What is taxable income in Denmark?

It is soon time to check and correct your tax return – Årsopgørelse – for 2018. Tax return is a document that states your income for 2018, the tax deductions and taxable income.

What is taxable income in Denmark?

Taxable income is used by tax administration (Skattestyrelsen) to calculate your total taxes for 2018. The calculation of the taxable income goes like this:

Personal income

– AM-bidrag (arbejdsmarkedsbidrag = labour market contribution) 8% of your income

+/- Capital income (interest rates paid or received, investment returns on e.g. stocks or mutual funds)

– Other deductions (in Danish = ligningsmæssige fradrag)

= Taxable Income (in Danish = skattepligtig indkomst)

 

Here is an example to illustrate this calculation:

Tax deductions will always lower your taxable income and thus your overall taxes.

What counts as a personal income in Denmark?

Personal income is all taxable income that is not capital income, i.e.: Salary, fee for giving a concert or a lecture (or if you are working as a freelancer), income from your company if you are self-employed, unemployment benefits (kontanthjælp or dagpenge), payments from private or public pension, profit from your hobby, money from rent of your property etc. 

Income you don’t need to pay taxes from:

The taxes are high in Denmark and many forms for income are getting taxed. But not everything. Here are some example (the list is not comprehensive) for income that is not taxed in Denmark:

  • Cash presents from your family (up to 65,700 DKK in cash presents from your parents, grandparents or children are tax-free)
  • Payments from insurance (life insurance, accident insurance, home insurance)
  • Income from sale of your private things (if you sell a chair or child clothes on DBA)

How can you lower your taxable income?

That is probably the most frequent question I am getting from the foreigners in Denmark with regards to their taxes. Let’s see how you can do it:
 
  • You should remember to enter all the tax deductions you are entitled to in your Årsopgørelse for 2018. 
  • Put (more) money on Iværksætterkonto (start-up account) if you want to start your own company one day. You can put money on this account until May 2019 and still get tax deductions for 2018.

Get your taxes right from the start

Taxable income, tax return, tax deductions… If you are still confused about all these tax words and it is difficult to understand your tax documents, because they are in Danish, don’t worry.

On the 24th of March from 10 to 12 AM you are invited to a webinar (online meeting), where I will guide you through the whole process of checking and correcting your Årsopgørelse for 2018. At the end of the webinar you will have a chance to ask all your questions with regards to personal taxes in Denmark.

You can sign up for the webinar here: 

 
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ElenaKabatchenko

Founder of Finance Guide Denmark – helping internationals in Denmark with the financial side of their integration

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