Denmark Payroll Information – Deel Global Payroll

Updated on: 2025/08/04 14:03 (UTC)

Overview

Denmark is a constitutional monarchy and a member of the European Union. The country of Denmark is the principal component of the Kingdom of Denmark, which also includes the constituent countries of Greenland and the Faroe Islands.

The country of Denmark is in northern Europe and is part of the Scandinavia region, while Greenland is located to the northeast of Canada and is considered part of North America, and the archipelago of the Faroe Islands is located to the north of the United Kingdom. The constituent countries of Greenland and the Faroe Islands have considerable autonomy and consequentially have tax and employment provisions that significantly differ from those in effect for the country of Denmark. This primer covers payroll provisions of the country of Denmark, which in Danish, the official language of Denmark, is rendered as Danmark.

Only one country, Germany, borders the country of Denmark, and Germany is to the south of Denmark. The largest part of the country of Denmark is attached to the European mainland, and the country also includes numerous islands, with three of the islands far larger and more populous than the others. The three such islands are Zealand (Sjælland), Funen (Fyn), and North Jutlandic Island (Nørrejyske Ø). The country of Denmark’s capital city of Copenhagen (København) is located on Zealand. While the country of Denmark does not share a border with Sweden, the two countries are quite close to each other, with the Øresund strait separating Sweden from Zealand by fewer than 5 kilometers at its shortest width between the two land masses. The country of Denmark is bordered to its east by the Baltic Sea, to the northeast by the Kattegat Sea, to the north by the Skagerrak Strait, and to the west by the North Sea.

Denmark’s currency is the Danish krone.

Employers in the country of Denmark are responsible for withholding income taxes and certain social taxes from employees’ earnings and making contributions for various benefit programs. Denmark’s local jurisdictions impose taxes as well.

Employers must comply with labor law on work hours, sick leave, maternity leave, paternity leave, parental leave, and other working conditions.

Foreign workers generally are covered by labor laws and must pay taxes.

Danish citizens working in the United States are covered by U.S. tax law with possible treaty and work status exclusions applying. Work within the U.S. states and territories is covered by various labor laws.

CURRENCY DETAILS

The currency of Denmark is the Danish krone (DKK), also known as the Danish crown and also simply known in Denmark as the krone. The internationally recognized three-letter currency code for the Danish krone is DKK, which also is one of the currency’s commonly used currency symbols. The plural form of Danish krone is Danish kroner.

When an amount of Danish kroner is written using the currency symbol DKK, as is commonly done in English, the symbol precedes the numerical value with a space between the numerical value and symbol.

There is a set of currency symbols applicable to crown currencies, which are currencies whose name contains a word that translates to crown, including the words koruna, krona, króna, and krone. When an amount of Danish kroner is written using the currency symbol Dkr. or one of its variants (Dkr, DKr., DKr, DKR., and DKR) to distinguish Danish kroner from other crown currencies, and when Danish documents use the general crown currency symbol kr. or one of its variants (kr, Kr., Kr, KR., and KR) to refer to Danish kroner, the symbol precedes or follows the numerical value with a space between the numerical value and symbol.

One hundredth ( ¹ ⁄ ₁₀₀ ) of a Danish krone is referred to as an øre, which has the same plural form as its singular form.

When amounts of Danish kroner are written in Danish, the comma that in English separates the thousands place from the hundreds place instead is rendered as a dot (.), and the dot that in English separates the ones place from the tenths place instead is rendered as a comma.

TAXES

Personal income taxes in Denmark are composed of a national tax, a municipal tax, and an optional church tax for members of the Evangelical Lutheran Church in Denmark (Folkekirken). Much of the total tax burden is collected under the general tax system, including a significant portion of the social taxes.

A labor market contribution (arbejdsmarkedsbidrag, abbreviated as AM or AM-bidrag), which is a general social security contribution used to support a variety of government-provided benefits, is levied before income taxes are calculated. ATP Lifelong Pension contributions are made by both employers and employees (ATP is an abbreviation of Arbejdsmarkedets Tillaegspension, which translates to Labour Market Supplementary Pension.)

Other contributions made by employers include contributions for a maternity benefits program; Employers’ Training Contributions (Arbejdsgivernes Uddannelsesbidrag, abbreviated as AUB), which reimburses employers that employ students; Funding Contribution (Finansieringbidrag, abbreviated as FIB) for various benefits; Employment Equity Fund (Arbejdsmarkedets Fond for Udstationerede, abbreviated as AFU), which guarantees payments of workers seconded to Denmark, and the Labor Market Occupational Diseases Fund (Arbejdsmarkedets Erhvervssikring, abbreviated as AES) for workers’ compensation for occupational illnesses.

The Danish Tax Agency (Skattestyrelsen) is one of seven separate tax entities that on July 1, 2018, replaced the Danish Tax and Customs Administration, also known as SKAT (skat is the Danish-language word for tax.) The Tax Agency oversees collection of taxes deducted at source from wages. The Danish Ministry of Tax (Skatteministeriet) has the primary responsibility of setting or otherwise enforcing rates of the national, municipal, and church taxes.

The tax year runs from Jan. 1 to Dec. 31.

Coronavirus (Covid-19) Guidance: Deposit deadlines for income tax withholding and the labor market contribution falling from April 30, 2020, to July 10, 2020, were postponed by four months. For businesses categorized as small or medium, the deadline for income tax withholding and labor market contribution deposits on Sept. 10, 2020, was postponed to Jan. 29, 2021; on Oct. 12, 2020, to March 31, 2021; on Nov. 10, 2020, to May 31, 2021; on May 10, 2021, to Sept. 27, 2021; and on June 10, 2021, to Jan. 31, 2022. For businesses categorized as large, the deadline for income tax withholding and labor market contribution deposits on Aug. 31, 2020, was postponed to Jan. 15, 2021; on Sept. 30, 2020, was postponed to March 16, 2021; on Oct. 30, 2020, to May 17, 2021; on May 31, 2021, to Oct. 15, 2021; and on June 30, 2021, to Jan. 17, 2022. However, returns must be filed on time.

Employers that did not make income tax withholding or labor market contribution deposits due March 31, 2020, or April 14, 2020, because they were ordered to close or suffered a decrease in business, are to be able to apply for a waiver of penalties and interest related to those deposits once coronavirus-related restrictions are lifted, subject to the payments being made immediately upon the lifting of restrictions.

Employers subject to the payroll tax categorized as other businesses exempt from VAT may make payroll tax deposits due July 15, 2020, by Sept. 1, and deposits due Oct. 15, 2020, by Nov. 16.

According to European Commission guidance, employees who normally work in one European Union member country and live in another are still considered to be insured by the social insurance system of the normal work country while working at home.

Effective until Feb. 2, 2021, Denmark’s Customs and Tax Administration is collecting feedback on Draft Guidance No. 20-1251971 regarding the taxation of employer-provided coronavirus tests and masks. Under the draft guidance, coronavirus tests required for employment would not be taxable; employer-provided masks provided for working hours would be tax-free; and coronavirus tests and masks not required for work would be taxable and covered by a limit of DKK 1,200.

Income Taxes

Income taxes include the national tax, municipal tax, and an optional church tax for a member of the Evangelical Lutheran Church in Denmark (Folkekirken).

Coverage: Residents of Denmark are subject to tax on their worldwide income. Denmark has no statutory definition of residence; generally an individual who is physically present in Denmark for more than six consecutive months or has a permanent residence there will be deemed to be a resident for tax purposes.

Rates and Thresholds: Total income tax, excluding the church tax, is levied at marginal rates.

Income tax in Denmark includes a national tax, municipal tax, and church tax.

