What is Danish B tax?

What is Danish B tax?

What is B tax - we look at that here.

Many may know what A tax is, ie, the tax you pay on your A income such as wages, unemployment benefits, but what is B tax and how do you pay for it?

You can read more about that in this article.

When do you have to pay B tax?

A Tax is a net income (income after tax is deducted) B tax is a gross income (no tax has been deducted).

Therefore, you must ensure that you pay tax on your B income.

For example, if you work as a freelancer, musician, self employed person or give lectures, you will often have to pay B tax because you will typically receive a fee.

Fees are used in situations where it is not a matter of permanent employment, but rather where you have carried out a single task or worked on a limited project.

The employer reports the amount to SKAT on the recipient's CPR number and it is then the recipient's task to pay tax on it.

You therefore only pay B tax after you have received the B income - whereas A tax is paid before you receive the salary.

What will you be paid after tax?

To calculate your B tax, you must first deduct labour market contribution (AM-bidrag in Danish) of 8% from your income. You then charge your withdrawal percentage on the remaining amount. The two numbers are added together and you now know what you have to pay in B tax.

Example of calculation of B tax

Amount before tax: DKK 3,500.

AM contribution: DKK 3500 x 0.08 = DKK 280

Tax: DKK 3220 x 0.38  = DKK 1223.6

B-tax payable: DKK 280 + DKK 1223.6 =  DKK 1503 (the amount is always rounded up to the nearest whole kroner).

This means that if you receive a fee of DKK 3,500 you will have to pay DKK 1,503 in tax. Thereby, you will be paid DKK 1,997 after you have deducted the tax yourself.

What happends if you do not pay B tax?

As with A tax, it is a legal obligation to pay B tax and if you don’t, you can be punished with a fine. If you receive B tax an income? and no tax is paid on it, you will get a big tax hit at the end of the year, as the entire taxable amount must instead be paid at once. In other words, you cannot avoid having to pay tax on the amount.

Should the main card or secondary card be used for a student job?

When you get a job, for example a student job, your employer will ask you which card should be used for you salary. This can be done from your main or secondary card.

Below you can see what the different tax cards mean and when you should use them. You can get your tax card online via Skat.dk (You can choose the English version).

Primary tax card

If you earn more than your tax exemption card you must have a primary tax card and if needed a secondary tax card too. The primary tax card is only used by one employer and is used where you earn the most. This means that if your employer or the State educational grant (in Danish "SU") already uses your primary tax card, you must use the secondary tax cards for other jobs. 

It is you who must tell your employer whether you want the tax to be deducted from your primary tax card, or the secondary tax card shall be used.

Secondary tax card

The secondary card is used if you are paid by several employers. For example State educational grant and an employer.

Tax exemtion card

The exemtion card is due to the amount you can earn in the course of a year without having to pay tax. Therefore, you only pay tax when your total salary in one year exceeds this amount. However, you must still pay labour market contributions of 8 percent of your entire salary.

It differs from person to person, how large the amount of one's tax exemption card is, but as a starting point the amount is around DKK 46,000 per year from the time you turn 18 years.

How much you can personally earn without paying tax is stated on your preliminary income assessment, which you can find on Skat.dk

So to answer the question of whether the tax should be deducted from the primary or secondary tax card? You must use your primary tax card where you earn the most.  The secondary tax card is therefore used everywhere else where you do not use the primary tax card.

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