What's the tax liability on a secondary income source, or side hustle, in Denmark?
Get the Scoop on Danish Taxes for Freelancers
Hey there!
Are you a freelancer working in Denmark and wondering about tax obligations for secondary income? Let's dive into the essentials and clear things up!
The Lowdown on Tax Cards
First, it's wise to understand the Danish tax system's three card types: frikort, hovedkort, and bikort.
- The frikort (literally 'free card') determines your yearly tax-free income. Age, among other factors, influences this amount, which can be found on your preliminary tax statement.
- The hovedkort (primary card) outlines your tax rate and any applied deductions. Manual additions are required to your tax statement for certain deductions. More on that later!
- The bikort (secondary card) is used when you have additional jobs or 'side hustles.' This card calculates the tax you owe from those earnings—always pick the bikort for secondary jobs since it applies a higher tax rate than the hovedkort.
These are crucial when dealing with the tax implications of freelance income. Keep in mind, the info below focuses mainly on freelancers' obligations. Don't confuse the bikort with B-skat, which applies to self-employed individuals.
Reporting and Deductions for Freelancers
As a freelance worker, you can deduct business-related expenses, such as office supplies, to reduce your taxable income. However, specific rules might apply to certain income types and costs, like the popular servicefradrag for household maintenance (though that doesn't directly relate to freelance income). Instead, focus on deducting legitimate business expenses.
The bikort is typically the card used by freelancers, making them responsible for reporting their income and business expenses. This involves keeping track of income and expenses to determine net profits. The E-tax system (TastSelv) allows freelancers to manage their tax obligations online, including submitting tax returns and preliminary income assessments.
If you're ever unsure or have questions about your tax cards or annual return, reach out to the Danish Tax Authority via telephone at 7222 2828.
Example Deduction Process:
- Document Your Expenses: Keep a record of all business-related expenses.
- Calculate Net Profit: Subtract these expenses from your total income to determine your net profit.
- Report Income: Use the E-tax system to report your freelance net profit.
- Preliminary Assessment: Ensure your preliminary income assessment reflects your correct taxable income.
Don't forget to consult tax professionals or use tax software to stay compliant with Danish tax regulations. Happy tax-swimming, freelancers!
[Recommended Reading: Explained: What is Denmark's B-tax, and who has to pay it?]
- Freelancers in Denmark may find it beneficial to understand the role of personal-finance factors, such as the tax system's frikort, hovedkort, and bikort, in shaping their tax obligations.
- Regardless of age, the amount of yearly tax-free income, represented by the frikort, is significant for freelancers and can be found on one's preliminary tax statement.
- News about the space of freelance finance may interest many Danish youths, who are now proceeding with personal-finance strategies that minimize their tax liability through deductions and accurate reportings.
- Artful management of a freelancer's finances includes deducting business-related expenses that can be forskudsopgørelse, thereby reducing taxable income.
- It's essential for freelancers to be aware of news regarding tax regulations in Denmark, as it can help them stay compliant and avoid any potential penalties or issues in the future.