National tax: Without regard to the amount of annual income generally exempt from income taxation, there are two national tax rates, often called the lower-bracket tax or bottom tax (bundskat), and the top-bracket tax or top tax (topskat). The bottom tax is assessable on income in excess of an individual’s personal allowance (personfradrag) and up to the top tax threshold (topskattegrænse). Two separate personal allowance amounts are in effect, one for individuals at least 18 years of age and one for individuals younger than 18 years of age. In the context of employment income, the top tax threshold refers to an employee’s amount of income after the labor market contribution has been subtracted from gross income. The top tax is assessable on income in excess of the top tax threshold. National tax rates range from zero to 15%.

Each of Denmark’s levels pertaining to personal income taxation is annually determined by multiplying a basic amount (grundbeløb) associated with that level by a regulatory multiplier and rounding the result up to the nearest 100 Danish kroner. The levels whose basic amounts are multiplied by the regulatory multiplier to determine values in effect for a year are the annual personal allowance for individuals who are at least 18 years of age, annual personal allowance for individuals who are younger than 18 years of age, annual top-bracket tax threshold, maximum annual employment allowance, annual threshold of income in excess of which a percentage of income may be claimed as a job allowance, the maximum annual job allowance, and the monthly threshold for determining whether a foreign employee working in Denmark is a highly paid foreign employee eligible for the special flat income tax rate.

Effective for 2022, the regulatory multiplier is 118.3%. Effective for 2021, the regulatory multiplier is 116.9%. Effective for 2020, the regulatory multiplier was 114.3%.

Effective from 2022 to 2025, the basic amount of the annual personal allowance for individuals who are at least 18 years of age, upon which the regulatory multiplier is applied to determine the level in effect for the year, is DKK 39,350. Effective for 2021, the basic amount of the annual personal allowance for individuals who are at least 18 years of age, upon which the regulatory multiplier is applied to determine the level in effect for the year, is DKK 39,900. Effective for 2020, the basic amount of the annual personal allowance for individuals who are at least 18 years of age, upon which the regulatory multiplier is applied to determine the level in effect for the year, was DKK 40,600.

The basic amount of the annual personal allowance for individuals who are younger than 18 years of age, upon which the regulatory multiplier is applied to determine the level in effect for the year, is DKK 31,500.

Effective from 2022 to 2025, the annual top-bracket tax threshold’s basic amount, upon which the regulatory multiplier is applied to determine the level in effect for the year, is DKK 467,000. Effective for 2021, the annual top-bracket tax threshold’s basic amount, upon which the regulatory multiplier is applied to determine the level in effect for the year, is DKK 466,000. Effective for 2020, the annual top-bracket tax threshold’s basic amount, upon which the regulatory multiplier is applied to determine the level in effect for the year, is DKK 464,500.

Effective for 2022, Denmark’s national personal income tax rates and minimum and maximum amounts of annual income for each tax bracket are as follows:

Range of Annual Income for Individuals at Least 18 Years of Age (Danish Kroner)	Range of Annual Income for Individuals Younger Than 18 Years of Age (Danish Kroner)	Income Tax Rate	Name of Tax Bracket
Up to DKK 46,600	Up to DKK 37,300	Zero	Annual Personal Allowance
More than DKK 46,600 and up to DKK 552,500	More than DKK 37,300 and up to DKK 552,500	12.10%	Lower-Bracket Tax
More than DKK 552,500	More than DKK 552,500	15%	Top-Bracket Tax

Effective for 2021, Denmark’s national personal income tax rates and minimum and maximum amounts of annual income for each tax bracket are as follows:

Range of Annual Income for Individuals at Least 18 Years of Age (Danish Kroner)	Range of Annual Income for Individuals Younger Than 18 Years of Age (Danish Kroner)	Income Tax Rate	Name of Tax Bracket
Up to DKK 46,700	Up to DKK 36,900	Zero	Annual Personal Allowance
More than DKK 46,700 and up to DKK 544,800	More than DKK 36,900 and up to DKK 544,800	12.09%	Lower-Bracket Tax
More than DKK 544,800	More than DKK 544,800	15%	Top-Bracket Tax

Effective for 2020, Denmark’s national personal income tax rates and minimum and maximum amounts of annual income for each tax bracket were as follows:

Range of Annual Income for Individuals at Least 18 Years of Age (Danish Kroner)	Range of Annual Income for Individuals Younger Than 18 Years of Age (Danish Kroner)	Income Tax Rate	Name of Tax Bracket
Up to DKK 46,500	Up to DKK 36,100	Zero	Annual Personal Allowance
More than DKK 46,500 and up to DKK 531,000	More than DKK 36,100 and up to DKK 531,000	12.11%	Lower-Bracket Tax
More than DKK 531,000	More than DKK 531,000	15%	Top-Bracket Tax

Effective for 2022, Denmark’s lower-bracket personal income tax rate is 12.10% and its higher-bracket personal income tax rate is 15%. Effective for 2021, Denmark’s lower-bracket personal income tax rate is 12.10% and its higher-bracket personal income tax rate is 15%. The lower-bracket tax rates for 2021 and for 2022 and later were reduced from 12.11% and 12.12%, respectively, in Law No. 532 of March 27, 2021.

Municipal and Church Taxes: The municipal and church taxes are considered by the Danish Ministry of Taxation to be part of a triad of personal income taxes, with the National Tax the third part of that triad. Rates of the municipal and church taxes vary among municipalities. More information regarding Denmark’s municipal and church taxes is available in the State/Jurisdiction Taxes section of this primer.

Health Care Tax: The health care tax (sundhedsbidrag) administered as an income tax is no longer in effect starting with 2019. The tax was set at a flat rate of 1% for 2018.

Registration: An employer must register with the Commerce and Companies Agency (Erhvervsstyrelsen) within eight days of paying wages for the first time. Registration may be performed through the Start a Business (Start virksomhed) online portal of the Central Business Register (Det Centrale Virksomhedsregister, abbreviated as VIRK).

Every employee must have a Tax Card (Skattekort), which is an online statement issued by the Danish Tax Agency that gives the employee’s tax rate and personal allowance. An employer uses the Tax Card to calculate an employee’s taxes.

Taxable Amounts: Taxable personal income includes all earnings from employment including wages and salary, bonuses, allowances, and pensions. Benefits, in general, are taxed at their market value, although some values are set by the Danish Tax Agency.

Employment Allowance: Employees are eligible for an employment allowance (beskæftigelsesfradrag) that functions as a tax deduction pertaining to personal income tax. The employment allowance is a percentage of employment income that may be applied as an employment allowance, subject to a maximum annual amount of employment income that may be claimed as an employment allowance.

Effective for 2022, in addition to other applicable deductions, an employment allowance of 10.65% of employment income can be claimed, subject to a maximum annual employment allowance of DKK 41,600. Effective for 2021, in addition to other applicable deductions, an employment allowance of 10.6% of employment income can be claimed, subject to a maximum annual employment allowance of DKK 40,600. Effective for 2020, in addition to other applicable deductions, an employment allowance of 10.5% of employment income could be claimed, subject to a maximum annual employment allowance of DKK 38,500. Effective from 2022 to 2025, in addition to other applicable deductions, an employment allowance of 10.65% of employment income can be claimed, subject to a maximum annual employment allowance to be determined based on the regulatory multiplier in effect.

Effective for 2021, the basic amount of the maximum annual employment allowance, upon which the regulatory multiplier is applied to determine the level in effect for the year, is DKK 34,700. Effective for 2020, the basic amount of the maximum annual employment allowance, upon which the regulatory multiplier is applied to determine the level in effect for the year, is DKK 34,400. Effective from 2022 to 2025, the basic amount of the maximum annual employment allowance, upon which the regulatory multiplier is applied to determine the level in effect for the year, is DKK 35,100.

Job Allowance: Employees also are eligible for a job allowance (jobfradrag) that functions as a tax deduction pertaining to personal income tax. The job allowance is a percentage of employment income in excess of an annual threshold amount that may be applied as a job allowance, subject to a maximum annual amount of employment income that may be claimed as a job allowance.

