How do you pay income tax for your employees in Denmark?
As an employer in Denmark, you must withhold income tax from the salary on behalf of your employees.
The amount of income tax to withhold from the salary is decided by the tax office in advance on the basis of a self-assessement system, and the tax withholding information is sent directly to the payroll system automatically once the employee is registered in the payroll system.
Calculating gross salary & taxes withheld
When we receive the payroll information from you, we calculate the salary and the amount of income tax your employees will pay.
After we’ve completed these calculations, we send you an email with the payslips for approval, which list both the gross salary, the income taxes withheld and the net amount that will be transferred to the employee’s bank accounts.
We also keep track of remaining holiday, holiday allowances, reimbursements, social contributions and pension.
Deadlines for paying salary and income tax
Transfer of salaries
In Denmark, most employers pay salaries on the last banking day of the month.
This isn’t a requirement, but it is the customary pay date.
If you have a Danish business bank account the net salary is usually transferred automatically from the payroll system to the employees.
If you have a foreign business bank account (f.ex. Revolut or Wise) the net salary is transferred manually by you to the employees.
Transfer of income tax
Withheld income taxes are due for payment on the 10th of the following month.
If you have a Danish business bank account the income tax is transferred automatically from the payroll system to the Danish Tax Agency.
If you have a foreign business bank account (f.ex. Revolut or Wise) the income tax is transferred manually by you to the “Skattekonto” belonging to the business (this is the tax account your business has been allocated by the Danish Tax Agency).
Employee tax rates
The personal income tax system in Denmark is progressive, so there is no fixed tax rate that applies to everyone.
Income taxes are dependent upon personal circumstances; some employees will pay a higher tax rate, while other employees will pay a lower tax rate.
As an employer, you automatically receive relevant tax information from the Danish Tax Agency on employees’ individual tax rates to the payroll system.
Main tax card, secondary tax card and a tax exempt card
An employee his required to use one of three different “tax cards”.
A “tax card” is the information that is sent electronically to the payroll system which determines how the employer should calculate the income tax for each employee.
Main tax card (“hovedkort”)
This information is passed to the main employer.
Secondary tax card (“bikort”)
This information is passed to a secondary employer.
Tax exempt card (“frikort”)
This information is passed to an employer if the expected annual income is below the threshold that will require the employee to pay income tax.
Relevant mainly to younger employees that have a part-time job next to their study with low income.
What payroll system to use?
Smaller businesses and companies
For smaller businesses and companies we recommend using Danløn.
Larger businesses and companies
For larger businesses and companies that require customised payslips, we recommend DataLøn.
How to setup the payroll system
We can assist you in setting up the payroll system as part of our payroll service.
How much does it cost for Dania Accounting to handle the payroll?
Payroll services are invoiced according to elapsed time.
An invoice is sent every month with a timesheet documenting our work.
We offer the following hourly rates for payroll services
375 DKK + VAT for customers with at least 20 hours of payroll services per month
450 DKK + VAT for customers with 3-19 hours of payroll services per month
550 DKK + VAT for customers with 1-2 hours of payroll services per month
A minimum of 0,5 hours per month (275 DKK + VAT) is invoiced.
We may request a retainer.
(Last update of this blog: 11.10.2023)