VAT and payroll tax

The Danish Tax Agency

Introduction to payroll tax

Businesses which sell VAT-exempt services are generally subject to payroll tax. The tax is based on the salaries and wages paid by the business to its employees and/or the business’s taxable profit. Get more information about the payroll tax and how to register your business on this page.

What is payroll tax?

Simply put, payroll tax is a tax for businesses which sell VAT-exempt services. The payroll tax is deductible in the tax accounts as an operating cost.

The business must pay payroll tax for the income year if the amount on which payroll tax is payable (the tax base) exceeds DKK 80,000. If the tax base does not exceed DKK 80,000 for the income year, the business is not required to register for and pay payroll tax.

There are a total of four methods for calculating the tax base. The activity and organisational form of the business determine which method is to be used and thus the amount which constitutes the tax base for the business.

Read more about businesses which are required to register for payroll tax at Introduktion til lønsumsafgift (Introduction to payroll tax) (In Danish).

Register your business

If you find out that your business is required to be registered for payroll tax, you must Register your Non-Danish Company.

Once the business has been registered, you will receive a registration certificate, which you can find in E-tax for businesses. Your method for calculation of the payroll tax is stated in the registration certificate.

For more detailed and comprehensive legal information, see our Danish-language legal guide.

Updated 12.03.2021