A-tax is tax deducted directly from your income. The tax is collected by your employer, who withholds a percentage of your pay before it is paid out to you.
B-tax is tax that is not deducted directly from your income, such as tax on interest income and business profits. This tax you have to pay yourself.
Besides A-tax and B-tax you also have to pay ATP contributions and labour market contributions.
Everyone who works in Denmark must pay contributions to the Danish labour market supplementary pension fund (ATP).
Labour market contribution (‘arbejdsmarkedsbidrag’)
Labour market contributions are used for the Government's labour market expenses, for example to cover unemployment benefits, supplementary training courses and maternity leave. Both ATP and labour market contributions are deducted from your pay before the calculation of income tax.
There are also a number of tax deductions that determine how much you eventually pay in taxes.
- Travel deduction ('befordringsfradrag') for travel between your home and your workplace. The deduction depends on the distance from your home to your workplace and is given for distances over 24 km regardless of the type of transport.
- Contributions to unemployment insurance. Learn more about unemployment insurance and a-kasser here
- Union subscriptions. Read more about trade unions here
Generally, a married couple pay taxes separately, but if you are married you can in some cases get a married couple's tax allowance.
If you do not use the entire tax value of your personal allowance, the balance is transferred to your spouse. This happens automatically on the tax assessment notice.
Getting married couple's tax allowance requires
- That you have limited tax liability
- That you have income from paid employment in Denmark
- That your spouse does not have income from Denmark
- That you are married and live at the same address as of the 31st of December
- That you do not use the grænsegængerordning (cross-border commuter tax scheme). Read more about this scheme at Expat in Denmark.
- That you fill in the spouse information. The married couple's tax allowance is only calculated for the months where you are employed by the 1st of the month, for example the 1st of February, the 1st of March, etc.
What is 'ægtefællebidrag' (spouse contribution)?
You can get deductions if you pay ‘ægtefællebidrag’ (spouse contribution). If you receive the spouse contribution you need to pay tax on the amount. This applies whether you are separated, divorced or living apart.