Tax system of Denmark
All taxpayers in Denmark have a personal tax deduction (personfradrag) of 46,500 DKK per year (for 2020)
Regardless of the fact that almost all European countries strive for unity of laws and integration in the areas of economic and social policy, the tax systems of European states are not distinguished by unity. Denmark - is a country with a fairly high level of taxes.
The tax paid to the treasury of the Danish state is for the benefit of the people (free medical care, free education at schools, free study of Danish language in the first 3 years after registration, excellent roads and so on). Here is an example of the distribution of 1 DKK:
Personal tax deduction (personfradrag)
All taxpayers in Denmark have a personal tax deduction (personfradrag), which is DKK 45,000 per year (for 2017) for people over 18 years old. Personal tax deduction is for all residents of Denmark, this is the money that is not taxable. If you, for example, earned only DKK 45,000 in 2017, you will not need to pay tax at all.
If you don’t have any income at all and you don’t use your personal tax deduction, this tax deduction to be transferred to your spouse, who can earn more money because her/his taxable amount will be reduced by using your tax deduction.
AM-BIDRAG (Tax for all people working in Denmark)
This is nothing more than 8% that you pay from all your salary. The Employer deducts AM bidrag from your salary after all retirement benefit payments have already been deducted (including ATP bidrag). However, you do not have to pay AM bidrag if you receive a scholarship, pension, government allowance, unemployment benefits and other benefits. All this should be specified in your tax card in order for your B-kort to be correct.
A-SKAT is your salary before tax minus AM-bidrag and non-taxable amount
All people working in Denmark are required to fill out a Preliminary Tax Return (forskudsopgrelse) with their expected annual income, due benefits, marital status, and so on by the end of each year from November or upon arrival in Denmark . After that, you get a tax card (so-called b-kort or free-kort). You should never compare your B-kort with B-kort of your friend or neighbor, as it depends on many factors, such as the beginning and end of your visa, your income, marital status and so on. If necessary, you can "increase your b-kort", if it was calculated by SKAT without taking into account your personal characteristics. Big b-kort doesn't mean to be correct.
New arrivals in Denmark should register in the tax system, which we described above. If you already have a tax card and you continue to work next year, the revenue authority will send you a preliminary tax card ("Forskudsopgrelse") for the next year, which you need to check and add the missing benefits, if any. If you do not do this, B-kort will be automatically created via computer and it does not know about your personal financial situation. Not knowing the laws does not exempt you from liability, and if you get a debt under SKAT at the end of the year due to your carelessness, you will have to pay it. To avoid such troubles, it is very important to make any changes in your tax card (change in the annual report, maternity leave, sick leave, transfer from a student visa to a work visa, etc.)
Annual report (Rsopgrelse)
Every year from March to July, everyone in Denmark fills out tax returns (selvangivelse). SKAT sends you a preliminary annual report. Your task is to control the accuracy of this information, as well as to specify missing benefits. For example: student benefits, due benefits, if you have a temporary contract, passenger fare from the place of residence in Denmark to the work place, credit, alimony, etc. After you fill out the tax return, you will see your annual report with red or green amounts. Red amount is a debt under SKAT, green amount is a nice bonus from the revenue authority in the form of "tax refund". You get a refund if during the last year you overpaid to SKAT. As a rule, you receive money in a short time on your NEM account if you do not have debts in the early years. Red amount is a debt that you can pay immediately, divide the payment into several months, or wait until SKAT deposits your debt in the tax card of the next year (with a small percentage).
Book a consultation and we will help you deal with your tax card.Book a consultation on Skat