Denmark raises tax deduction for commuters amid high fuel prices

The Danish government’s tax council on Tuesday decided to increase the rate for tax deductions given to commuters, due to high fuel prices.

expensive petrol in denmark
Denmark is to give higher tax subsidies to commuters due to high fuel prices. The cost of a litre of petrol exceeded 16 kroner in March 2022 and is currently around 15 kroner. Photo: Bo Amstrup/Ritzau Scanpix

The government organ Skatterådet, a tax council whose responsibilities include deciding certain subsidy rates, agreed on Tuesday to increase a tax deduction given to commuters who travel over a certain distance to work.

People who travel between 25 and 120 kilometres to and from work will now be able to claim 2.16 kroner for each kilometre they travel. That is an increase of 18 øre (0.18 kroner) on the existing rate.

The decision was confirmed my Skatterådet in a press statement.

The commuter deduction, termed kørselsfradraget in Danish, 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. The deduction is always calculated based on kilometres travelled if the journey was made by car, even if it was actually made by train.

Commuters can claim the deduction if they travel over 24 kilometres to get to and from work over (12 kilometres each way). 

An equivalent tax deduction for commuters who use their private vehicles to get to work, the befordringsgodtgørelse, will also be subject to increased rates settled on by the tax council, with the rate raised by 19 øre to 3.70 kroner per kilometre, though this will not be applied retroactively through the tax year.

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

Only twice previously in the last 20 years have the tax deductions been extraordinarily changed in the middle of the tax year, Skatterådet said in the statement.

They are usually set in November based on projections of the price of fuel throughout the coming year.

Recent months have seen the cost of both petrol and diesel increase significantly, caused in part by the Russian invasion of Ukraine.

Prime Minister Metter Frederiksen earlier this week said she wanted the tax subsidies to be raised, while the opposition Liberal party also backed the decision in comments to news wire Ritzau. Liberal tax spokesperson Louise Schack Elholm said “We would naturally have like it to be more. But this was what could be managed”.

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Danish government to increase tax break for trade union members

The Danish government says it wants trade union membership to be made cheaper by increasing tax subsidies given on membership fees.

Danish government to increase tax break for trade union members

The tax subsidy for trade union membership fees would be increased from 6,000 kroner to 7,000 kroner per year under the government plan.

“We are doing this to strengthen the Danish [labour] model and it obviously will also give a tax break to many Danes,” Social Demlcratic tax minister Jeppe Bruus told financial news outlet Finans.

“The Danish model depends on a high grade of membership for both trade unions and employer organisations. We are giving a helping hand in this regard,” he said.

Danish tax rules allow reductions on taxable income for membership fees paid to both trade unions and unemployment insurance providers termed A-kasser.

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

A similar proposal was tabled in parliament by the previous, single-party Social Democratic government and had a majority backing, but was not adopted in time for last November’s election.

The Social Democrats have since supported their current partners in the coalition government, the Liberal (Venstre) and Moderate parties, to support the plan.

The Liberals were reported to oppose the move as recently as November 24th, when they were still in talks to form the government.

The new proposal to increase the tax break on trade union membership comes after the government successfully abolished the Great Prayer Day public holiday, effective from 2024.

The Great Prayer Day abolition was strongly opposed by trade unions, who accused it of being an attack on the Danish labour model.

But the new proposal will not soften the blow of losing the public holiday, the leader of trade union HK said in comments to Finans.

“If the government thought this, they certainly have a quite different target to me,” HK chairperson Anja C. Jensen told Finans.

Jensen meanwhile praised the proposal for being a “recognition of the role of trade unions in the Danish [labour] model”.