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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.

Published: 16 September 2021 16:43 CEST
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.

READ ALSO:

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

What are Denmark’s rules for taking extended leave due to child sickness?

It’s a situation we hope you never experience, but Denmark has rules in place for people who take periods of absence from work to look after children with long-term illness.

Published: 8 February 2022 12:10 CET
What are Denmark’s rules for taking extended leave due to child sickness?

If your child is seriously ill and you have to take time off work to care for him or her, you may be entitled to payments to cover lost wages.

Whether you qualify for the welfare support depends on whether the child needs to be hospitalised or cared for at home in a way that can be given equivalence with hospital treatment. More detail on this follows below.

If you are currently looking for work and receiving unemployment insurance (dagpenge in Danish) through membership of an A-kasse, the same rules can apply to you if you have to stop receiving this insurance to look after the child (for example, if you can no longer attend job centre meetings or regularly apply for jobs as required by the dagpenge system).

A short side point on terminology: The Danish term dagpenge is not just used in relation to the unemployment security that you get through A-kasse membership. It is also used in a number of different contexts related to the social welfare system. For example, barselsdagpenge means the money you receive (from the state) while on parental leave. Payments you can receive while looking after a sick child can also be called dagpenge even though they are not the same as A-kasse payouts.

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

People who are employed (rather than self-employed) can find out from their employer whether they have the right to take leave from work to take care of a child for an extended period.

If you are member of a trade union, the collective bargaining agreement (overenskomst in Danish) between your union and you employer will set out the rules that apply in your situation.

Non-union members can only take leave through agreements with their employer, rather than through rules defined in a collective bargaining agreement. As such, you do not have a legal right to take leave from work but can do so via an agreement with your workplace.

If you are currently looking for work and receiving payments through your A-kasse, you should contact the A-kasse.

If you do have the right to take leave to care for your child, a number of criteria will normally have to be fulfilled. Your child must be under 18 years old; the doctor treating them must confirm they expect their illness to last longer than 12 days (less for single parents) and require treatment at a hospital or other facility or equivalent treatment at home.

In order to receive compensation for time of work, you must be off work or work reduced hours as a result of the child’s illness and fulfil the general requirements which would qualify you for parental leave.

READ ALSO: Parental leave in Denmark: What are the new rules and when do they take effect?

Note that these rules for long-term child illness are not the same as the statutory ‘first day off’ which parents have the right to take (either paid or unpaid) if their child is taken ill acutely.

There are also separate rules for loss of income for parents who work less on a more permanent basis, to take care of a child with a disability or a chronic disease. We will write about this in a later article.

How do I apply for payments when off work for over 12 days to look after a sick child?

Before you submit documentation, your employer (or A-kasse) must register your absence via the Virk.dk website. If you are self-employed, you can also register absence on Virk.dk.

It is important to submit documentation and applications as quickly as possible. You can only receive money from the day your absence is registered – in other words, it is not backdated.

Once your employer has registered your absence, you have eight weeks to submit the relevant information and documents. You will receive a notification via your secure digital mail E-boks, which provides you with a link to submit your application.

The doctors who are treating you child (not your GP) will be required to complete documentation detailing the child’s illness and expected treatment time, and where the treatment will take place. They will also describe the child’s care needs and what parents will need to do. It is your responsibility to make sure the documentation is submitted. You can also see the doctors’ form here and submit documents via this link, but remember that your employer must register your absence first.

How much will I be paid?

You can receive a maximum of 4,465 kroner per week (in 2022) pre-tax, and for a maximum of 52 weeks within an 18-month period.

If your trade union ensures a full salary during your absence, your employer can be refunded part of your wages while you are away. They must apply within eight weeks of your return to work.

If you have further questions or are unsure how the rules apply to your specific situation, you can call Udbetaling Danmark, the agency responsible for administration and payment of social welfare support. The relevant contact information can be found here.

READ ALSO: ‘Omsorgsdage’: What you need to know about Denmark’s childcare leave days

Source: Borger.dk

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