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Five essential words you need when paying taxes in Denmark

The headquarters of the Danish Tax Agency in Copenhagen. A few key vocab items can help you better understand your tax return.
The headquarters of the Danish Tax Agency in Copenhagen. A few key vocab items can help you better understand your tax return. Photo: Mads Claus Rasmussen/Ritzau Scanpix
To mangle an old adage, the only certainties about moving to Denmark are learning the language and taxes.

We hope our brief guide to essential Danish tax vocabulary will give you a little help with both.

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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 preliminary tax return or annual return.

These are calculated and displayed on the website of the national tax authority, SKAT. As such, a good grasp of the necessary technical terms will help you to fill out your paperwork correctly, including things like any deductions to which you might be entitled.

Forskudsopgørelse, årsopgørelse

Forskudsopgørelse (preliminary tax return) and årsopgørelse (annual return, calculated and displayed on the SKAT website at the beginning of March) are possibly the most important Danish tax terms.

Accessing the annual tax return is a yearly event for taxpayers. Within a set deadline which falls at the beginning of May, taxpayers can edit their tax information, such as by changing income or tax exemption information.

Around three out of four taxpayers in Denmark get refunds after the yearly annual return. The amount refunded varies from person to person, but 2019 saw 3.4 million people paid an average refund of 4,700 kroner, according to official data. Many others have to pay money back to the tax authority, however.

Prior to the publication of the annual return, you can check how much tax you’ve paid or are due to pay during the course of the year and edit your income and deductions details on the preliminary version of the return, the forskudsopgørelse. 

Fradrag

A fradrag or deduction can reduce your tax bill just like in many other national tax systems. These can be entered into your tax returns, as described above.

Various types of deduction are available. These include kørselsfradrag (travel deduction) and håndværkerfradrag and servicefradrag (literally, builder’s deduction and service deduction), given for making improvements to homes or holiday homes.

Various other costs relating to work can be deducted from income tax, including kost og logi (food and accommodation); dobbelt husførelse for housing costs if living away from home temporarily due to work; and A-kasse og fagforening (unemployment insurance and trade union membership).

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

AMbidrag

AM-bidrag or arbejdsmarkedsbidrag, literally ‘labour market contribution’ is a taxation amounting to 8 percent of your wages. Grammar lovers will note use of the antonym word to fradrag.

The tax is paid directly to SKAT by your employer (for those who are not self-employed or freelance), and will be displayed on your tax returns.

If you are not self-employed or freelance, the wage slip you are issued by your employer will tell you the amount to which this 8 percent taxation is applied: some parts of your gross income are not applicable to the AM-bidrag.

Feriepenge 

Feriepenge (holiday money) is a monthly contribution paid into a special fund, depending on how much you earn.

You can claim back the money once per year, provided you actually take holiday from work.

You will be notified when the money can be paid out around May, and directed to the borger.dk website, from where you claim it back from national administrator Udbetaling Danmark.

Brutto, netto 

Your income before tax is brutto (gross), i.e. the amount prior to calculation and payment of tax and application of deductions. Netto is not usually a supermarket when talking about tax, but is the amount you receive after paying all levies.

EXPLAINED: How to understand your Danish payslip


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