Effective for 2022, in addition to other applicable deductions, a job allowance of 4.5% of annual employment income in excess of DKK 202,700 can be claimed, subject to a maximum annual job allowance amount of DKK 2,700. Effective for 2021, in addition to other applicable deductions, a job allowance of 4.5% of annual employment income in excess of DKK 200,300 can be claimed, subject to a maximum annual job allowance amount of DKK 2,600. Effective for 2020, in addition to other applicable deductions, a job allowance of 4.5% of annual employment income in excess of DKK 195,800 could be claimed, subject to a maximum annual job allowance amount of DKK 2,600.

The basic amount of the annual threshold of income in excess of which a percentage of income may be claimed as a job allowance, upon which the regulatory multiplier is applied to determine the level in effect for the year, is DKK 171,300.

Effective from 2020 to 2025, the basic amount of the maximum annual job allowance, upon which the regulatory multiplier is applied to determine the level in effect for the year, is DKK 2,600.

Withholding Methods: Taxes are withheld at source from an employee’s earnings when an employer pays the employee. Income tax withheld from employment income is often called A-tax (A-skat).

Returns and Remittances: An employer must report monthly all taxes withheld and all ATP payments to eIncome (eIndkomst), a common portal on the Danish Tax Agency’s website for all payroll and tax information that is then shared by the Danish Tax Agency, ATP, and all government agencies. An employer may report directly online to eIncome or through a private payroll system or a service provider. The report must also include information about gross wages, net wages paid, hours worked, annual leave pay, and benefits paid.

EasyPay (LetLøn) is the Danish Tax Agency’s alternative online reporting system for small employers that also calculates taxes and ATP contributions but does not provide payslips.

An employer must remit withheld taxes once a month to the Danish Tax Agency. The deadline for returns and remittances is the 10th of the next month, except the deadline for December is Jan. 17. If the deadline falls on a Saturday, Sunday, or holiday, the deadline is the next working day.

Employers categorized as large, defined as having an income tax withholding liability of more than DKK 1 million per year or a labor market contribution liability of more than DKK 250,000 per year, must submit returns and remittances by the last day of each month.

Employee Share Plans: According to the Assessment Act, the difference between the price at subscription and the exercise price of stock options are subject to taxation as regular income. Employers must withhold income tax and social tax on this amount.

The sale of any security is taxable as capital gains, according to the Assessment Act.

Recordkeeping: An employer, or other withholding agent, must keep all accounting records and records used to calculate taxes for five years after the end of the relevant tax year.

Penalties: Any person who intentionally or recklessly gives false or misleading information or fails to withhold taxes with an intent to evade government taxes, or with aggravating circumstances, may be sentenced to 18 months in prison, with a maximum sentence of eight years.

The civil penalty for tax underpayment is an interest charge on tax due.

Social Taxes

Coverage: Denmark has a comprehensive social welfare system largely financed through general taxation. Specific social taxes in Denmark include the labor market contribution (arbejdsmarkedsbidrag) and the ATP lifelong pension contributions.

The labor market contribution (arbejdsmarkedsbidrag, abbreviated as AM or AM-bidrag) is a general social security contribution used to support a variety of government-provided benefits.

The state pension (folkepension) is a universal pension funded through general taxation instead of being funded exclusively through taxation involved in payroll processing, although there are additional government-supervised pension components funded through taxation involved in payroll processing. The ATP Lifelong Pension (ATP Livslang Pension) is financed through contributions by employers and employees to a pension fund and is intended as an added benefit to the state pension. An employer also may set up a privately managed plan. ATP (Arbejdsmarkedets Tillægspension), which administers the ATP Lifelong Pension, is an independent public pension fund with compulsory membership for workers.

The Supplementary Labor Market Pension (Supplerende Arbejdsmarkedspension, abbreviated as SUPP), also known as the Supplementary Occupational Pension Scheme and also overseen by ATP, is a voluntary pension scheme for employees who desire early retirement.

Private employers also are responsible for the following social insurance assessment obligations:

Barsel.dk, a maternity benefits program (the Danish-language word barsel translates to maternity, and maternity benefits are known in Danish as barselsdagpenge);
Employers’ Training Contributions (Arbejdsgivernes Uddannelsesbidrag, abbreviated as AUB), which fund reimbursements for employers that employ students, and which includes a component for adult and continuing education (voksen og efteruddannelse, abbreviated as VEU);
Funding Contribution (Finansieringsbidrag, abbreviated as FIB) for various benefits;
Employment Equity Fund (Arbejdsmarkedets Fond for Udstationerede, abbreviated as AFU), which guarantees payments of workers seconded to Denmark; and
Labor Market Occupational Diseases Fund (Arbejdsmarkedets Erhvervssygdomssikring, abbreviated as AES) for workers’ compensation for occupational illnesses.

A Danish citizen, domiciled in Denmark, may start to collect the state pension at the age of 65 ¹ ⁄ ₂ . The age of eligibility will gradually rise by six months per year from 2019 to 2022 to 67 years of age.

An early retirement benefits program is being gradually phased out. By 2023, the early retirement age will increase from 60 years of age to 64 years of age. From 2018 through 2023, the number of years that early retirement benefits are paid will gradually decrease from five years down to three years.

Rates and Thresholds: Employees are required to pay a labor market contribution and contributions for the ATP Lifelong Pension and the Supplementary Labor Market Pension. Employers are required to pay Employers’ Training Contributions, a Funding Contribution, and contributions for the ATP Lifelong Pension, Barsel.dk, the Employment Equity Fund, and the Labor Market Occupational Diseases Fund.

Labor Market Contribution: Employees pay the labor market contribution at the rate of 8% of gross earnings, and employers make no contributions. The labor market contribution is levied before income taxes are calculated.

ATP Lifelong Pension: An employer generally pays ² ⁄ ₃ of the contribution and an employee pays ¹ ⁄ ₃ , although in some years the contribution shares might slightly deviate from this ratio because of rounding.

Effective for 2021, unchanged from 2020, for each full-time employee, the rates are DKK 189.35 per month payable by the employer and DKK 94.65 per month payable by the employee, for a total contribution of DKK 284.

All employees who are more than 16 years of age who work more than nine hours per week make ATP contributions at rates that are set according to an employee’s regular number of hours worked.

Supplementary Labor Market Pension (SUPP): An employee generally pays ¹ ⁄ ₃ of the contribution and the government pays ² ⁄ ₃ of the contribution, although in some years the contribution shares might slightly deviate from this ratio because of rounding.

Effective for 2021, for each full-time employee, the rates are DKK 185 per month payable by the employee and DKK 370 per month payable by the government. Effective for 2020, for each full-time employee, the rates were DKK 181 per month payable by the employee and DKK 362 per month payable by the government.

Barsel.dk: All private employers contribute to Barsel.dk, a statutory program for maternity benefits, unless they are part of another approved maternity plan.

Effective since Oct. 1, 2020, the contribution rate is DKK 306.25 per full-time employee per quarter. Effective from Oct. 1, 2019, to Sept. 30, 2020, the contribution rate was DKK 287.50 per full-time employee per quarter.

Employers’ Training Contributions (AUB): A private employer that makes ATP Lifelong Pension contributions for more than the equivalent of one full-time employee must make AUB Employers’ Training Contributions (Arbejdsgivernes Uddannelsesbidrag). An employer that employs students may receive reimbursement and other subsidies from the fund.

Effective for 2021, the total Employers’ Training Contributions rate is DKK 700.75 per full-time employee per quarter, including a basic Employers’ Training Contributions rate of DKK 588.50 and an adult and continuing education rate of DKK 112.25. Effective for 2020, the total Employers’ Training Contributions rate was DKK 697.75 per full-time employee per quarter, including a basic Employers’ Training Contributions rate of DKK 617 and an adult and continuing education rate of DKK 89.75.

