Payment via FerieKonto or Feriekasse
Holiday pay paid directly to Feriekonto or a Feriekasse by the employer is already taxed before it is paid into the Holiday Pay Fund. Taxation is applied in the same way as for ordinary income. Therefore, no tax is payable when the holiday pay is paid out.
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“FerieKonto” is a scheme run by the Directorate of Employment that manages holiday pay for 874,000 employees. ATP administers the scheme. Employers make regular contributions of 12.5 per cent of gross wages to FerieKonto, which then pays these out to employees when they take holiday leave.
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A “Feriekasse” manages and pays out holiday pay on behalf of employers. To be approved, a Feriekasse must be registered with Feriepengeinfo.
Payment from employer
Holiday pay paid directly by the employer is not taxed before it is paid into the Holiday Pay Fund. Tax is payable when it is paid out. It is taxed in the same way as ordinary income.
Taxation of returns on investments
There are two types of return on investment in the Holiday Allowance Fund. There are assets contributed to the fund, which the fund may invest, and there are assets which employers may retain in return for paying interest (index-linked) to their employees.
Taxation of the return on the fund’s investments in the financial markets follows the general rules governing the taxation of pension returns and is therefore subject to PAL tax.
In Denmark, individuals are taxed on the returns from their pension schemes. The tax rate is set at 15.3%. PAL tax is collected by the pension fund. In other words, the pension fund is obliged to deduct and pay the tax on behalf of the employee.
The indexation (return on investment) of the assets that employers choose to retain within their business is tax-free.
