country.

You might be eligible for a tax refund from Denmark if:

  • You worked on a short-term contract.
  • You paid for your accommodation and food while in Denmark.
  • You remained a resident of your home country while employed in Denmark.

Tax benefits in Denmark

Depending on the costs incurred, you are entitled to the following reliefs:

  • Commuting costs – depending on the distance.
  • Costs of traveling home.
  • Costs of crossing toll bridges, which can be used by all employees of Danish companies who have to cross a toll bridge to get to work (depending on the bridge and mode of transportation).
  • Relief for running a dual household.
  • Food and lodging costs.
  • Alimony paid, awarded by a court.
  • Trade union dues.

Cross border-worker relief
Cross-border relief for individuals with at least 75% of their annual income from work in Denmark, settling with a spouse who has no income from Denmark and whose income in foreign country has not exceeded DKK 46,700 gross. To take advantage of the cross-border relief, you must document this with a marriage certificate on a European form and a certificate from the tax office (translated into English) of your and your spouse’s income.

Enlarged commuting allowance for those with low incomes
If your income is less than DKK 340,800, you can get a maximum deduction of DKK 15,400. The deduction is gradually reduced for incomes above DKK 290,800. You can also deduct gifts, contributions and donations made to charities, associations, foundations, institutions and religious communities that are approved by the Danish tax authority.

Documents evidencing eligibility for concessions:

  • Fuel receipts or ferry/airline tickets confirming travel to and from your country.
  • Gate receipts in Denmark.
  • Bridge toll bills.
  • Documents confirming the rental of an apartment in Denmark and the rental agreement.
  • Marriage certificate.
  • Documents confirming registration in your home country.
  • A certificate from the tax office of the spouse’s earnings.
  • Documents certifying household management in the place of permanent residence.
  • A certificate of alimony paid for the tax year in question and a court decision on the award of alimony translated into English or Danish by a sworn translator, together with proofs of payment.
  • A certificate issued by a bank regarding the amount of credit interest paid during the tax year under review, translated by a sworn translator into English or Danish. This document should include the following information:
    • Name of the bank where the loan is taken.
    • Details of the borrower.
    • The amount of the loan taken out.
    • Determination of the type of loan (consumer or mortgage).
    • Information on the amount of credit interest already paid.

It is worth noting that not everyone is entitled to all tax credits under the current law. The correctness of the entry of reliefs is very important in case of possible later inspections by SKAT.

For foreigners, some benefits require a minimum period of residence. EU and EEA nationals, as well as other foreigners living and working in Denmark temporarily, can opt to be covered by their home country’s social security system if it has a social security agreement with Denmark.

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