Danish income tax - a short introduction
Arbejdmarkedsbidrag (AM-bidrag) - labour market contribution
In addition to municipal taxes, all employees in Denmark also pay a labour market contribution (AM-bidrag) of 8 percent. This is a tax, which, among other things, covers in the event of unemployment and sickness benefits and expenditure for training and activation. The labour market contribution is deducted from your entire gross earnings. Income tax is then deducted.
Municipal tax and sundhedsbidrag
Municipal tax make up the largest portion of the total income tax, 24 percent (2019) for commuters living in Sweden and working in Denmark.
State tax in Denmark
State tax increases in line with income. In 2020 the following applied:
- Bottom-bracket tax: for amounts above the basic deduction of DKK 46.500, you pay 12.14 percent in tax
- Top tax: for amounts above DKK 531.000 (after AM-bidrag) you pay 15 percent in tax
You pay tax on your income after the deductions have been subtracted. This means that you make your deductions first and the state and municipal tax is then deducted from the remaining amount. You can make several different deductions on your annual salary. The deductions you are entitled to depend on whether you have a full tax liability or a limited tax liability or if you are taxed according to the cross-border rule.
As a commuter you can be taxed according to either limited tax liability or the cross-border rule.
Managing your tax in TastSelv
In Denmark Skattestyrelsen have a system called TastSelv. You can find more information on Skattestyrelsens website. In TastSelv you can change the information if your income changes during the year, among other things. You need a NemID or a TastSelv code to be able to access your tax information. Please note that the TastSelv code is only valid until the 1st of January 2020, and will then be removed as an option for logging in.