Funding Contribution (FIB): A private employer pays a Funding Contribution to ATP to help finance various benefits for unemployed persons.

Effective for 2021, the total Funding Contribution rate per full-time employee per quarter is DKK 206.25, consisting of the following component rates:

Contribution to unemployment, vocational adult and continuing education, and temporary labor market benefits: DKK 36;
Contribution for sickness: DKK 11;
Contribution for maternity leave: DKK 21;
Contribution to resource course benefits during job orientation: DKK 7.75; and
Contribution to the Employee Guarantee Fund: DKK 130.

Effective for 2020, the total Funding Contribution rate per full-time employee per quarter was DKK 148, consisting of the following component rates:

Contribution to unemployment, vocational adult and continuing education, and temporary labor market benefits: DKK 26.25;
Contribution for sickness: DKK 0.25;
Contribution for maternity leave: DKK 15.50;
Contribution to resource course benefits during job orientation: DKK 6; and
Contribution to the Employee Guarantee Fund: DKK 100.

Employment Equity Fund (AFU): All public and private Danish employers are required to contribute to the Employment Equity Fund. The fund guarantees payments of workers seconded to Denmark, who are employed by foreign companies registered in an EU/EEA country.

Effective for 2021, the AFU funding rate is DKK 4.25 per full-time employee per quarter. Effective for 2020, the AFU funding rate was DKK 3 per full-time employee per quarter, although no contributions were due for the third and fourth quarters.

Labor Market Occupational Diseases Fund (AES): A private employer makes contributions for workers’ compensation for occupational illnesses and work injuries for every employee covered by the ATP Lifelong Pension to the Labor Market Occupational Diseases Fund. Employees who work fewer than nine hours per week and volunteers who are not paid still are eligible for workers’ compensation, but employers are not required to make contributions for them.

Effective for 2021, contribution rates range from DKK 63.50 to DKK 1,323.50 per full-time employee per quarter, depending on the industry and number of employees. Effective for 2020, contribution rates ranged from DKK 53.75 to DKK 1,289.25 per full-time employee per quarter, depending on the industry and number of employees.

The AES rates for all industries are provided by the government of Denmark on a webpage of the country’s Central Business Register (Det Centrale Virksomhedsregister, VIRK).

Withholding Methods: Taxes are withheld at source when an employer withholds taxes from an employee’s earnings.

Returns and Remittances: All social security contributions are paid as ATP payments.

An employer must report monthly all taxes withheld and all ATP payments to eIncome (eIndkomst), a one-stop repository on the Danish Tax Agency’s website for all payroll and tax information that is then shared by the Danish Tax Agency, ATP, and all government agencies. An employer may report directly online to eIncome or through a private payroll system or a service provider. The report must also include information about gross wages, net wages paid, hours worked, annual leave pay, and benefits paid.

EasyPay (LetLøn) is the Danish Tax Agency’s alternative online reporting system for small employers that also calculates taxes and ATP contributions but does not provide payslips.

Payments to ATP are remitted quarterly. For ATP lifelong pension payments, an employer may pay by check, through online banking, or through a payroll service provider. For other payments that are collected by ATP, an employer may use ATP’s online system, Total Payment (Samlet Betaling), to aggregate those contributions into one payment.

The deadline for returns and remittances is the 10th of the next month for the Danish Tax Agency and July 14, Oct. 14, Jan. 20, and April 14 for the first, second, third, and fourth quarters regarding ATP payments. If the deadline falls on a Saturday, Sunday, or holiday, the deadline is the next working day.

Employers categorized as large, defined as having an income tax withholding liability of more than DKK 1 million per year or a labor market contribution liability of more than DKK 250,000 per year, must submit Danish Tax Agency returns and remittances by the last day of each month.

Recordkeeping: An employer, or other withholding agent, must keep all accounting records and records used to calculate taxes for five years after the end of the relevant tax year.

Penalties: Late AUB, Barsel.dk, FIB, and AFU payments are assessed monthly interest at the rate of 1.5%. Late AES payments are assessed monthly interest depending on the National Bank’s official lending rates.

Employers that fail to make social security payments are subject to a penalty of twice the outstanding sum, and may be subject to criminal prosecution.

Any person who intentionally or recklessly gives false or misleading information or fails to make deductions with an intent to evade government taxes, or with aggravating circumstances, may be sentenced to 18 months in prison, with a maximum sentence of eight years.

Other Taxes

Businesses or organizations that supply services that are exempt from VAT are subject to a payroll tax (afgift af lønsum) under the Act on Payroll Tax, Consolidated Act No. 466 of May 22, 2006. The tax, also called a salary tax in English, is calculated by different formulas, depending on the nature of the business or organization and its services.

Rates for specific types of businesses are:

financial service providers: effective for 2022, unchanged from 2021, 15.3%; and effective for 2020, 15.2%;
lotteries, tourist information offices, unions, organizations and associations: effective for 2022, unchanged from 2020 and 2021, 6.37% of payroll; and
publishers or importers of newspapers: effective for 2022, unchanged from 2020 and 2021, 3.54% of the value of newspaper sales.

Effective for 2022, unchanged from 2020 and 2021, the rates for other businesses exempt from VAT are 4.12% of payroll plus the profits or minus the losses of the enterprise from its business activities.

Religious societies and institutions are exempted from the tax if at least 50% of their running expenses are paid out of public funds. The act also exempts enterprises engaged in nonprofessional sports, the leasing of real property, and the transportation of persons if the transport is directly to and from abroad.

State/Jurisdiction Taxes

Denmark’s 98 municipalities impose a municipal tax, also known as a commune tax (kommuneskat), and an optional church tax (kirkeskat) for a member of the Evangelical Lutheran Church in Denmark (Folkekirken). The taxes are withheld from an employee’s earnings.

Effective for 2021, unchanged from 2020, the municipal tax rate for Copenhagen (København), Denmark’s most populous city, is 23.8%, and the city’s church tax rate is 0.8%.

Municipal Tax: Rates of the municipal tax are available from the government of Denmark for all municipalities in Denmark, with rates varying among municipalities.

Effective for 2021, municipal tax rates range from 22.8% for the municipality of Frederiksberg to 26.3% for the municipalities of Brønderslev, Haderslev, Langeland, Lolland, Læsø, Norddjurs, Nyborg, Odsherred, Sorø, Svendborg, and Vesthimmerland. Effective for 2020, municipal tax rates ranged from 22.8% for the municipalities of Frederiksberg, Gentofte, and Rudersdal, to 27.8% for the municipality of Langeland.

As with the national tax, employees are not assessed the municipal tax up to their personal allowance. There is a personal allowance for individuals who are at least 18 years of age and a personal allowance for individuals who are younger than 18 years of age.

Effective for 2021, the annual personal allowance for individuals at least 18 years of age is DKK 46,700 and the annual personal allowance for individuals younger than 18 years of age is DKK 36,900. Effective for 2020, the annual personal allowance for individuals at least 18 years of age is DKK 46,500 and the annual personal allowance for individuals younger than 18 years of age is DKK 36,100.

Church Tax: The church tax rates for all municipalities are available from the government of Denmark, with rates varying among municipalities.

Effective for 2021, church tax rates range from 0.40% for the municipality of Gentofte to 1.30% for the municipality of Læsø. Effective for 2020, church tax rates ranged from 0.39% for the municipality of Gentofte to 1.30% for the municipality of Læsø.

COMPENSATION AND BENEFITS

An employee who works more than an average of eight hours per week must receive a written employment contract or statement within one month after being employed, according to the Employment Contracts Act, Consolidated Act No. 240 of March 17, 2010. The contract must include information about the employer’s and employee’s name and address; location of employment; description of work or the employee title, grade, nature, or category; a starting date; an end date, if the position is temporary; the employee’s rights to paid leave, including paid annual leave; the duration of the employee’s and the employer’s required notice of dismissal; salary and benefits; wage payment dates; normal daily or weekly working hours; and any relevant collective bargaining agreement.

