Do you have to pay tax in Denmark? What are the rates that apply to foreign nationals? Find out in this article.
Like most European countries, Denmark has a wide tax system which is, however, deemed to be one of the world's highest ones. Indeed, different types of taxes apply for everyone at various rates. Most of the adult population, including employees, job seekers, retirees and students have to pay tax. So make sure to inquire about the relating conditions and formalities well before moving.
Taxes have a crucial role in terms of the population's welfare. In fact, the country's high comfort and standard of living heavily rely on taxes. Thus, income tax, as well as other taxes, facilitate access to all services for the whole Danish society. This is why the Danish tax system is said to be one of the highest ones in the world along with a rather wide public sector.
Good to know:
All residents in the country have to pay income tax if they occupy a paid job. Rates generally vary according to the wage threshold. Higher earners will thus pay higher taxes.
Types of taxes
There are two types of taxes in Denmark: direct and indirect taxes.
Direct taxes are deducted at source by employers. These include wages, rental income and property tax, as well as municipal tax.
Municipal tax generally varies from one area to another and is calculated according to individual income. Municipal tax, for its part, varies according to the area and the municipality upon which it depends. The amount to be paid is determined by the value of the property.
Indirect taxes apply on sought or bought services and products. These include a 20% value added tax (VAT), customs duties, green taxes (environmental taxes on oil, electricity, water, waste, etc.), tax stamps, among others.
Registration at the SKAT
First of all, you are required to apply for your CPR number (find more information in the article Phones and Internet in Denmark) upon your arrival. This number will be required for several formalities such as opening a bank account, opening a tax account, subscribing for a phone line, seeking treatment at the hospital, among others. Once you have obtained this number, you simply have to drop by the nearest SKAT, that is the tax office, to your place of residence. A tax identification card will then be issued.
Tax year and declarations
The tax year matches the calendar year, that is from January 1st to December 31st. You will receive your tax declaration form, as well as a yearly tax statement, between March and April. Note that the yearly tax statement may also be sent later on.
When filing your tax declaration form, you will have to specify your tax status according to your income, allowances, etc. Make sure that all information provided match with those specified on your payslips, bills and statements of account, etc. In case some of these information are incorrect or if you wish to complete the form, you can do so before May 1st. E-filing and phone filing services are also available.
The yearly tax statement, for its part, indicates whether you have paid more or less tax according to your income and other criteria that are considered. In case you have paid less tax, you will have to settle your account on July 1st at the latest. If you have paid excess tax, on the other hand, the sum will be refunded.
E-filing services are available in Denmark since more than 10 years. You can thus submit your tax declaration via TastSelv. However, you will require your NemID (find more information in the article Setting up a business in Denmark).