Denmark confirms tax cuts in most income brackets

Michael Barrett
Michael Barrett - [email protected]
Denmark confirms tax cuts in most income brackets
Finance Minister Nicolai Wammen heads a team of Danish lawmakers presenting the country's income tax reforms, which will take effect in 2025. Photo: Thomas Traasdahl/Ritzau Scanpix

Denmark is to introduce income tax cuts worth an estimated ten billion kroner after a deal was reached confirming an earlier proposal.


The tax reform has been in the pipeline for some time and has now been agreed upon between the government and a number of opposition parties, enabling a final version of it to pass through parliament.

The agreement was presented on Thursday by government ministers as well as representatives from opposition parties the Social Liberals, Conservatives, Denmark Democrats and Nye Borgerlige, all of which back the reforms.

Among other measures, the reform increases the income tax deduction given to people in employment, beskæftigelsesfradraget, and adds a new bracket of tax for the very highest earners, usually referred to in Danish as toptopskat, “top-top-tax”. 

“[The agreement] means that over three million Danes [taxpayers in Denmark, ed.] will get more out of going to work. It also means that if you are a single-parent provider, you will get more from going to work,” Finance Minister Nicolai Wammen said at the briefing, as reported by news wire Ritzau.

“The aim of this is to make it more attractive to make an effort [to work],” he added.

The bulk of the agreement closely resembles the proposal presented by the government in November.


This includes a raise to the income tax deduction given to people in employment, beskæftigelsesfradraget. An additional tax cut will be given to single-parent families.

READ ALSO: Beskæftigelsesfradraget: What is Denmark's employment allowance?

The highest rate of tax, topskatwill be halved for persons whose annual income is under 750,000 kroner, meaning they will pay a rate of 7.5 percent on income that falls into the topskat bracket, instead of the regular 15 percent.

The government also proposes adding a new bracket of tax for the very highest earners, often referred to in Danish as toptopskat, literally “top-top-tax”. The new bracket will apply to people with annual incomes over 2.5 million kroner.

Other measures not included in the proposal have been added to the final agreement. This includes the reduction of inheritance tax and repeal of a tax related to inheritance from siblings.

The government projects that the tax reform will increase the country’s workforce by at least 5,300 people by 2030.

Bruus said that Denmark’s tax system is neither more nor less complex under the new rules.

“It’s become fairer,” he said.

The reforms will begin to take effect from 2025.

While the cost of the reforms is quoted at 10.75 billion kroner, the government expects their overall cost to the state to be 6.75 billion kroner, because it will increase consumer spending power which will find its way back to the state via VAT (moms).


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