The Danish society is a welfare society and is based on the concept of citizens having equal access to different services paid for by taxes. this includes services such as healthcare, childcare and education. Taxes are administered by the Danish Tax Agency, Skattestyrelsen (SKAT).
The tax rates in Denmark are generally known to be high but it is less known that social security is financed by taxes. Furthermore, everyone has access to the same public services regardless of income and employment.
As a rule of thumb, if you live in Denmark, you are fully taxable to Denmark. Your global income shall therefore be declared and taxed in Denmark.
If you have foreign income, a double tax treaty will determine which country has the right to tax the income and which country should grant a credit for paid taxes in the other country. We recommend contacting the Foreign department at SKAT for further guidance.
As a non-Danish researcher, there are different ways in which you can be taxable in Denmark, please read below.
The principle behind the Danish tax system is progression. This means the more you earn, the more tax you pay.
All individuals in Denmark pay a gross income tax of 8%, called Labour Market Contribution (AM-tax/AM-bidrag) on salary income (also called A-income).
After AM-tax, municipal tax, church tax (optional), health tax and state tax is paid. Furthermore, as a tax payer you may be eligible for various deductions such as interest expenses, travel expenses, contributions to some charity funds and union fees.
If you are not eligible for the Researcher Taxation scheme, you must register with the Danish Tax Agency ("set up a tax card") when you have recieved your CPR number. If you do not have a tax card, you will be taxed 55% of your salary.
Because so many personal circumstances determine the tax rate, it is impossible for CBS to estimate your tax rate in advance. The tax rate can vary from approx. 30% to approx 56%. Most people range between 35 - 42 %, Please contact SKAT for more information about deductions etc.
Preliminary tax assessment and tax card
Upon arrival in Denmark and for each year that follows, all regular tax payers need to register a preliminary tax assessment (forskudsopgørelse) with the Danish Tax Agency. In this, the expected/estimated income and expected deductions are registered, and a preliminary tax rate and the tax free deduction are calculated. A tax card with information about tax rate and monthly tax free deduction is automatically sent to the employer and in that way, the preliminary taxes are withheld.
The preliminary tax assessment can be registered when you have a Civil Registration Number (CPR number). You can change the assessment as many times as you like, either online at skat.dk or by calling SKAT.
If you fail to register a correct tax card you will either pay too little or too much in preliminary taxes. Then you will either get a refund or have to pay the unpaid taxes in the the following tax year. This is announced with the tax assessment (årsopgørelsen) on skat.dk in March each year.
In the middle of March, tax payers recieve a tax assessment (årsopgørelse) in in their online file with SKAT covering the previous year. In accordance with your preliminary tax assessment, you will either get a refund or have to pay the unpaid taxes.
The tax payer in question is responsible for ensuring that the information in the tax assessment is correct and complete and if necessary, declare additional information to the tax authorities in a tax return.
If you do not receive a tax assessment you need to contact SKAT and submit a tax return.
If you are employed at CBS as a Postdoc, Assistant Professor, Associate Professor or Professor, you may be eligible for the Researcher Tax Scheme. It entails a flat rate tax of curretly 32.84 per cent for a period of 84 months. The Researcher tax consists of an 8% labour market contribution and 27% tax. The 27% is calculated after the deduction of the 8% labour market contribution.
The Researcher Tax Scheme only applies to salary from CBS. Other income will be taxed according to the regular tax rules. If you do have other income, you will have the same liabilities as described above under the ordinatiry taxation in Denmark.
In order to be covered by the flat reate tax of 32.84%, it is a requirement that you are hired in a Postdoc position or above and that you have not been tax liable to Denmark for 10 years prior to your employment at CBS.
IMPORTANT: This also means that if you register in Denmark more than 30 days before you take up your position at CBS, you will NOT be eligible for the Researcher Taxation. Furthermore, if you have a gap in your employment of more than one month and keep your address in Denmark, you may also not be eligible to continue on the Researcher Taxation.
No tax card is needed for individuals covered by the Researcher Tax Scheme with no other income or assets that are taxable to Denmark.
Foreigners living in one country and working in Denmark, are as a starting point limited tax liable to Denmark. This also applies when you are on the Researcher Taxation Scheme. If you are not eligible for the Researcher Taxation Scheme, you may be eligible for the special Cross-border Commuter Tax Scheme. This scheme allows you to deduct expenses to a larger extent than if you use the regular rules for limited tax liability.
For detailed information in the special tax conditions applying to cross-border commuters in the Øresund region, please visit oresunddirekt.com. For more information if you live in another country, please contact SKAT.
For specific questions about your personal tax status, we advise you to contact the Danish Tax Agency.
Should you leave Denmark at a later point, it is important that you remember to notify the Danish Tax Agency - you can read more here.