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When planning a professional trip to Denmark, it is important to address tax issues, which can vary depending on the nature of the job. Whether you intend to work full-time under an employment contract or intend to set up a sole proprietorship, anyone working in Denmark and tax residents here are required to settle their taxes with the Danish tax authorities.
Knowing how to properly fill out the required forms and understanding the local tax laws are very important issues, but they may differ from those in your home country. Proper preparation and knowledge of the applicable rules allow her to carry out all formalities quickly and efficiently. When in doubt, it is also worthwhile to seek the assistance of local tax advisors, who can help guide you through the applicable regulations and avoid any potential settlement problems.
Under Denmark's tax system, two types of tax law can be distinguished: full and limited. Those who work in Denmark but live outside the country are subject to limited tax law. In this case, they only pay taxes in this country on income earned in Denmark, while they must settle other tax obligations in their country of residence. Full tax law, on the other hand, applies to Danish citizens. Such taxpayers are required to pay and settle all taxes due in Denmark, regardless of the source of income.
Employees residing in Denmark for at least six months are required to settle their taxes. In order to make the appropriate application to SKAT (Danish Tax Authority), they should first follow a few important steps.
First, it is necessary to register with the SKAT tax system. Then, obtaining a CPR number, which functions as the equivalent of the Polish Tax Identification Number and is also necessary for running errands at banks and making appointments with doctors, is another important step.
The next step is to obtain a TASTSELV code through the website www.skat.dk, which is used for online tax settlements. The TASTSELV code can only be obtained using a CPR number. If you have trouble obtaining a TASTSELV code, it is possible to send your tax return by registered mail, but this can extend the time to settle up to 2-3 months. However, most settlements are done online at the SKAT website, where the settlement decision is issued immediately.
In terms of tax settlements, the key documents are:
I. Selvangivelse: A tax return form that is issued by the tax office and mailed to the taxpayer's address, regardless of location, both in Denmark and Poland.
II. Arsopgorelse: An annual statement from the Danish tax authority that shows the income and taxes paid for the year. This document also includes information about a possible tax refund or possible need for a surcharge.
III. Lonseddel: These are weekly or monthly pay slips.
IV. Oplysningsseddel: This is a document attached to the last check issued by the employer at the end of employment or at the end of the fiscal year. The information contained in this document includes details of income earned and taxes paid.
In 2024 in Denmark, the tax-free amount is DKK 49,700, which is roughly equivalent to PLN 30,000. As a result, those with the lowest incomes will often not be required to pay taxes, plus they can expect more favorable tax refunds from the Danish tax authorities.
In Denmark, the tax year is the same as the calendar year and runs from January 1 to December 31. The deadline for filing a tax return depends on the individual obligations specified in the declaration sent by the authority; this document must be submitted by May 1 or July 1. In addition, it is possible to make a settlement with the Danish Tax Authority for the past three years backwards.
Under current regulations, not everyone is entitled to a full set of tax deductions. For this reason, it is particularly important to enter deductions accurately in order to avoid problems during possible subsequent audits by SKAT. Improper application of reliefs can lead to financial penalties and additional obligations to correct tax returns. It is also a good idea to regularly check the current regulations to ensure that you are taking advantage of the reliefs you are entitled to in accordance with current standards.
Tax deductions that a Danish taxpayer can take advantage of, depending on the amount of expenses incurred:
- Commuting expenses - Deductions are based on the distance traveled.
- Trade union dues.
- Costs of food and lodging.
- Costs of crossing toll bridges - The amount of the deduction depends on the bridge and the mode of transportation used to cross it.
- Expenses for traveling home.
- Interest on loans - May be deducted for consumer loans and mortgages in both Denmark and Poland, provided that at least 75% of annual income is from Denmark. To deduct mortgage interest, 1% of the value of the property must also be added.For married couples, the spouse's income is also taken into account.
- Alimony paid.
- Relief for running a dual household.