Employees are guaranteed certain benefits under laws governing work hours, sick leave, maternity leave, paternity leave and parental leave, among others.

The Salaried Employees Act, Consolidated Act No. 81 of Feb. 3, 2009, gives certain benefits to salaried employees, such as termination pay. Salaried employees are defined by the statute as trade and office workers, technical workers and managers.

Collective bargaining agreements or individual employment agreement may provide for higher levels of benefits.

Denmark’s retirement plans are covered under social taxes.

Coronavirus (Covid-19) Guidance: Employers that must temporarily lay off at least 30% of their employees or more than 50 employees may apply to the Danish Business Authority (Erhvervsstyrelsen) through the Virk.dk portal for a wage-replacement program, known as salary compensation (lønkompensation). The amount of the subsidy is 75% of wages for salaried employees and 90% for nonsalaried employees, up to a maximum of DKK 30,000 per month. The monthly limit is prorated for part-time employees, defined as those who work less than 37 hours per week. Employers may apply until Aug. 11, 2021, for the period from Dec. 9, 2020, to June 30, 2021.

Employers can require employees for whom the employer is receiving salary compensation for at least 21 days to use days of annual leave, another form of paid leave, or unpaid leave if no paid leave is available, unless the employee agreed to a salary reduction because of the pandemic. One day of leave may be required to be used per 28 days of salary compensation, up to a maximum of five days of leave, and the employee may choose the type of leave used. Starting April 13, 2021, employees for whom the employer has received salary compensation for at least 30 days may return to work once for up to the last seven days of a salary compensation period without affecting the employer’s ability to receive the compensation.

Effective from Feb. 27, 2020, to June 30, 2021, employers may be reimbursed for days of paid sick leave provided to employees who have Covid-19, or for wages paid when employees cannot work because they are required to stay at home. The maximum reimbursement is the maximum sick leave benefit provided by municipalities.

Minimum Wage

Denmark does not have a law mandating a minimum wage.

Overtime

Denmark does not have a law regarding overtime compensation. Overtime is regulated by collective agreements.

Hours of Work

Average work hours may not exceed 48 hours over a seven-day period, as calculated over a reference period of four months, according to the Act on the Implementation of Parts of the Working Time Directive, Consolidated Act No. 896 of Aug. 24, 2004. Employees must be given a rest period of at least 11 consecutive hours within each 24-hour period. Employees are also entitled to one rest day per week, preferably Sunday, according to the Working Environment Act, Consolidated Act No. 1072 of Sept. 7, 2010.

Holidays

Denmark observes the following public holidays:

New Year’s Day, Jan. 1;
Maundy Thursday (Thursday before Easter), date varies;
Good Friday (Friday before Easter), date varies;
Easter, date varies;
Easter Monday (Monday after Easter), date varies;
Common Prayer Day (the fourth Friday after Easter), date varies;
Ascension, date varies;
Pentecost, date varies;
Whit Monday (day after Pentecost, seventh Monday after Easter), date varies;
Christmas Day (Dec. 25);
Boxing Day (Dec. 26).

Salaried employees receive full pay on holidays. Collective agreements may provide for additional holidays and the terms of holiday pay for non-salaried employees.

Leave

An employee is entitled to 25 days of annual leave per year, earning 2.08 days of leave for each completed month of employment.

Effective Sept. 1, 2020, the statutory annual leave system also uses a holiday year (ferieår), which runs from Sept. 1 to Aug. 31. Employees may take leave accrued in a holiday year until Dec. 31 of the calendar year in which the holiday year ends. At least 15 days of leave, or all earned days if the employee has earned less than 15 days, must be taken in the period between May 1 and Sept. 30.

Previously, the holiday year ran from May 1 to April 30. Annual leave earned in a calendar year could only be taken during the next holiday year, starting May 1 of the following calendar year.

A transition period affected annual leave earned from Jan. 1, 2019, to Aug. 31, 2019; this leave could not be used until the period from May 1, 2020, to Aug. 31, 2020, unless the employee left the labor market entirely. Leave earned from Sept. 1, 2019, to Aug. 31, 2020, was not given to employees for their use, but instead is managed as a savings contribution to the Employees’ Holiday Fund (Lønmodtagerne Feriemidler), which is paid to the employee when they retire or leave the labor market. Employers were to calculate and report holiday allowances for all employees to the Employees’ Holiday Fund for pay periods falling within the period from Sept. 1, 2019, to Aug. 31, 2020, using eIncome, and could report monthly or make one report due Dec. 31, 2020. Employers are to decide by Sept. 1, 2021, whether to pay the calculated allowances to the Employees’ Holiday Fund; to pay the allowances directly to employees, subject to annual inflation adjustments; or a combination of both options.

Salaried employees that are paid monthly and receive full pay on public holidays and sick days are entitled to their full salary during periods of annual leave and must receive a holiday supplement (ferietillæg) of at least 1% of their pay. Employees who do not meet all three of the requirements for the holiday supplement are not entitled to their full salary during periods of annual leave and instead receive a holiday allowance (feriegodtgørelse) of 12.5% of their salary. Effective starting Sept. 1, 2020, holiday allowances must be reported and paid to FerieKonto by the last day of the month, if the pay period ends on the 15th day of the month or earlier; or by the 15th day of the following month, if the pay period ends on the 16th day of the month or later. Holiday allowances must be reported using eIncome (eIndkomst), a common portal on the Danish Tax Agency’s website for all payroll and tax information that is then shared by the Danish Tax Agency, ATP, and all government agencies. Employees receive their allowances from FerieKonto during periods of annual leave. Effective until Aug. 31, 2020, employers were required to report and pay allowances quarterly to FerieKonto, by Feb. 7, May 7, August 7, and Nov. 7 of each year.

Employers must also calculate and pay a holiday allowance for resigning salaried employees. Effective starting Sept. 1, 2020, the allowance must be calculated, reported to FerieKonto using eIncome, and paid by the last day of the month of the employee’s resignation. Effective until Aug. 31, 2020, the allowance was to be calculated and reported by the 10th day of the month following the employee’s resignation, and paid by the 7th day of the second month following the employee’s resignation.

Payment Denmark (Udbetaling Danmark) has the responsibility of paying out benefits for other types of leave, including sick leave, maternity leave, paternity leave, adoption leave, and parental leave. An employer may apply for reimbursement for wages paid to employees from Payment Denmark.

Sick leave: The employer pays sick leave benefits for the first 30 days of sick leave, according to the Act on Sickness Benefits, Consolidated Act No. 653 of June 26, 2012. After 30 days, the municipality pays the benefits. An employee may receive sick leave benefits for 52 weeks during an 18-month period, but benefits may be extended under certain circumstances such as when the employee is undergoing medical treatment.

An employee who has worked for at least 74 hours during a period of eight weeks for the same employer before the sickness began is entitled to sick leave pay. Sick leave pay is calculated on the basis of average earnings and is subject to a maximum weekly benefit.

Effective for 2021, the maximum sick leave benefit is DKK 4,460 per week. Effective for 2020, the maximum sick leave benefit was DKK 4,405 per week.

Maternity leave: A woman is entitled to 18 weeks of maternity leave, with four weeks before the due date and 14 weeks after the birth, under the Maternity Act, Consolidated Act No. 1070 of Nov. 14, 2012. Two weeks of leave after the birth are compulsory. She may take an additional 32 weeks of parental leave after the 14th week, but the total amount of parental leave may not exceed 32 weeks per family that must be taken before the child’s ninth birthday.

An employee must have worked at least 120 hours during the 13 weeks before the start of maternity leave to be eligible for cash benefits during leave.

