Learn to love them: Danish taxes
It is one of the most often cited criticisms of Denmark: The taxes are too high. And yes, they don’t exactly rank among the lowest in the world (in fact, they are the highest in Europe). Ironically, however, most Danes are perfectly happy to pay their taxes, and even though tax reductions are on the political agenda once in a while, there is never a mass public demand. Tax reductions are good, but welfare is better – Danes know and appreciate what they are paying for.
So, what are expats to do?
Firstly, get acquainted with the basics, and understand the benefits. SKAT (The Danish Tax Administration) provides an easily accessible SKAT – Introduction for new citizens, as well as a more thorough outline of the tax laws, and how taxes are spent. The latter hasn’t been updated since 2008, so check out the Tax Reform 2010 changes in this presentation by BDO as well.
Second, if you are a highly paid inbound expat or a researcher recruited from abroad, you may be able to qualify for the popular 25% Tax Regime. This allows employees to choose between a taxation rate of either 25 % for up to 36 months (3 years) or 33 % for up to 60 months (5 years). Our ”house-experts” at BDO kindly provide this free, general guide to the 25% Tax Regime.
Third, don’t worry too much about how your Danish taxes are calculated! As Finn Madsen, who many of our members have already met in connection with Expat Thursdays in Copenhagen or local tax seminars in Aalborg and Odense, points out:
We have a very advanced and trustworthy tax filing and reporting system in Denmark, with all important numbers being registered automatically by your employer, bank, pension institute, and so on.
(Finn Madsen, BDO)
In stead, he adds, make sure that you take advantage of any foreign tax saving opportunities (and if you’re a US citizen, make sure that you don’t forget to file your tax return!).
It would be foolish to expect a future love affair between the expat community and Danish taxes – but appreciating how the system works and what it pays for is a step in the right direction. At Expat in Denmark we would like to help you understand how it works, so please contact us if you have any general questions.
Expat in Denmark
Peter A. Lemmich
Helle Granhøj
The Copenhagen Post
Neal Greenspan
Craig Till
linnkatarina
Expats should understand the importance of the danish tax system and pay all their taxes sincerely.Ultimatley, the welfare system runs from these tax collections and all of us expats get almost similar benefits as danes during our stay in denmark.
Higher taxes can be a cause of frustation for the tax payer only when the state governments do not utilise these funds preperly for the welfare of its peolple and in denmark the kommune system plays an effective role in allocating these funds for the benefit of the people living in their kommune in denmark including expats.
absolutely right IF there’s a balance. If there’s not, then it’s plainly ridicolous (and, I would say, bluntly offensive).
We expats come here without having used Danish support in our lives. Just think about the long years of pre-schooling, or education itself: most expats had to work to support themselves (and maybe their families, without any support from the state) while obtaining their degree. Yeah, education here can be free for some nationalities. EXACTLY as in other European countries, and if you add the cost of living, studying (for example) in other parts of Europe and paying tuition is still more convenient.
Truth is, we are supporting an EXTREMELY expensive welfare system. All may be fine, IF we would also benefit of it as the Danes. We could start with an English translation of all the official documentation used in the inteface with the authorities, a full compliance to the European laws (for example, the 8% “voluntary” contribution to the labor market is officially “not described as a tax”), and a lot of other changes that in the end would really make Denmark as a “welcoming country”. The point is that the provided services are targeted to Danes, while people having different necessities have to pay what they require with increased economical and social costs.
I don’t care if somebody is telling me that I’m a “brave pioneer”, like Expats in Denmark and other initiatives seem to suggest. Every pioneer is making a balance between gains and costs.
One amazing example is that, despite I pay taxes in Denmark, it’s more convenient to send the children to school in Sweden.
For now, Denmark is (maybe) convenient only for singles or people without kids in scholar age. In fact, most expats leave when they have to decide where to “settle down”.
So, again: why Denmark, then?