How will new Danish government change income tax?

Ritzau/The Local
Ritzau/The Local - [email protected]
How will new Danish government change income tax?
The offices of the Danish Tax Agency. Photo: Niels Christian Vilmann/Ritzau Scanpix

The new Danish government plans to make changes to tax rates that it says will result in lower tax at both the top and bottom ends of the income scale.


Denmark’s new government is now in place, with ministers appointed on Thursday after the agreement that paved the way for the new three-party coalition was presented on Wednesday.

Weeks of negotiations were necessary to reach the agreement following the November 1st election.


The three government parties – the Social Democrats, Liberals and Moderates – said on Wednesday that they will reduce taxes at the “top and bottom” and introduce a new tax on millionaires.

The top tax bracket, topskat, will see its rate halved according to the agreement, to a rate of 7.5 percent for incomes up to 750,000 kroner per year.

The amount taxpayers need to earn to pay topskat changes each year but in 2022, the threshold is 600,543 kroner. After labour market contributions (AM-bidrag), this is 552,500 kroner. 

READ ALSO: ‘Topskat’: What is Denmark’s high income tax bracket?

Earnings above 750,000 will be subject to the same 15 percent topskat rate used under the current system, until another new bracket is reached: an additional 5 percent in tax will be applicable to earnings past the threshold of 2.5 million kroner per year.

Meanwhile, the tax deduction for people in full time work, beskæftigelsesfradraget, will be bolstered, as will a special deduction for single parents. These new tax policies will cost the government 4 billion kroner and 0.3 billion kroner respectively.

Cuts to topskat are a sign of concessions to the Liberals, traditionally a party which favours low taxes. The Liberals, however, did not pledge to reduce the top tax bracket in their election campaign. They are thought to have asked for the measure as to signal they were given considerable policy incentives for joining the coalition government.

The new government also plans to reduce inheritance tax on businesses from 15 to 10 percent.

The tax, known as a “generational change” tax, applies when control of companies is handed down.

READ ALSO: How could Denmark’s new government change life for foreigners?


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