So you missed Denmark’s July 1st tax deadline. Now what?

Outstanding tax payments in Denmark were due July 1st, but if you have missed that deadline here is what you can do.

So you missed Denmark's July 1st tax deadline. Now what?
Photo: Skattestyrelsen

Last year presented a number of situations likely to impact outstanding tax liabilities for Danish residents. 

In a year where more people than usual experienced unemployment changes, there are ample scenarios where outstanding tax might be due, from taxing holiday pay in connection with a job change, lower income than expected due to job loss, to using your primary tax card for two different jobs in the same period.

Perhaps your transport deduction between home and work was less than anticipated after many months of remote work, or you’ve jumped on the hot housing market as either a buyer or seller (both of which can impact your tax assessment). 

Maybe you’ve profited from investments during a record year for most stock markets. Another possibility? You sent the payment via online banking before July 1st, but it wasn’t deducted from your account by the deadline.

Regardless of the cause, missing the July 1st outstanding tax deadline can be stressful.

Here’s what happens next.

What happens when you miss the outstanding tax deadline?

Well first of all there’s no need to panic – missing the deadline doesn’t mean that you will be dragged off to a debtor’s prison.

If you haven’t paid outstanding tax by July 1st, the Danish tax authority Skattestyrelsens will include your outstanding tax for 2020 in your preliminary tax assessment for the following year.

However they will add an additional 3.8 percent interest on top of the 1.8 percent interest that accrues between January 1st and the July 1st deadline, so you will end of paying more. 

This will be factored into your monthly tax payments throughout 2021. The maximum interest Skattestyrelsens will tack onto next year’s taxes is 21,798 kroner. 

Amounts beyond that are charged in three installments, usually in August, September and October 2021. Skattestyrelsens will send a message to your e-Boks when the first installment is due. It’s possible to set up direct debit, Betalingsservice, and pay the installments automatically.

What about tax deadline extensions related to Covid-19?

Although the outstanding tax deadline remains July 1st, the deadline to correct your tax assessment for 2020 has been extended from May 1st to September 1st. 

When you correct your tax assessment ahead of September 1st, your new outstanding tax will be calculated but will include both the 1.8 percent daily interest and the 3.8 percent additional interest.

If you owe more than 21,798 kroner, your three installments will begin the following month. Exact amounts and due dates will be sent to your e-Boks.

How can I avoid interest on my outstanding tax payments in the future?

To avoid outstanding tax due next year, check to see if your preliminary income assessment for 2021 is correct. 

Keep in mind that paying outstanding tax between January 1st and July 1st is still subject to interest, 1.8 percent, from the first of the year until the day you make your payment.

If circumstances prevent you from correcting your preliminary income assessment before January 1st, it’s still wise to pay outstanding tax as soon as possible to limit accrued interest. 

Payments can be made within the online tax website, TastSelv, by selecting ‘Betal skat’ (pay tax) and the year you’re paying for. Payments can be made by Dankort, via online banking, or even from a foreign bank account.

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Does Denmark really have the highest tax in the world?

Denmark is known for having having high income tax but is it really the highest tax in the world?

Does Denmark really have the highest tax in the world?

It is well known that Denmark is a country of high taxes but during the election last year, several politicians complained that Denmark’s tax was the highest in the world.

“We are the world’s most heavily taxed country”, said Liberal’s (Venstre) party leader, Jakob Ellemann-Jensen, during a debate between prime ministerial candidates on DR in October 2022.

Then-leader of the Nye Borgerlige party leader, Pernille Vermund, made a similar point on Twitter, writing “we live in a country with the world’s highest tax burden”, in a post about failures in nursing homes.

More recently, the libertarian opposition party Liberal Alliance has also pushed the line that taxpayers are subject to a higher rate in Denmark than in any other country.

Politicians and parties making this assertion typically refer to the fact that the OECD (Organisation for Economic Co-operation and Development) has listed Denmark as the highest tax country for several years.

The most recent OECD report listed Denmark as top, followed by France, Belgium, Italy and Sweden.

But some economists disagree with the way tax is assessed in these world rankings, which makes Denmark’s tax system appear more extreme than it is.

How much do people in Denmark pay in tax?

A salary in Denmark will include the following deductions: Labour market tax (AM-bidrag 8%), State tax (bundskat 12%), Municipality tax (kommuneskat 25%), State pension contribution (ATP-bidrag 94.65 kroner).

If you have an income of 45,500 kroner per month (which is the average salary in Denmark, according to Statistics Denmark), that means around 45.1 percent will be taxed, and 94.65 will go towards the state pension, giving you a total of 24,884.85 kroner per month (3,340 euros per month) after deductions. 

Various tax deductions can result in this amount being reduced.

READ MORE: What salary can you expect to earn in Denmark?

Why is Denmark so high in the world rankings?

Analysis from Denmark’s economic-political thinktank Economic Council of the Labour Movement (Arbejderbevægelsens Erhvervsråd, AE) shows that some key factors are missing in the OECD calculations of countries’ tax burdens.

“The tax burden is the amount of personal income a typical person is meant to hand over to a government and the total income in society administered by the government,” AE’s chief analyst Jon Nielsen told The Local.

“The OECD calculates the tax-to-GDP ratio but that is not a good reflection of the tax burden for two main reasons.

“Firstly, the calculations include taxes on social benefits. Tax collected on social benefits is not income that shifts from the hands of citizens to government, it is income shifted from one area of government to another.

“In 1994, public pensions became taxed, so the tax-to-GDP ratio rose without the government getting higher revenue, or citizens getting lower disposable income, because benefits were set up to compensate people. So if you compare countries where social benefits are fully or partly taxed, we need a correction to make the comparison accurate,” Nielsen said.

This situation was noted by Statistics Denmark in its report ‘Taxes and Charges’ 2022.

“The second correction needed is that we should be using gross domestic income (GDI) to compare countries and not gross domestic product (GDP). GDP measures how much value is created within Denmark’s borders but a lot of Danish income now comes from abroad,” Nielsen told The Local.

“During the last thirty years, globalisation has set in and more income has come from assets abroad, for example through pension funds. If you include that income, the Danish tax burden is reduced,” Nielsen said.

If you take those factors into account, Denmark drops to fifth place among the OECD countries, an AE analysis concluded.

“The myth that we the have the highest taxes in the world makes people think of Denmark as somewhere exclusively highly taxed and an international exception, but we are not. We are in the higher ranks of course but there is nothing special about Denmark and high taxes,” Nielsen told The Local.

Is Denmark’s tax too high?

Politicians who favour lower taxes in Denmark might argue that the analysis by AE doesn’t change anything. 

“I have no doubt that there is more than one way to calculate the tax burden. But even if you use AE’s figures, it does not change the fact that the tax burden is very high in Denmark. Fifth place is also high,” the Conservative mayor of Lyngby-Taarbæk municipality, Sofia Osmani, told newspaper Politiken in October 2022.

AE’s chief analyst Nielsen argued that Denmark’s tax system is what provides an equal society.

“You can’t say that countries with high taxes are more expensive to live in. The fact that healthcare, childcare and education are financed by the tax system, means that the personal amount you have to spend on those items is less than in other countries,” Nielsen said to The Local.

“Denmark’s taxes are one of the reasons we have such an equal and highly productive society, where the general education level is high, the infrastructure works well and spending on research and development is high. The fact that we have high taxes is a key reason why our welfare system produces these equal and fair opportunities for all,” Nielsen said.

READ ALSO: How will new Danish government change income tax?