Income tax

The Danish welfare system is financed by taxes

All Danish residents are liable to taxation on their income. Personal income tax is paid to state, county and municipality.
The Danish tax system is a graduated tax system. That means that people are assessed according to their personal income the higher earnings, the more tax is paid, up to a certain level. The total income tax to state, county and municipality can never exceed 56%. Income tax is paid from salary income, investment/unearned income and employee benefits. Deductions can be given, for instance for transportation costs. Furthermore, there is a special tax rate for dividends and certain income in connection with share trading. If one owns real estate, tax on the value of own residence (public assessment value tax).

Favourable provisos for foreign knowledge workers

The Danish tax system comprises a number of provisos and regulations that favour foreign labour in Denmark:

  • The 26% tax scheme means that key employees and researchers recruited abroad can obtain a significantly lower tax rate the first five years of residence in Denmark.
  • If ones family remains in ones native country, allowances for double residence are given.
  • Denmark has entered into agreements with other countries to avoid double taxation.
  • Foreign employees remain covered by the social security of their native country, if certain conditions are met. In this case, the employees must not pay social security contributions in Denmark.