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How do you pay income tax for your employees?

As an employer in Denmark, you are obliged to withhold income tax from the salary on behalf of your employees. The amount of income tax to be withheld from the salary is decided by the tax office and the information is sent to the payroll system automatically once the employee is registered in the payroll system.

How do you pay income tax for your employees?

As an employer in Denmark, you are obliged to withhold income tax from the salary on behalf of your employees.

The amount of income tax to be withheld from the salary is decided by the tax office and the information is sent 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.

What payroll information do we need from you when you order payslips?


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 transferred automatically from the payroll system to the employees.
If you have a foreign business bank account (f.ex. Revolut) 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.
If you have a foreign business bank account (f.ex. Revolut) 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 tax office).


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 information from the tax office on employees’ individual tax rates to the payroll system.


Main tax card, secondary tax card and a tax exempt card

An employee has a choice between using 3 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 should be passed to the main employer.


Secondary tax card (“bikort”)

This information should be passed to a secondary employer.


Tax exempt card (“frikort”)

This information should be 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 Bluegarden.


How to setup the payroll system

We will 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?

You can see our pricing here


(Last update of this blog: 3.7.2022)


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