In order to document your right to relief, you will need to provide the following documents:
- Fuel receipts or ferry/airline tickets that confirm travel to and from Poland.
- Bridge and gate receipts in Denmark.
- Rental agreement and other documents proving rental of an apartment in Denmark.
- Documents proving registration in your home country.
- Marriage certificate.
- Certificate from the Polish tax office regarding the spouse's earnings.
- A certificate from the bank regarding the amount of loan interest paid during the tax year being accounted for. This document should include: the name of the bank, the details of the borrower, the type of loan (consumer or mortgage), the amount of the loan taken and information on the interest paid.
- Documents confirming the household in the place of permanent residence.
- Include certificates of paid alimony for the tax year and a court decision awarding it.
These documents must be translated into English or Danish by a certified translator and should include receipts of payments made. In addition, make sure that all documents are legible and contain the necessary information to avoid delays in the settlement process.
A deduction can also be made for donations, contributions and gifts made to charitable organizations, foundations, associations, institutions and religious communities that have been approved by the Danish tax authority. This possibility applies to all forms of financial support that are directed to these approved entities.
Taxation according to income:
I. Income less than DKK 340,800 - When your income is less than DKK 340,800, you are entitled to a maximum deduction of DKK 15,400 under the expanded commuting allowance.
II. Income in excess of DKK 290,800 - When your income exceeds DKK 290,800, the deduction will be gradually reduced.
Individuals who earn at least 75% of their annual income from work in Denmark and have a spouse who does not earn income in Denmark and whose earnings in Poland do not exceed DKK 46,700 gross may qualify for the cross-border employee relief. To claim this relief, it is necessary to provide a marriage certificate in European form and a certificate from the Polish tax office, which must be translated into English. This certificate should include confirmation of both your and your spouse's income.
The obligation to report income to the Danish tax authority SKAT is incumbent on all employees in Denmark, regardless of the amount earned. Neglecting this obligation can result in a fine, which can be a maximum of DKK 5,000.
The private annual tax return is based on information provided by the employer, bank, unemployment fund and other sources. The preliminary tax return prepared by SKAT will be available until March 15 of the following year; it only needs to be adjusted if necessary, that is, to make any corrections. The opportunity to make corrections to the return exists until May 1 of the year following the year of income, while final corrections can be submitted until July 1. A return containing errors may result in a taxpayer having to pay a tax surcharge.
Tax documents can be sent by mail or electronically using TastSelv/NemId codes. After the tax office verifies the return, the taxpayer will receive a final statement containing all the information about a possible refund of overpaid tax or the need for a surcharge, along with a set due date and the official account number. The excess tax will be transferred to NemKonto, a special account for transfers with Danish public institutions. Tax refunds that SKAT transfers will also go to NemKonto.
It is possible to send the tax return either by mail or electronically, using TastSelv/NemId codes. Once the tax office has reviewed your return, you will receive a final statement, which includes information on whether you will be refunded any overpaid tax or need to make a surcharge, along with the due date and the office's account number. The excess tax will be transferred to NemKonto, an account designated for transfers from Danish public institutions. The tax refund that SKAT sends will go to NemKonto.
To check your tax return on SKAT, click the “Se årsopgørelsen” option. Green indicates a tax refund, while red indicates an underpayment. Changes to the return, including the introduction of tax credits, can be made by selecting “Ret årsopgørelsen / oplysningsskemaet.”
There are various deductions available in the Danish tax system, which can include expenses such as housing, food, commuting and even running a dual household. With these deductions, you can reduce the amount of tax due and get a more favorable refund. It's important to factor in the tax deductions you're entitled to on your own in your annual tax return with the IRS.
Planning to work or stay longer in Denmark? Ensure your peace of mind and financial security with our tax return services. We will help you understand the intricacies of the Danish tax system, take advantage of available reliefs and properly fill out all the necessary forms. With us, you'll avoid mistakes and the stress of paperwork, gaining confidence that your tax affairs are in the best hands.