Statutory cash benefits for maternity leave are calculated on the basis of the hourly wage of the employee, subject to a maximum weekly payment.

Effective for 2021, the maximum maternity leave cash benefit is DKK 4,460 per week. Effective for 2020, the maximum maternity leave cash benefit was DKK 4,405 per week.

Salaried employees are entitled to 50% of their pay during maternity leave, according to the Salaried Employees Act, Consolidated Act No. 81 of Feb. 3, 2009.

All private employers contribute to Barsel.dk, a statutory scheme for maternity benefits, unless they are part of an approved maternity plan. Effective since Oct. 1, 2020, the contribution rate is DKK 306.25 per full-time employee per quarter. Effective from Oct. 1, 2019, to Sept. 30, 2020, the contribution rate was DKK 287.50 per full-time employee per quarter. Contributions are paid to ATP (Arbejdsmarkedets Tillægspension), which operates an independent public pension fund, among other duties.

Paternity leave: A father is entitled to two weeks of paternity leave within the first 14 weeks after the birth, under the Maternity Act, Consolidated Act No. 1070 of Nov. 14, 2012. He is also entitled to 32 weeks of parental leave, but the total amount of parental leave may not exceed 32 weeks per family that must be taken before the child’s ninth birthday.

A man must have worked at least 120 hours during the 13 weeks before the start of paternity leave to be eligible for cash benefits.

Statutory cash benefits for paternity leave are calculated on the basis of the hourly wage of the employee, subject to a maximum weekly payment.

Effective for 2021, the maximum paternity leave cash benefit is DKK 4,460 per week. Effective for 2020, the maximum paternity leave cash benefit was DKK 4,405 per week.

Adoption leave: Parents who adopt a child abroad are entitled to four weeks’ paid leave before receiving the child, which may be extended for an additional four weeks, under the Maternity Act, Consolidated Act No. 1070 of Nov. 14, 2012. Parents who adopt a child in Denmark are entitled to one week of paid leave before receiving the child. After receiving the child, both parents are entitled to two weeks paid leave. Subsequently, one parent is entitled to an additional 12 weeks of paid leave.

Statutory cash benefits for adoption leave are calculated on the basis of the hourly wage of the employee, subject to a maximum weekly payment.

Effective for 2021, the maximum adoption leave cash benefit is DKK 4,460 per week. Effective for 2020, the maximum adoption leave cash benefit was DKK 4,405 per week.

Parental leave: Each parent is entitled to 32 weeks of paid parental leave, but the total period may not exceed 32 weeks per family that must be taken before the child’s ninth birthday, under the Maternity Act, Consolidated Act No. 1070 of Nov. 14, 2012. Parental leave applies to both biological and adoptive parents. A father may start parental leave during the first 14 weeks after birth or after receiving an adopted child; a mother’s parental leave may begin after her 14 weeks of maternity leave ends. Both parents may take parental leave at the same time.

Statutory cash benefits for parental leave are calculated on the basis of the hourly wage of the employee, subject to a maximum weekly payment.

Effective for 2021, the maximum parental leave cash benefit is DKK 4,460 per week. Effective for 2020, the maximum parental leave cash benefit was DKK 4,405 per week.

Compassionate leave: An employee is entitled to take unpaid leave if the employee’s immediate presence is urgently needed due to a relative’s sickness or an accident, according to the Act on Employees’ Entitlement to Absence from Work for Special Family Reasons, Act No. 223 of March 22, 2006.

Wage Payment

Employees may be paid monthly, every two weeks, weekly, or by the hour for day workers. An employee should receive a payslip that shows taxes withheld, labor market contributions, supplementary pension fund contributions, personal allowance, annual leave pay and net pay.

Bonuses and Special Benefits

Denmark does not mandate employers to provide bonus payments to employees.

Termination Pay

In general, salaried employees who have been continuously employed for 12 or 17 years are entitled to receive severance pay corresponding to one or three months’ salary, respectively, in case of dismissal by the employer.

Salaried employees who are dismissed without cause and have been employed for at least one year at the time of dismissal are entitled to compensation. As a general rule, the maximum compensation is an amount equivalent to the salary payable for 50% of the statutory notice period. Depending on the employee’s age and seniority, this may be increased up to six months’ salary. An employee with at least 10 years of service may receive four months’ salary; after 15 years of service, six months’ salary.

An employer must give one month’s notice of termination to a salaried employee who has worked less than six months; three months’ notice after six months of employment. Required notice then increases by one month for every three years, up to six months maximum notice. An employee may resign after giving one month’s notice.

Workers’ Compensation

Compensation for occupational illnesses and for accidents are treated differently.

Regarding work-related illnesses or diseases, employers are required to make contributions to the Labor Market Occupational Diseases Fund (Arbejdsmarkedets Erhvervssygdomssikring (AES)). After a work-related disease or illness is verified by the National Board of Industrial Injuries (Arbejdsskadestyrelsen), AES pays the benefits to the employee.

An employer makes contributions for every employee covered by the ATP Supplementary Pension Fund, which covers all employees who work more than nine hours per week. Employees who work fewer than nine hours per week and volunteers who are not paid are still eligible for workers’ compensation, but employers make no contributions for them. An employer’s contributions are calculated by industry and by number of employees.

An employer is required to take out insurance to cover workplace accidents, according to the Workers’ Compensation Insurance Act, Consolidated Act No. 278 of March 14, 2013.

Recordkeeping

An employer, or other withholding agent, must keep all accounting records and records used to calculate taxes for five years after the end of the relevant tax year.

An employer is required to keep statistical records of the number, age, sex and health of the employees as well as machine, tools, substances and other workplace conditions, as determined by the Ministry of Employment, according to the Working Environment Act, Consolidated Act No. 1072 of Sept. 7, 2010.

FOREIGN WORKERS

Foreign workers generally are covered by labor laws and must pay taxes.

Visa Requirements: Citizens of the Nordic countries Finland, Iceland, Norway, and Sweden do not need a work permit or visa to work in Denmark. In addition, Denmark subscribes to the principle of free movement of labor, under which every European Union citizen, European Economic Area citizen, and Swiss national has the right to work in any EU member country. The EEA includes all EU members, Iceland, Liechtenstein, and Norway.

A U.S. citizen does not need a visa to enter Denmark for a short period of less than 90 days and may perform work-related activities such as attending a business conference or training. However, a residence and work permit may be required if the purpose of the visit is to create a product, change a product, or contribute to the output of a company in any way.

A foreigner from a non-Nordic/EU/EEA country must have a residence and work permit before entering Denmark to work. An employer starts an initial application with the Danish Agency for Labor Retention and International Recruitment (Styrelsen for Fastholdelse og Rekruttering) for a residence and work permit. An employee completes the application and then submits it directly to the agency or through the local Danish embassy.

Effective since June 1, 2019, the Danish Immigration Service (Udlændingestyrelsen) and the Danish Agency for International Recruitment and Integration (Styrelsen for International Rekruttering og Integration, abbreviated as SIRI) are to notify the employer of a foreign employee if the employee’s residence permit expires or if a residence permit is refused when the employee had permission to work.

