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TAXES

Four ways to (legally) lower your tax bill in Denmark

Denmark has a reputation for having higher taxes than most other countries. These deduction rules can help you to reduce your annual bill.

Four ways to (legally) lower your tax bill in Denmark
Knowing which deductions you might be entitled to claim can help ensure you don't overpay on your tax bill. Photo: Thomas Lekfeldt/Ritzau Scanpix

Denmark recently overtook France to become the highest tax country in the European Union, according a new comparison of tax rates across the bloc.

The 2020 edition of Taxation Trends in the European Union found that Denmark’s government in 2019 raised 46.1 percent of GDP in tax revenues.

While that fits in with the country’s long-established model providing a high social security net, there are a number of deduction rules to be aware of if you want to ensure you’re not paying more than you need to.

Self-employed and employed people alike can adjust their tax returns by logging in to the skat.dk website and entering the deductions on their forskudsopgørelse (preliminary tax return, prior to March) or årsopgørelse (annual return, calculated and displayed on the SKAT website at the beginning of March). The deadline for the latter falls in May each year.

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Travel deduction (kørselsfradrag) 

If you travel a long distance to get to and from work, you may be entitled to deduct some of your travel expenses from your taxable income.

The travel deduction, or kørselsfradrag, is designed to cover the cost of travelling to and from work over a set minimum distance. It applies to rail and car journeys alike (for cars, the cost of fuel used for commuting comprises the deductible amount).

You can claim the deduction if you travel at total of 24 kilometres to get to and from work (12 kilometres each way, in other words). This only applies on days when you actually travelled from your home to a place of work, and not, for example, for days you spent working from home.

As such, many people claimed a much lower travel deduction in 2020 compared to preceding years, with home working mandatory for many during the Covid-19 pandemic.

The value of the deduction is 26 percent. As such, if you spent 1,000 kroner on travel in a year, your tax bill can be reduced by 260 kroner.

Food and accommodation (kost og logi) 

Like with transport, you can get a deduction for the cost of food and accommodation (such as hotel stays) from your tax bill, if these are incurred when you stay away from home for work. In this case, by applying a daily rate for deduction.

Deductions are also granted for so-called “double householding” (dobbelt husførelse) if you have a temporary work place far from your home, which, due to the distance, requires you to take accommodation rather than travel from home each day.

The maximum amount for which you can be given a deduction is 29,300 (for the 2021 tax year).

Work clothes, textbooks, courses (and more) 

With a few exceptions, the cost of things that you need to buy to be able to do your job – clothing, textbooks or equipment – can be applied as a tax deduction.

It should be noted that such items must only be bought for work use, so if, for example, you purchase a laptop and use it for both work and personal matters, it won’t be tax deductible.

If you have a home office or workshop, you can deduct costs for the room in a narrow set of circumstances only: the type or extent of the work you do in the room must prevent it from any other (private) home use. A laboratory would qualify, for example, but a desk in the corner of your bedroom won’t.

However, you can apply a deduction to at least 6,500 kroner of your income if you are eligible for this deduction.

Likewise, clothes and textbooks must be impossible to conduct your work without for them to qualify for deductions. Think uniforms, not suits; and academic journals in your specific field, not National Geographic.

Unemployment insurance and union membership (A-kasse og fagforening) 

If you are member of an unemployment insurance provider (A-kasse) or a union – which the majority of people on the Danish labour market are – then you can claim a deduction for your membership fees.

EXPLAINED: Should I sign up with a Danish union and get unemployment insurance?

There are rules for the maximum costs you can claim a deduction for – around 6,000 kroner per year for unions, for example, which may be a little less than you actually pay.

As with the other deductions listed above, you include these costs in your tax return by logging on to the website of the Danish Tax Authority, SKAT, and entering them in the appropriated boxes on your preliminary or annual return.

Sources: SKAT (1), (2), (3)

READ ALSO: What do Denmark’s proposed welfare reforms mean for foreign residents?

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For members

WORKING IN DENMARK

Can foreigners lose their Danish work permits if they take part in strikes?

Membership of a trade union in Denmark can occasionally result in your union requiring you to take part in industrial action by going on strike. But can that put foreign workers at risk of losing their work permits?

Can foreigners lose their Danish work permits if they take part in strikes?

Around two-thirds of people in employment in Denmark are members of a trade union.

Union membership forms a core part of Denmark’s “Danish model” by which the labour market regulates itself through collective bargaining agreements between the trade unions and employer organisations.

These agreements form the basis of salaries – rather than laws – and also ensure standards for working hours and vacation time under the agreements made in various labour market sectors.

As such, it’s common to be a union member in Denmark and foreign nationals working in the country are also likely to find it in their interests to join a union.

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One aspect of union membership is that members may be required to participate in industrial action, such as strikes, blockades, or solidarity actions.

For example, the 2021 Danish nurses strike organised by the Danish Nurses’ Organisation (DSR), which represents 95 percent of nurses in Denmark.

“The nurses’ strike is an example of the results of unsuccessful negotiations on the renewal of their collective agreement,” Peter Waldorff, international consultant at FH, Denmark’s largest trade union confederation, told The Local.

In this case, he continued, DSR called the strike and decided which members would be required to withdraw from work to join the strike. As the strike continued from June to August 2021 (one of the longest strikes in recent Danish history), an increasing number of union members were called to strike until the dispute was resolved. 

In such a situation, it is conceivable that some of the workers asked to take part in the strike would be foreign nationals from countries outside of the EU or EEA, who need a work permit to take employment in Denmark.

READ ALSO: How can you get a work permit in Denmark if you are not an EU national?

Foreign employees who are union members would participate in the strike just as Danish members would.

Although the employees involved in the strike would stop receiving their salaries they would instead receive conflict aid from the union, “meaning the person would not need to receive dagpenge or other social aid,” Stine Lund, senior legal consultant at the Danish Society of Engineers (IDA), a trade union for engineering, science, and IT professionals, told The Local

That is an important distinction for internationals working in Denmark because receiving social benefits can impact the ability to fulfil work permit criteria.

The employer would also be required to re-employ all employees once the conflict is resolved, Lund added. 

According to FH’s legal department, Waldorff said, participation in legally-called industrial action should not affect work permits. 

The Danish Agency for International Recruitment and Integration (SIRI) confirmed this to be the case.

“Third-country citizens will not have their residence permit revoked on the basis of employment, if they don’t work at their employer due to the reason that they participate in a legal labour dispute during their employment. EU/EEA citizens residing in Denmark will not lose their right to reside in Denmark on the basis of participating in a legal labour dispute,” SIRI said in a statement to The Local.

Although foreign workers can be asked to strike, the likelihood they will have to remains relatively low.

“In Denmark, strikes are relatively rare,” Waldorff said.

In the academic labour market, collective agreement conflicts almost never happen, according to Lund.

“We haven’t been in a situation where that measure has been taken for many, many years,” she said.

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