Danish employment deductions and the two tax bases
Denmark gives employees two automatic deductions worth up to DKK 66,400 a year between them. Both are useful, but neither does what most people assume: they reduce your municipal tax and nothing else.
The two deductions
| Deduction | Rate | Maximum | Maximum reached at |
|---|---|---|---|
| Beskæftigelsesfradrag | 12.75% | DKK 63,300 | DKK 496,471 |
| Jobfradrag | 4.5% above DKK 235,200 | DKK 3,100 | DKK 304,089 |
Both are applied automatically. There is nothing to claim.
Why they only touch municipal tax
Denmark taxes two bases. Personlig indkomst is your pay after the 8% labour market contribution, and it carries bundskat plus mellemskat, topskat and toptopskat. Skattepligtig indkomst is that figure less the ligningsmæssige fradrag, which is where these two deductions live, and it carries municipal and church tax only.
Worked example at DKK 500,000
| Step | Amount |
|---|---|
| Gross salary | DKK 500,000 |
| Less AM-bidrag at 8% | DKK 40,000 |
| Personlig indkomst (bracket tax base) | DKK 460,000 |
| Less beskæftigelsesfradrag | DKK 63,300 |
| Less jobfradrag | DKK 3,100 |
| Skattepligtig indkomst (municipal base) | DKK 393,600 |
The deductions reduced the municipal base by DKK 66,400 and the bundskat base by nothing. At a municipal rate of about 25%, that makes them worth roughly DKK 16,633 a year in actual tax saved, not the DKK 66,400 that the headline figures suggest.
The personfradrag is different
The personal allowance of DKK 54,100 is set against both bases, so it genuinely reduces bundskat as well as municipal tax. It is the one allowance that works the way people expect.
The Denmark salary calculator shows both bases in its breakdown, and the four bracket reform guide covers what sits on top of them.