Tax
Here you can read about tax.
- What is A-tax?
- What is a tax card?
- What is B-income?
- What is B-tax?
- What is the value of a company car - free car?
- What tax should be paid in connection with a free phone?
- How is bonus taxed?
- Gifts from the employer
- What is Tax Identification Number?
1. What is A-tax?
A-tax is the tax deducted from an employee’s income at source. A-tax is calculated from an employee’s wages, fees, vacation pay, holiday pay, daily allowances and sick pay. It is the employer’s responsibility to withhold and report A-tax for the employee. The tax is paid to the Danish Tax Agency (SKAT) as provisional tax. End of year, SKAT makes a calculation to determine whether the employee has paid more or less than the tax payable for the whole year.
How much an employee should pay in A-tax is individual and determined by their personal tax card. The tax card is obtained electronically from the tax authorities (SKAT) and contains information about the employee’s personal deductions and tax rate. In order to obtain the employee’s personal tax card, the employer or Azets need to collect some information from the employee including name and social security number. This information should be requested through a secure platform such as Drive due to GDPR regulations.
2. What is a tax card?
The tax card is issued and calculated by the municipality where the employee resides. There are three types of tax cards:
- Primary card - used by the employee's main employer
- Secondary card - used by a possible second employer (if the employee has a second job)
- Free card - typically used by young people who have a part-time job.
3. What is B-income?
B-income is a tax that is not deducted directly from an employee’s income at source, and is paid to the Danish Tax Agency (SKAT). For example, if an employee has a company besides its main occupation, the person would pay B-taxes on what they earn. It can also be derived from interest income and so forth.
4. What is B-tax?
Only self-employed individuals pay B-tax. If you, as an employer, hire a self-employed consultant, you typically pay a fee without deducting tax or AM contributions. This is the consultant's B-income, and they must pay B-tax on the amount themselves.
5. What is the value of a company car - free car?
An employee with a company car (free car) must be taxed on the value that the car represents. The value of the car itself and the car's age have an impact on how high the taxation will be. The higher the value, the greater the taxation. You can read more about how the value of the car is calculated here.
The value of a free car is calculated as follows: https://skat.dk/data.aspx?oid=2234830
Furthermore, A-skat and AM-bidrag (social contributions) must be paid on the amount for the free car. Payroll systems such as Zenegy automatically calculate this, when the value of the free car is specified.
6. What tax should be paid in connection with a free phone?
If the employee has a free phone, it must be taxed accordingly. The tax value is usually changed once a year, on January 1st. The tax value can be found on SKAT.dk
7. How is bonus taxed?
If an employer and employee has a bonus agreement written in the contract, this is considered as salary and must be taxed accordingly. Hence, the employer must pay A-tax and AM contributions on the employee's bonus.
As a starting point, bonuses are always holiday pay qualified, but it is individual from company to company or from bonus to bonus, whether pension should be paid on this. It is therefore important that we receive this information when a bonus is paid out.
8. Gifts from the employer
An employee can receive tax-free gifts from the employer up to a certain amount. See limitations and the amount here
Read more about employee benefits when you are an employer on skat.dk
9. What is Tax Identification Number?
Employees residing abroad
Starting from January 1st 2024, it is mandatory to have a Tax Identification Number (TIN) for employees residing abroad.
This requirement is already applicable for pre-paid employees.
Please inform Azets of the TIN for any employees not residing in Denmark. The number is unique to each individual, so all employees with addresses outside Denmark should provide their TIN.
For further information, you can refer to the following link: https://www.azets.dk/news/tax-identification-number/