Use your tax exemption card if your expected income within the year is less than the amount of money you are allowed to earn before you have to pay tax. Typically, you use your tax exemption card when you are young and start your first job or when you receive the state education grant (SU) while living at home and having no job.
You only start paying tax once you have earned as much as your tax exemption card allows you to. If you work and earn a salary, however, you will have to pay labour market contributions (AM-bidrag) of 8% of your entire salary - even in you have a tax exemption card.
Your tax exemption card may be used by multiple employers or providers (state education grant for example). Once you have earned what corresponds to the amount on your tax exemption card, your employer/provider will withhold tax according to the withholding rate stated on your preliminary income assessment. Your employer/provider will automatically be informed of the withholding rate by the Danish Tax Agency (Skattestyrelsen).
At the end of the year, you will normally receive a new tax exemption card. However, please check your preliminary income assessment to see if it has been generated.
How much can you earn without having to pay tax?
It varies from person to person how much a person can earn without having to pay tax. It depends on your deductions and allowances which again depend on a number of personal matters.
At the top of your preliminary income assessment you can see the amount relevant for you. If you have a tax exemption card, it is stated as a so-called tax exemption amount which is the amount you are allowed to earn for the year without having to pay tax. If you have a primary tax card, the number stated tells you how much you may earn per month or per two weeks without having to pay tax.
Irrespective of the amounts stated in your preliminary income assessment you always have to pay 8% of your salary in labour market contributions (AM-bidrag) (however, this does not apply to the state education grant (SU), unemployment, sickness and parental leave benefits (dagpenge) or pension).