Summary
Denmark operates a comprehensive social security system which provides a range of old age, invalidity, sickness, unemployment and other social benefits, including family allowances and income guarantees. Entitlement to benefits generally derives from and individual’s contribution history, although some benefits arise due to residence in Denmark.
Details
Contributions
The Danish social security system is financed mainly through revenue coming from taxes. Employees and employers make minimal contributions to social security. Employer contributions are generally less than $2,500 per year, and Employee contributions are around $150. There is also an 8% employee charge for unemployment insurance, although strictly speaking this is a tax charge.
Treaties
Denmark has social security agreements with all European Economic Area countries and around 20 other non-EEA countries, including the US, India, China and Australia. These agreements determine which country has the right the levy social security contributions, has the obligation to provide benefits, and prevent social security being levied twice on the same income. Non-EU Nationals are not covered by the EU Social Security agreement – Denmark has an opt out.
Because Denmark’s social security contribution rate is so low, there is a considerable financial benefit from structuring assignments from social security agreement countries in a way that avoids having to remain insured in the home country. This is usually achieved by considering assignment lengths or a change of employment contract location.
Exemptions
Given the low rate of contributions, exemptions are not applicable.
Administration
The seven elements of social security are aligned with tax withholding and the administration surrounding the withholding and payment of Danish social security is not complex.
Benefits
The Danish benefit system is very broad and by most standards, generous. Entitlement to benefits comes from paying contributions to the social security system and, in particular, from residence in Denmark. Combined with the low rate of contribution, this magnifies the benefit of a host based approach for expatriates working in Denmark.
Other
Danish social security contributions and in some cases foreign social security contributions are deductible from personal income for tax purposes
Social security insights are intended to provide quick and straightforward insights into social security regimes. Always seek professional advice based on actual circumstances before acting.
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