11/05/2026
Payroll compliance in Denmark
Establishing a local legal entity isn't mandatory for handling employee hiring and payroll processing in Denmark. Foreign companies can fulfill all payroll-related employer obligations without a permanent establishment in the country. However, there are various registration procedures that both resident and non-resident employers must complete before commencing payroll operations. Initially, acquiring a commercial registration number (referred to as a CVR number) from the Danish Business Authority (DBA) is essential. This number serves to identify the business and must be referenced in all interactions with local authorities. Once obtained, companies must register as employers for income tax through an exclusive online portal (available only in Danish) administered by the Danish Customs and Tax Administration (SKAT). Additionally, employers need to register with ATP (Arbejdsmarkedets Tillægspension), the mandatory pension fund covering all employees in Denmark. Other payroll-related obligations include implementing an industrial insurance scheme, mandatory for all employers, and obtaining a NemID—a specialized online signature/identification certificate essential for accessing official online portals related to tax reporting and more. NemID is also necessary for accessing the digital mailbox (e-Boks), mandated for communication with authorities, and for utilizing the tax filing e-service. While not obligatory by law, establishing a local bank account is advisable to streamline payments to authorities, particularly because a local bank account is a prerequisite for the Nets direct debit service commonly used by Danish employers. Irrespective of whether employers choose a local or foreign account for payroll transactions, they must designate one bank account as their official Nem Konto. This designated account will be used for all tax and social security payments. In Denmark, the taxation of employment income involves four distinct levies: state tax, municipal tax, labor market tax, and optionally, church tax. Additionally, social security contributions, imposed on both employees and employers, are relatively low.
Employers in Denmark are responsible for three primary tasks concerning tax withholding from employee wages: deducting income tax at the source, reporting the withheld amounts to authorities, and settling outstanding dues. Termed A-tax, income tax deducted from employment earnings must be remitted to authorities by the 10th of the subsequent month for small and medium-sized enterprises, or by the month's end for larger entities. Monthly tax reports must be submitted through the SKAT e-filing system on the same day. Details regarding payment deadlines and tax declarations are available on SKAT's website. Employers are not mandated to submit an annual A-tax withholding declaration. Conversely, employees are required to file individual tax returns by May 1 of the subsequent year, with an extended deadline until July 1. The tax year aligns with the calendar year.
In Denmark, social security contributions are notably modest compared to other European nations. This is largely due to the Danish social security system primarily relying on regular tax revenues for funding. Additionally, contributions aren't calculated based on a percentage of the employee's salary or wages; instead, they consist of fixed amounts that both the employee and employer must pay quarterly. Invoices for these contributions are dispatched to registered employers via the e-Boks system for separate payment. The employee's portion amounts to DKK 1,135.80 annually and encompasses contributions to the obligatory ATP pension fund. Conversely, the employer's social security share encompasses contributions to various funds, including the ATP pension fund, maternity leave fund, scheme for financing state pension costs, vocational training fund, and fund for work-related diseases. Additionally, employers contribute to compulsory occupational accidents insurance at varying rates depending on the sector and the employee's role. Due to differing contribution levels across funds, the total employer contribution is typically estimated to range between DKK 10,000 and DKK 12,000 annually, though it may extend up to DKK 15,000.
Employees in Denmark are entitled to a range of benefits, including:
1. Annual leave and public holidays: Employees receive 5 weeks of annual leave, which is accompanied by a 12.5% holiday allowance. Additionally, there are 11 public holidays.
2. Maternity leave: Mothers are entitled to 18 weeks of paid maternity leave at 50% of their normal wages.
3. Paternity leave: Fathers are entitled to 2 weeks of paternity leave.
4. Parental leave: Both parents can take a total of 32 weeks of parental leave, with the option to extend it by either 8 or 14 weeks.
5. Sick leave: The duration of sick leave is determined by either a collective bargaining agreement (CBA) or an individual employment agreement. If not specified, employees are entitled to at least 30 days of fully paid sick leave. Afterward, employees receive sickness benefits for up to 22 weeks.
In Denmark, there is no national minimum wage prescribed by labor law. Instead, minimum pay rates are established for each sector through collective bargaining agreements. Similarly, there are no overarching regulations concerning overtime pay, which is typically delineated within an individual employee's contract, unless specified otherwise in a collective bargaining agreement. Compensation for overtime commonly takes the form of additional pay or compensatory time off. The provision of a 13th month salary is not obligatory.
While there is no mandated frequency for payroll processing in Denmark, most employers opt for a monthly schedule. Payments to employees must be made in the local currency, the Danish Krone (DKK), and it's illegal to remit salaries to Danish employees into foreign bank accounts. Following each payroll cycle, employees must receive a payslip containing the following details:
- Pay period covered, working hours, and pay date
- Gross and net salary figures
- Deductions for A-tax and labor market contributions
- Total pension contributions
- Withholding rates and pertinent data from the employee’s tax card
- Holiday pay and any additional employee benefits
- Employee particulars (name, address, civil registration/CPR number)
- Employer information (name, address, CVR number)
Both paper and digital payslips are legally acceptable, with digital distribution being the more prevalent choice. The primary platform for disseminating digital payslips is the E-boks system. Employers are required to retain payroll records for a minimum of 5 years.
