A-tax
What is A-tax?
As an entrepreneur, there are a number of tax obligations that you need to be aware of to ensure that your business operates legally and in accordance with tax legislation. One of the central aspects of tax payment for both you as an entrepreneur and your employees is A tax.
This means that all Danes who have an income, whether they are salaried or receive money from the state, must hand over part of the person's income to the Tax Agency, that money is called A-tax.
But what exactly is A tax?
A tax, also known as labor market contribution, is a form of advance tax that employers deduct from their employees' wages. This move happens automatically every time the employees are paid a salary. The purpose of A-tax is to ensure that tax is regularly paid to the state, so that the annual statement does not result in a large residual tax for the employee.
How does A tax work?
As an employer, it is your duty to calculate and pay A tax for your employees to the tax authorities (TAX) every month. A-tax is calculated on the basis of the employee's salary income and the deduction percentage, which is determined based on the employee's tax situation. It is important to have correct information about your employees, including their CPR numbers and information about any deductions, as this affects the calculation of A tax.
This means that the higher your income, the more you have to pay in A tax. However, it is not all of your income that you have to pay tax on, because everyone has a personal deduction, which is the income you get tax-free. The personal allowance in 2022 for people over 18 is DKK 46,600. This means that you can earn DKK 46,600 tax-free spread over one year.
Self-employed entrepreneurs and A tax
If you are an independent entrepreneur and have no employees, you are not obliged to deduct A tax from your own income. On the other hand, you must ensure that you pay tax on your earnings as part of your annual statement.
Registration with SKAT
When you start your business, you must register with SKAT and be assigned a CVR number (CVR = Central Business Register). This number identifies your company to the authorities and is essential for correct reporting of taxes and charges, including A tax.
The importance of correct reporting
As an entrepreneur, it is crucial to report A tax correctly and on time to avoid fines and unnecessary complications. Missing or incorrect reporting can result in financial consequences and potentially damage your company's reputation. Therefore, it is a good idea to maintain good communication with SKAT, seek advice from accountants or tax experts, and ensure that you stay up-to-date on any changes in tax legislation.
You are more than welcome to reach out to Startup Centrals coaches within this area, they will be able you guide you in the right direction.
Entrepreneurial life entails many areas of responsibility, including correct handling of tax obligations such as A-tax. By having a solid understanding of what A tax is, how it works and how it affects your business, you can create a healthy financial future for yourself and your business.
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