As a student in Denmark, you will quickly discover the amazing word “skat”. It means taxes and it is a hard topic. Danes are seen by other countries as “happy tax payers” but that is not quite true.
Yes, they pay a lot of taxes and they get a lot in return. However, this does not change the fact that paying those taxes is not a pleasure for most.
This article will be mainly about how taxes work in Denmark and how you should start looking into them when you arrive here to study and/or work.
Taxes
First of all, what are you paying? How much?
In short, there are 2 types of taxes: direct and indirect taxes.
Direct taxes are:
- A-tax (tax deducted from income at source)
- B-tax (tax not deducted from income at source)
- State tax (progressive tax)
- Municipal tax (variable)
- Church tax (optional)
- Labour market contributions (AM-bidrag)
- ATP contributions (Danish labour market supplementary pension fund, mandatory)
- Property value tax based on the public property assessment
- Property tax (land tax)
- Car tax (not discussed in this article)
Indirect taxes are:
- VAT (included in goods price)
- Green taxes (to pay for spending society’s resources)
- Excise duties (levied on the import, manufacture and sale of certain goods)
- Customs duties (for non-EU goods)
Liability
Also, the taxes depend on your liability type. You are fully liable if you live in Denmark for 6 consecutive months. Otherwise, you are partially liable.
If you have non-Danish assets, savings or other, inform SKAT. better to be safe than sorry since you could get a nice fine.
Students
If you are a student, be sure to call (by phone!) SKAT, and tell them:
- When did you move to Denmark to study
- If you are subject to income tax in your home country
- If you are registered for studies (up to master’s degrees)
- If you run your own business while you are in Denmark (and what type of business)
This way you can discover if you can apply the special student rule on your taxes.
What is the special student rule?
Simply, it means that you are not subject to full tax liability before you have stayed in Denmark for 365 days within 2 years.
You can also get an extra tax reduction if you come from one of the countries in the list here. If this is the case, fill out this form and send it to Skat so they apply the reduction of your tax card.
So, what do you need to (legally) work in Denmark?
- a personal tax number (if you stay less than 3 months) or a CPR number (if you stay more than 3 months)
- a tax card
- a NemKonto
- MitID
If you receive a non-Danish scholarship, you need to declare it in your preliminary tax assessment (forskudsopgørelse). Usually, Danish scholarships will already deduct the tax.
Workers
You can get a tax number, up to 1 month before starting to work. You need to send some documents through this link or when visiting an International Citizen Service centre.
Documents you need:
- Employment contract (signed by you and your employer)
- Photo ID such as passport or national ID card (both front and back).
- Marriage certificate in the original language if you are married
- Danish work permit (if a citizen from outside the EU, Norway, Iceland, Switzerland or Liechtenstein)
Preliminary tax assessment
When do you need to modify it?
If you get new working conditions as an employee:
- Working from home or having a new distance from your job (affects any mileage deduction)
- Going up or down in salary
- Getting a new job
- Losing a job
- Starting or stopping getting mileage deductions
If there are changes in your financial and civil status:
- Buying a home or second home
- Selling a home or second home
- Getting married or divorced
- Starting to get a pension or early retirement
- Paying less or more into retirement savings
If there are changes in your study conditions:
- Starting or stopping getting SU
If you get new working conditions as an employee:
- Gaining or stopping having deductions for interest expenses
- Interest expenses change
- Closing my business
- Profits have changed in my business
- Starting your own business
- Starting or stopping getting mileage deductions
Deductions
You are entitled to different deductions as a worker and/or student in Denmark. Deductions and other allowances exist when:
- You travel more than 24 km to and from full-time or part-time work or paid internship
You can get a deduction (approx. 26%) for the days you work. This deduction is applicable even if you don’t go by car: train, bus, bike, carpooling, etc.
→Be careful! You can’t get a deduction for transport between home and work if:
- your employer pays for your transport
- you have a company car at your disposal
- you travel to and from your place of education (as the state education grant (SU) is not considered a salary)
- you drive to and from unpaid internships.
→In 2024, the deductions rate per transport day was 2,25 kr. from the 25th to the 120th km and 1,12 kr. from the 121st km.
→If you cross the Great Belt Bridge or the Øresund Bridge, you get additional deductions.
→If you earn less than 336,700 kr. per year, you get additional deductions in transport.
- You improve your household services
You are entitled to claim a deduction for the wage costs on certain household services such as cleaning, minding of children or garden work carried out in your home or your holiday home.
→ Payments may not be made by cash if you want the tax deduction!
→ Payments need an invoice!
- You have interest expenses
You get a deduction if you have:
- interest on bank loans
- interest and contributions on mortgage loans
- interest on consumer loans with a finance company
- interest on a credit card arrangement
- negative interest rates.
- You work
If you work and pay the labour market contributions, you receive
- an employment allowance: max. 10.65% or 45,100 kr. in 2024
- a job allowance: 4.50% of income over 216,100 kr. or a max. of 2,800 kr. in 2024
→ if you are a single parent you are entitled to an extra allowance!
You can deduct the costs of employment-related expenses like food, clothing or study spaces in exceptional cases only, even though they are also related to your work. However, the first 7,000 kr. in 2024 are not deductible.
- You are part of (some) union and/or funds
You can deduct a maximum of 7,000 kr. as part of trade union fees.
- You contribute to your pension
Do you have 15 years or less before you retire?
You may obtain an additional deduction of 32% on contributions of up to DKK 80,600 in 2024.
→ The maximum deduction is thus 25,792 kr. in 2024.
Do you have more than 15 years before you retire?
You may obtain an additional deduction of 12% on contributions of up to DKK 80,600 in 2024.
→The maximum deduction is 9,672 kr. in 2024.
If your pension scheme is an annuity pension or temporary old-age pension (life annuity) (like the one of my employer), when you contribute (in 2024) you can obtain tax relief on up to 63,100 kr. in total for contributions to these two pension types.
How to set up the preliminary tax assessment?
Go to www.skat.dk and log in using your MitID. Go to the Forskudsopgørelsen page.
The only section I care about and you SHOULD FOR SURE care about are:
- Section 201: write your estimated salary BEFORE TAXES. If you are sure, calculate your average monthly salary and multiply it by 13. Add also holiday allowance and holiday pay from your employer, the value of employee benefits (multimedia facilities, company car and food and accommodation), employer-funded health insurance, compensation for lost earnings, remuneration for work on boards, committees, etc.
- Section 306: ONLY FOR STUDENT, here is your SU estimate before taxes. DO NOT TOUCH IT! It is directly managed by the state.
- Maybe you should also look into Section 417, “Mileage deductions”
That is it!
DO NOT TOUCH THE REST!
Believe me! If you want to change something else but you are not sure 100% of what you are doing, call SKAT!
Here, I will list the translations and meanings of the other sections. At the start at least, do not touch the rest!
Remember, I am not an expert in the matter, I am just a student and worker who has lived in Denmark for over 2 years so I only know about MY experience!
Have fun!