The major programs for foreign workers are the following:

Corporate Scheme (Koncernordningen). The program applies to a Danish company that is part of an international corporation. The applicant must be employed by a foreign affiliate who intends to work in Denmark on a project that is innovative or educational in nature. While the work permit is valid, the employee can alternate between working in Denmark and abroad.
Greencard Scheme (Greencard-ordningen). Under this point-based program, an applicant, who does not have a job offer, must score 100 points based on five criteria: education, language skills, work experience, adaptability and age. Adaptability means that the applicant has been educated or worked in the EU/EEA or Switzerland and thus is deemed to be able to quickly adapt to the Danish labor market. The point system is meant to assess whether it is likely that the applicant will be able to find suitable work in Denmark. An applicant must also show that he or she can support themselves for the first year in Denmark. A successful applicant is granted a residence permit and does not need a separate work permit. A Greencard permit gives the holder the right to paid or unpaid employment but not self-employment. The permit is granted for three years initially, but may be extended.
Positive List (Positivlisten). The Positive List includes jobs where there is a shortage of skilled labor including academics; IT and telecommunications technology; management; social and religious work; sales, purchasing and marketing; health and personal care; and training and guidance. An applicant must have a written job contract or firm job offer.
Fast-Track Scheme (Fast-track ordningen). Under this program, employers may hire certain classes of foreign employees to work in Denmark who may receive a temporary work permit to start work after the employer has submitted an application for residence and work permits. To participate, the employer must apply for a certification from the Danish Agency for International Recruitment and Integration. To receive a certification, the employer must have at least 20 full-time employees, must not have been convicted under the Danish Aliens Act more than twice in the previous year or fined at least DKK 60,000 (if the employer has fewer than 250 employees) or at least DKK 100,000 (if the employer has at least 250 employees) under the act, must not be involved in a labor dispute, and must be in good standing with the Danish Working Environment Authority (Arbejdstilsynet). A certification is valid for four years, but may be extended if the employer continues to fulfill the certification requirements.
The Fast-Track Scheme has four subordinate schemes: the Pay Limit Scheme, programs for researchers, programs for employees who are receiving training or training other employees, and programs for short-term employees who are working in Denmark for up to 90 days in a year.
Pay Limit Scheme (Beløbsordningen): Employees who are offered a job in Denmark with an annual salary over a certain threshold may apply for residence and work permits using the Fast-Track Scheme’s subordinate Pay Limit Scheme. Effective for 2021, the program applies to foreigners who were offered a job with an annual salary of at least DKK 445,000. Effective for 2020, the program applied to foreigners who were offered a job with an annual salary of at least DKK 436,000. An applicant must be able to produce a written job contract or job offer that specifies salary and employment. Some applicants must produce an additional authorization; for example, doctors must be qualified by the Board of Health.
Researcher track (Forskersporet): Employees who are offered a position in Denmark for the primary purpose of performing research may apply for residence and work permits under the Fast-Track Scheme’s researcher track. Researchers do not have to be employed full-time, but must have a written contract showing that the employer fulfills Danish working-condition standards.
Educational track (Uddannelsessporet): Employees who have significant experience in their field may apply for residence and work permits under the Fast-Track Scheme’s education track if they are receiving advanced training or providing other employees with advanced training.
Short-term track (Korttidssporet): Employees who are not exempt from work-permit requirements and are working in Denmark for up to 90 days in a year may apply for residence and work permits under the Fast-Track Scheme’s short-term track. Effective since June 1, 2019, the 90-day period may be divided into multiple periods, but an application must be submitted for each period.

Effective since June 1, 2019, employees on one of the four tracks of the Fast-Track Scheme may change positions within a business without applying for a new work permit.

Taxes: Denmark has no statutory definition of residence; generally an individual who is physically present in Denmark for more than six consecutive months will be deemed to be resident for tax purposes. Residents of Denmark are subject to tax on their worldwide income.

Under a special program, highly paid foreign employees and foreign researchers may work in Denmark for a period of time while being assessed a special flat income tax rate instead of tax rates assessed based on the country’s personal income tax brackets.

Effective since Jan. 1, 2018, the applicable period of time in which highly paid foreign employees and foreign researchers working in Denmark may be assessed the special flat income tax rate is 84 months (seven years), which may be continuous or divided into multiple periods that together consist of a total of 84 months.

Effective since Jan. 1, 2018, the special flat income tax rate for foreign employees and foreign researchers working in Denmark is 27%.

To qualify as a highly paid employee, an employee must be paid a gross salary of at least a threshold amount, after deduction of supplementary pension fund contributions. Applicable amounts for calculating the threshold amount include an employee’s basic salary, payments to labor market pension schemes by the employer and the employee, and paid holiday allowance. Additional salary components such as employer-paid housing, transportation, and other fringe benefits do not count as part of an employee’s salary for the purpose if determining whether an employee can qualify as a highly paid employee for applicability of the special tax rate.

. Effective for 2021, an employee needs to be paid at least DKK 69,600 per month, after deduction of supplementary pension fund contributions, to qualify as a highly paid employee. Effective for 2020, an employee needed to be paid at least DKK 68,100 per month, after deduction of supplementary pension fund contributions, to qualify as a highly paid employee.

The monthly threshold for determining whether a foreign employee working in Denmark is a highly paid foreign employee eligible for the special flat income tax rate is determined by multiplying a basic amount of this level by the regulatory multiplier in effect.

Effective for 2021, the regulatory multiplier is 116.9%. Effective for 2020, the regulatory multiplier is 114.3%.

The basic amount of this monthly threshold, upon which the regulatory multiplier is applied to determine the level in effect for the year, is DKK 59,500.

Applications for work permits under the on the preferential tax regime for highly paid employees and foreign researchers are required to include sworn declarations confirming that employees will be paid according to Danish minimum salary standards. Employers also are required to check a box stating that salaries up to and including the minimum amount will be paid into a Danish bank account.

There is no minimum salary requirement for approved foreign researchers. An employer submits an application to the Danish Tax Agency, which decides if an employee qualifies for applicability of the special flat income tax rate. Under the program, an individual is not entitled to a personal allowance or deductions of any kind and also must pay the labor market contribution and the supplementary pension fund contribution. Under some circumstances, mandatory foreign social contributions can be deducted in the final calculation of tax; for example, if the employee is covered by social security in another European Union/European Economic Area country with which Denmark has an international agreement on social security.

Wages/Payments: There are no special provisions for paying foreign employees.

WORKING IN THE UNITED STATES

Foreign workers from Denmark must meet general visa requirements and be certified to be employed in the United States. General visa requirements for the U.S. are included in the separate

Denmark is eligible for the visa waiver program for business visitors, which allows Danish citizens to travel to the U.S. for 90 days or less for business-specific purposes without having to obtain a B-1 business visa. Stays longer than 90 days will require a visa. Individuals may return to the U.S. under the visa waiver program if a “reasonable length of time” has passed. The determination for reasonable length of time is at the discretion of the Department of Homeland Security.

U.S. employers also must check the names of all new-hires and employees against the Specially Designated Nationals and Blocked Persons List, administered by the Treasury Department’s Office of Foreign Assets Control (OFAC). Because OFAC prohibits financial transactions with individuals on the list, employers cannot employ them and may face fines for failing to comply.

For tax purposes, Danish citizens are subject to U.S. employment-based taxation on income earned in the U.S. unless they can claim an exemption under certain tax treaty provisions or they work under specific visa types that exempt earnings from taxes. Denmark has both a tax treaty and a social tax totalization agreement with the U.S.

State and local taxation of Danish workers also can apply, although some states within the U.S. recognize international tax treaties that can eliminate that income tax liability for foreign workers.

The U.S. labor laws apply to all workers employed and providing services in the country.

Work eligibility as an employee is contingent upon Department of Homeland Security and Labor Department approval and the employee receiving a U.S. Social Security number from the Social Security Administration.

Tax Residency: In general, employees working in the U.S. on a temporary basis are considered nonresidents for tax purposes unless they qualify for resident status. Employees can be granted permanent resident status through the so-called green card test or if they meet the substantial presence test under the U.S. tax code. More information on these requirements is in the

Permanent residents are subject to U.S. tax requirements the same as U.S. citizens and are taxed under the U.S. system on their worldwide earnings.

Income Taxes: Generally, nonresidents in the U.S. who are from Denmark and are working in the U.S. are subject to U.S. taxes based on their U.S.-sourced income. Income is taxed differently based on whether it is categorized as wage income or nonwage income, which includes interest and dividends.

