Taxes in Europe Database v2
Statutory Notice No 471 of 12th June 2009.
The labour market contribution is not really a labour market contribution, but a personal income tax applying only to labour income. Before 2008, the revenue was earmarked for certain social security expenditures through the Labour market Fund, but this system was abolished from 2008, and the tax enters the budget in the same way as the other income taxes. All taxpayers working in Denmark have to pay the labour market contribution no matter of where they are socially secured.
In addition to the labour market contribution, the Danish PIT also consists of 'State and municipal tax', 'Tax on employee shares and bonds', as well as 'Taxation of pension schemes', which have their own seperate tax forms.
Tax payers are wage and salary‑earners, self‑employed persons and employers.
The gross earning for wage and salary‑earners and profits for self‑employed persons. Transfers such as social pensions, unemployment benefits etc. are not subject to this tax.
The tax is essentially a gross labour income tax. In the previous law on labour market contribution, foreigners working in Denmark were not subject to pay the labour market contribution if they had social coverage in their home country. Since the tax is now a PIT, this exemption no longer applies.
The tax is calculated on the basis of wages and salaries, etc. Therefore, no contribution is payable on the basis of following income:
There is no deduction in the contributions, but the contribution is deducted before personal income tax is assessed.
The contribution is withheld by the employer and the pension institutes.