Payment via FerieKonto or Feriekasse
Holiday allowance paid directly to Feriekonto or a Feriekasse by the employer is already taxed before paid into the Holiday Allowance Fund. Taxation takes place just like regular income taxation. Therefore, no taxation takes place when the holiday allowance is disbursed.
“FerieKonto” is a scheme of the Directorate of Employment that handles holiday allowance for 874,000 employees. ATP administers the scheme. Employers regularly pay 12.5% of gross wages to Feriekonto, which disburse them to the employees when they take holidays.
A “Feriekasse” manages and disburses holiday allowance on behalf of employers. In order to be approved, a Feriekasse must be registered with Feriepengeinfo.
Payment from employer
Holiday allowance paid directly from the employer is not taxed before paid into the Holiday Allowance Fund. Taxation takes place when disbursed. Taxation takes place like regular income taxation.
Taxation of return of investments
There are two types of return of investments in the Holiday Allowance Fund. There are assets submitted to the fund, which the fond may invest, and there are assets which the employers may keep against paying interest (indexing) to the employees.
Taxation of the return on the fund's investments in the financial markets follows the taxation of pension returns in general, and is therefore subject to PAL tax.
In Denmark, individuals are taxed on the return of their pension schemes. The tax rate is fixed at 15.3%. PAL tax is collected by the pension fund. That is, the pension fund is obligated to withhold and pay the tax on behalf of the employee.
Indexation (return on investment) of the assets, which the employers choose to keep in their business, is tax-free.