A Form W-4, Employee’s Withholding Certificate, must be filed by each employee with their employer. All nonresidents in the U.S. who are from Denmark and are working in the U.S. must claim “single” in Step 1c, regardless of marital status; write “Nonresident Alien” or “NRA” in the space under Step 4c of the form; and may not claim “exempt” in the space under Step 4c.

Nonresident alien employees may adjust withholding using Step 2b or 2c of the Form W-4; certain employees also may be able to use Steps 3, 4a, or 4b. More information about Form W-4 requirements for nonresident alien employees is available in the

Although the versions of Form W-4 issued in 2020 or later significantly differ from the versions issued in 2019 or earlier, nonresident employees that filed a valid version of Form W-4 from 2019 or earlier with their employer do not need to file another Form W-4 with the employer unless they need to implement a change for their withholding. On Forms W-4 issued in 2019 or earlier, nonresident alien employees were required to check the “single” box on line 3, regardless of marital status; write “Nonresident Alien” or “NRA” above the dotted line on line 6; and were not permitted to claim “exempt” on line 7 of the form.

An additional amount is added to a nonresident alien employee’s wages for calculating federal income tax withholding, with the amount based on pay period frequency and the date of the employee’s most recently filed Form W-4. The table of additional amounts applicable to Forms W-4 from 2020 or later and the table applicable to Forms W-4 issued before 2020 are available in the

Nonwage income and self-employed foreign workers can be subject to income tax withholding at a flat rate of 30%.

Additionally, foreign workers may be taxed differently based on the specific type of visa they hold.

Tax treaties: Denmark and the U.S. have both a tax treaty with provisions addressing host country taxation of the nonresident workers and a social tax totalization agreement. To claim the tax treaty benefit, the nonresident must file Form 8233, Exemption From Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien Individual, with the employer. Separate requirements apply under the totalization agreement.

Students, trainees, teachers and researchers in particular must include a statement with Form 8233 to claim a tax treaty exemption from withholding of tax on compensation for dependent personal services. This statement affirms that the teacher or researcher is temporarily in the U.S. for purposes of studying or has accepted an invitation by the U.S. government (or by a political subdivision or local authority) for the purpose of teaching or engaging in research for a period not expected to exceed two years by a university or other recognized educational institution in the U.S. It also must affirm that the individual will receive compensation for services performed in the U.S. No limit is placed on the teacher, researcher or student compensation for Danish citizens.

Examples of the statements necessary to claim a treaty exemption from U.S. taxes are included in Internal Revenue Service Publication 519, U.S. Tax Guide for Aliens.

Social Taxes: Most foreign workers are subject to paying into the U.S. Social Security system. Foreign nationals who are exempt from paying income tax and who do not have the eligibility to receive a social security number may not be required to pay social taxes. Foreign workers contributing to Social Security for a certain time period may be eligible to receive benefits.

Generally, foreign workers in the U.S. that have specific visas as exchange visitors or students or who are temporarily in the U.S. for agricultural work are not subject to social taxes on income that is obtained from the purpose in which they originally entered the U.S.

Totalization Agreements: Social Security totalization agreements can allow foreign workers and U.S. nationals working abroad to avoid paying into two social security systems while being subjected to losing benefits for their home country system. Under totalization agreements, generally, foreign workers will only pay into one of the social security systems- either the home or the foreign system- but not both. Foreign nationals, utilizing a totalization agreement, also can count years of contributions paid to different social security systems to all of the systems they have contributed to in order to be eligible for benefits in one country.

Denmark and the U.S. have entered into a totalization agreement and a summary of those provisions is included in

Wage Payment: Under certain visas for certain types of employment, employers are required to pay foreign workers the higher of either the prevailing wage or the actual wage that is paid to U.S. workers that have similar skills and qualifications.

There are no particular requirements that employees be paid in U.S. dollars.

TREATY ARRANGEMENTS

Denmark has entered into more than 70 income tax treaties, including an income tax treaty with the United States. Denmark has 20 totalization agreements for social tax coverage purposes, including an agreement with the United States.

A multilateral income tax treaty, the Convention Between the Nordic Countries for the Avoidance of Double Taxation with Respect to Taxes on Income and on Capital, is in effect for Denmark and four other countries. This multilateral treaty also is in effect for the Faroe Islands, which is an autonomous, self-governing constituent country of the Kingdom of Denmark. The treaty also is known as the Nordic Convention or Nordic Double Taxation Treaty (NDTT).

Denmark also has an income tax treaty and totalization agreement in effect between its European mainland and Greenland, which is an autonomous, self-governing constituent country of the Kingdom of Denmark. These treaties affect taxation and social tax coverage of individuals who may have presence in some form in Greenland or in the European mainland part of Denmark.

Denmark’s tax treaties are available in

RESOURCES

General

European Commission, EURES, Living and Working Conditions, Denmark

European Union, Europa, Managing Staff, Denmark

Virk.dk, Employer’s duties (Danish)

Act on Collection of Taxes (Danish)

Act on Employees’ Entitlement to Absence from Work for Special Family Reasons (Danish)

Act on Payroll Tax (Danish)

Act on Sickness Benefits (Danish)

Act on the Implementation of Parts of the Working Time Directive (Danish)

Employment Contracts Act (Danish)

Maternity Act (Danish)

Order on Withholding Tax (Danish)

Salaried Employees Act (Danish)

Workers’ Compensation Insurance Act (Danish)

Working Environment Act (Danish)

CIA World Factbook: Denmark

U.S. State Department: U.S. Relations With Denmark

Currency Details

Unicode Consortium: Currency Symbols

International Organization for Standardization: Currency Codes - ISO 4217

United Nations: United Nations Terminology Database: Denmark

Taxes

ATP Home Page (Danish)

Average Municipal and Church Tax Rates (Danish)

Tax Agency Figures and Statistics (Danish)

Tax Agency Legal Guidance (Danish)

Tax Agency Legal Guide, Withholding of Income Tax and Labor Market Contributions (Danish)

Payroll Tax Rates (Danish)

Tax Agency Business Home Page (Danish)

Assessment Act (Danish)

Law No. 248 of Feb. 23, 2021 (Danish)

Law No. 532 of March 27, 2021 (Danish)

Law No. 779 of May 4, 2021 (Danish)

Compensation and Benefits

Borger.dk, Old Age Pension (Danish)

Holidays Act (Danish)

Virk.dk: Employer’s Guide to the New Holidays Act (Danish)

Employees’ Holiday Fund (Danish)

Employees on Maternity Leave (Danish)

European Commission: Your Social Security Rights in Denmark

International Network on Leave Policies and Research, Denmark Country Report

Life in Denmark.dk, Holiday Allowance

Ministry of Employment (Danish)

Law No. 2204 of Dec. 29, 2020 (Danish)

Law No. 158 of Feb. 2, 2021 (Danish)

U.S. Social Security Administration, Social Security Programs Throughout the World: Europe, 2018: Denmark

Foreign Workers

Danish Immigration Service and the Danish Agency for International Recruitment and Integration: New to Denmark.dk:

Notice Regarding Notification When Employees’ Residence Permits Expire
Notice Regarding Changes to Fast-Track Schemes, Effective June 1, 2019

Tax Scheme for Researchers and Highly-Paid Employees (Danish)

Work in Denmark.dk

Working in the United States

U.S. Department of Labor:

Foreign Labor Certification
Hiring Foreign Workers

U.S. Internal Revenue Service:

IRS Notice 1392, Supplemental Form W-4 Instructions for Nonresident Aliens
IRS Publication 15, Circular E, Employer’s Tax Guide
IRS Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities
IRS Publication 519, U.S. Tax Guide for Aliens
IRS Publication 901, U.S. Tax Treaties

U.S. Department of State, Visa Waiver Program

Treaty Arrangements