Denmark

Individual - Significant developments

Last reviewed - 03 June 2021

During 2012, a number of tax law changes took place, and some of the changes will take effect over the years to come. Changes to tax

rates, tax bands, and deductions for individuals are part of these changes.

Extended tax return filing deadline for income year 2019

The Danish Minister for Taxation has on 31 March 2021 decided that due to Covid-19 the Danish tax return filing deadline for the income year 2020 shall be extended. The extended tax return filing deadline for the income year 2020 is 1 September 2020. The extended Danish tax return filing deadline applies to all individuals who are liable for submitting a Danish tax return for income year 2020.

Coronavirus - Special temporary tax rules for the income year 2020

The coronavirus has changed many people’s travelling and working conditions, which may also have tax implications. The Danish government has introduced special temporary tax rules to mitigate some of the potential adverse tax implications of the coronavirus. Some of the special rules are optional and must be applied for no later than 1 May 2021. Situations covered by the special rules include such as the following: 

  • Employees who are normally working and/or living outside Denmark but again temporarily staying/working in Denmark.
  • Employees subject to the Danish expat tax scheme (flat tax rate of 32.84%) but spending less time in Denmark and more time in another country than normally.

Deductions for employees

The employment allowance is raised to a maximum of 40,600 Danish kroner (DKK) (2021). This allowance is to be raised over the years to come as well.

Service expenses

Certain approved expenses regarding household services may be deducted. The deduction is capped at DKK 25,000 in 2021 (DKK 6,400 in 2020) per individual. Additionally, a deduction for the use of craftsmen for certain types of services may be applicable. The deduction is capped at DKK 25,000 in 2021 (DKK 12,800 in 2020) per person.
Kindly note that the household service deduction is multiplied with a factor of 1.35, and the deduction thus amounts to DKK 33,750. This increases the deductible value of the expense incurred from around 25.6% to 35%. The deductible value for the use of craftsmen remains around 25.6%.

Special expatriate tax regime for foreign specialists, researchers, etc.

The government and a sufficient number of votes from other parties have, in November 2017, agreed to extend the maximum period in the special expatriate tax regime for foreign specialists, researchers, etc. from 60 months to 84 months and to increase the tax rate from 26% to 27% with effect from 1 January 2018. A bill was introduced in the Parliament and was passed on 19 December 2017.

Amendment of the existing service deduction proposed

The Danish government has proposed to temporarily amend the current service deduction scheme for the income year 2021, so that the maximum deduction for services is raised to DKK 25,000, and the tax value of the service deduction is increased from approx. 25% to approx. 35%. The maximum deduction for craft services is raised to DKK 25,000. The purpose is to support the service industry and promote private environmental investments. The deductible benefits are not changed.

The Danish government has also proposed to introduce a separate tax exemption in the income year 2021 for employers' gift cards to employees with an amount limit of DKK 1,200, which can be used for hotels, restaurants, amusements, museums, theatre and cinema etc.

Covid-19 tests etc.

Due to Covid-19, the Danish parliament decided to ensure that employees are not taxed on the value of employer-paid Covid-19 tests etc. Therefore, tax exemption has been introduced for employer-paid Covid-19 tests etc. for employees and their households. The exemption also covers persons who receive Covid-19 tests etc. in connection with e.g. personal work, duties as a member of boards, committees, councils etc. The tax exemption applies per 1 January 2020. Employers can deduct expenses incurred in connection with Covid-19 tests etc. when calculating the taxable income.

Tax exempt gift cards

Due to Covid-19, the Danish parliament has made it possible for employers to give their employees a tax exempt gift card to the so-called "hospitality and entertainment economy" (e.g. hotels, restaurants, museums, cinemas etc.). The amount may not exceed DKK 1,200 per employee. If the amount exceeds DKK 1,200 the employee is tax liable for all of the amount and not only the amount above DKK 1,200. If the employee has more than one employer, the employee may only receive one tax exempt gift card with a total value of DKK 1,200 from all of the employers. The employer shall not report the tax exempt gift card unless the value is more than DKK 1,200.