Determining the tax liability for a 'side hustle' in Denmark: Insight into taxation rates and obligations.
Laying Down the Law on Secondary Sources of Income in Denmark
Are you raking in the cash on the side, but unsure about how taxes apply? Let's take a closer look at the rules for secondary income in Denmark.
Danish Tax Cards: The Trifecta of Fiscal Freedom
To shed some light on the topic, let's first break down the three types of tax cards governing your tax obligations:
- Frikort (Free Card): This card sets the amount of tax-free income you can earn in a year. Keep an eye on your preliminary tax statement (Forskudsopgørelse) to learn the specifics of your case.
- Hovedkort (Primary Card): This card represents your income tax rate and deductions including those applied automatically.
- Bikort (Secondary Card): This card is used when you have a secondary job or multiple jobs. It's essential to use it for all additional sources of income as it subjects these earnings to a higher tax rate, ensuring no exemptions.
Hovedkort vs. Bikort: Navigating the Choices Ahead
When engaging in a secondary job, always choose the bikort. This card will apply a higher tax rate, ensuring that your earnings are adequately taxed. Using the hovedkort may lead to some of your income escaping taxation, contrary to your best intent.
The aforementioned rules apply primarily to employees. Self-employed individuals and freelancers, on the other hand, must be familiar with Denmark's B-tax and their registration requirements. These questions are further covered in our article, “What is Denmark's B-tax and who has to pay it?”
What If My Side Hustle is Freelance?
If you're self-employed or a freelancer submitting invoices for services provided, you may qualify as an honorarmodtager. Your income from this secondary source will be subject to both income tax and VAT, depending on your annual turnover.
In general, you don't have to register for VAT (Moms) below 50,000 DKK. However, there may be exceptions where the additional job takes on a more employment-like character, in which case the rules for employees apply. Keep a close eye on your income, as it may push you over the VAT registration threshold.
For those who make money from selling second-hand items, be mindful of the applicable taxes, as the rules for these transactions differ from those for personal sales. As a rule of thumb, remuneration from the sale of items bought specifically to be resold is subject to income tax, regardless of the platform used to facilitate the sale or the item's origin.
In doubt about your specific circumstances? The Danish Tax Authority (Skattestyrelsen) is here to help, reachable at 7222 2828.
In the Discussion
Feel free to join the conversation below, sharing your thoughts on this matter and any questions you may have. Share your experiences and if you require clarification, simply email us at [email protected]. Let's keep our discussion civil and appropriate, acknowledging our shared terms of use to ensure engaging and informative insights for all readers.
Further Reading
To explore related topics, consider checking out the following articles:- #Taxes- Buses to replace trains on commuter route north of Copenhagen- Denmark's yellow health insurance card to become optional- Why it was finally time for me to cough up and apply for Danish citizenship- What proportion of foreign nationals stay in Denmark for the long term?
- As a youth, if you’re earning side income from selling art, be aware that the taxes on these earnings may be subject to a higher rate due to the Bikort, even if the items were previously owned.
- Personal-finance news for Danish citizens: the art community should keep track of their income from selling art, as it might incur tax even after resale.
- The Danish Tax Authority offers resources and support to artists and others involved in the creative industry regarding their tax obligations, ensuring fairness in taxation regardless of the nature of their secondary income.
- The finances of young art enthusiasts might accidentally exceed the VAT registration threshold if they start selling their art creations, so it's essential to consider this possibility when engaging in secondary sources of income.
- Regardless of the proportion of youth engaged in creative pursuits or the types of secondary income sources, the Danish Tax Authority remains a valuable resource for individuals seeking guidance and clarity on their tax obligations.
