B-income in Denmark: What employees and employers need to know
B-income is a special type of income that both employees and employers should be aware of. Unlike A-income, no tax or labour market contributions (AM contributions) are automatically deducted before payment. This means the recipient must report and pay tax themselves, while the employer is obliged to report the payment to the Danish Tax Agency (SKAT).
In this article, we provide an overview of what B-income is, how it's taxed, and the key responsibilities for both recipients and payers.
What is B-income?
B-income refers to income paid without automatic deduction of tax and AM contributions. It commonly applies to freelance fees, side jobs, or short-term projects. The recipient is responsible for declaring and paying tax and contributions, while the paying organisation must report the amount to SKAT so it appears on the recipient's tax return.
Typical recipients include consultants, advisers, journalists, speakers, freelancers, and board members.
Is B-income taxable?
Yes, B-income is fully taxable. The recipient must pay income tax and the 8% AM contribution. Since deductions aren't automatic—as they are with A-income - it's wise to set aside around 50% of any B-income to cover future tax obligations.
If you expect regular B-income, remember to include it in your preliminary tax assessment. This ensures the correct amount is deducted through a higher tax rate or reduced personal allowance - or paid directly as B-tax. Failing to do this may result in a large tax bill the following year.
B-tax is typically paid in 10 instalments per year, based on your estimated income. Read more about how we can advise your company about company tax in Denmark.
Reimbursed expenses and deductions
Any reimbursements for costs incurred in earning B-income, such as travel or accommodation, must be reported in full. However, unlike employees, B-income recipients cannot receive tax-free allowances for travel or mileage.
That said, you may still deduct certain business-related expenses on your tax return, provided they are:
- Necessary to earn, maintain, or secure your income
- Not personal in nature
- Documented (save receipts/invoices)
- Not already deducted through a business if you're also self-employed.
Examples of deductible costs:
- Courses: Deductible if they maintain or update your current professional skills. Initial or degree-level education is not deductible.
- Phone usage: Deductible if you've made business-related calls on your personal phone to a significant extent. Subscriptions or phone purchases are not deductible.
- IT equipment: Not deductible if used for personal purposes.
Reporting obligations for employers
B-income typically arises from short-term work or freelance assignments, not formal employment. If you’re a company paying a fee for personal services outside an employment contract, you must report it - even if no VAT applies.
To report correctly, you’ll need the recipient’s CPR number.
Reportable examples include:
- Fees or payments not subject to VAT
- Employee shares
- Free travel (AM contributions not applicable)
- Free accommodation
- Free meals and lodging
- Use of a pleasure boat.
Note: Board member fees must be reported as A-income, according to Section 43 of the Withholding Tax Act.
Need help?
At Azets, our experienced consultants can support you with tax, VAT, and accounting. Learn more about b-income in Denmark at skat.dk.
