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Before we delve into the taxation of personal income in Denmark, it's crucial to note that the information provided here is for informational purposes only and should not be construed as specific recommendations.
For personalised advice on your tax situation while working in Denmark, it's advisable to consult with a tax advisor.
Denmark is known for a lot of good things but taxation might not be one of them. Denmark is the number one country in Europe with the highest top statutory income tax rate.
In Denmark, individuals may be taxed in different ways depending on their residency status and income sources. Here's a breakdown:
Full tax liability: Individuals who are considered residents in Denmark are subject to full tax liability, meaning they are taxed on their worldwide income. However, if they are considered tax residents in another country according to a: Double Taxation Treaty, abbreviated DTT, they may not be fully liable for tax in Denmark. Meanwhile, various deductions are available, reducing the effective tax rate in most cases
Limited tax liability: Individuals with limited tax liability to Denmark are only taxed on income derived from Danish sources. These sources include:
If you work in Denmark and receive compensation from a company or entity that operates within Danish legal boundaries
Salary for work in Denmark if the stay exceeds 183 days within a 12-month period
Other types of personal income like: Directors' fees; pension distributions and social security benefits
Compensation received for services provided under specific regulations governing the hiring out of personnel
Income from a business enterprise with a permanent establishment in Denmark
Income from property located in Denmark
Dividends and royalty income from Danish companies
Remuneration for advisory assistance
Now we are ready to check out the structure of the personal income tax in Denmark as individuals are subject to various taxes on their personal income, including: National income tax, municipal tax, labour market tax and church tax.
Each type of income is taxed differently and at varying rates. This will affect deductions and overall tax liabilities.
Types of Income:
Tax Rates (2024):
State Taxes:
Local Taxes:
Share Tax:
Additional Notes:
National Taxes:
Bottom tax: Levied at 12% on personal income and positive net capital income
Local Taxes:
Share Tax:
Church Tax:
Denmark is considered a welfare state. What does it mean?
Being labelled as a welfare state means that Denmark places a high priority on social welfare and public wellbeing. In practical terms, this translates to a robust system of social policies and programmes designed to provide citizens with a wide range of benefits and services. These may include:
The goal of a welfare state is to ensure that all members of society have access to essential services and support, regardless of their socio economic status. By prioritising the welfare of its citizens, Denmark aims to create a more equitable and inclusive society where everyone has the opportunity to thrive and contribute to the collective good.
A good way to compensate for the high income tax is to get a higher salary, so let's see how to negotiate salaries in Denmark.