Denmark Labour Market Contribution Guide (AM-Bidrag Explained)

What Is the Labour Market Contribution

The AM-bidrag (arbejdsmarkedsbidrag) was introduced in 1994 to replace portions of employer social-security contributions with a broad-based employee levy. It is a flat 8% deducted from your gross income before the calculation of ordinary income tax (A-tax, municipality tax, church tax, etc.).

• Rate — 8% flat on virtually all personal earned income. There is no progressive bracket and no ceiling — the full 8% applies regardless of how much you earn.
• Who pays it — All employees, freelancers, and self-employed individuals. Employers do not pay AM-bidrag — it is an employee-side contribution.
• Legal basis — The AM-bidrag is governed by the Danish Act on Labour Market Contribution (Lov om arbejdsmarkedsbidrag). It is classified as a "social contribution" in international tax treaties but functions like a gross income tax for domestic purposes.
• Purpose — Revenue funds the public employment service (jobcenters), dagpenge (unemployment insurance), activation programmes, and other labour market measures. Unlike the ATP (Arbejdsmarkedets Tillægspension), which funds a specific pension scheme, AM-bidrag goes into the general state budget.

Because AM-bidrag is deducted before any other tax, it effectively reduces the base on which other taxes are calculated. If you earn 50,000 DKK gross, the AM-bidrag of 4,000 DKK (8%) is taken first, and then ordinary tax is applied to the remaining 46,000 DKK. This order is important for understanding your effective marginal tax rate → see our personal tax guide for a full breakdown.

Income Subject to AM-Bidrag

The AM-bidrag applies to most types of earned income. Here is what is included:

• A-income (salary from employer) — Standard salary, wages, bonuses, commissions, holiday pay, overtime pay, and severance payments are all subject to 8% AM-bidrag. This is deducted automatically by your employer through the eIndkomst reporting system.
• B-income (freelance, fees, honoraria) — If you receive income from freelance work, consulting fees, board member fees, or other non-employment work, this is B-income subject to AM-bidrag. You report B-income in your forskudsopgørelse (preliminary income assessment) and SKAT adjusts your AM-bidrag accordingly.
• Business profit (self-employed) — If you run a sole proprietorship (personligt ejet virksomhed), the net profit is subject to AM-bidrag, up to a maximum amount. The calculation involves deducting business expenses from revenue first, then applying the 8% contribution on the resulting profit.
• Honorary fees and director's fees — Fees paid to board members, directors, and trustees are treated as B-income and subject to AM-bidrag. This applies even if the fee is modest.

The common thread is that AM-bidrag applies to active earned income — money you actively work for. Passive income streams (investments, rental income, pensions) are generally not subject to AM-bidrag.

Income NOT Subject to AM-Bidrag

Several important income types are explicitly exempt from the AM-bidrag:

• Pension payouts — Withdrawals from ratepension, aldersopsparing, livrente, and employer pension schemes are NOT subject to AM-bidrag. They are taxed only as personal income (A-income for tax purposes) without the 8% contribution. See our pension tax guide →.
• SU (student grants) — Statens Uddannelsesstøtte (state educational support) is A-income but explicitly exempt from AM-bidrag. The same applies to other educational grants.
• Social benefits — Kontanthjælp (cash benefits), folkepension (state pension), førtidspension (disability pension), boligstøtte (housing benefit), and child benefits (børne- og ungeydelse) are all exempt.
• Share income and capital gains — Gains from shares (aktieindkomst), dividends, bond interest, and other capital income are not subject to AM-bidrag. They are taxed under their respective regimes (27/42% for shares, personal income for capital income).
• Gifts and inheritance — Taxable gifts and inheritance are subject to gift/inheritance tax, not AM-bidrag.
• Rental income — Income from renting out property (whether a room or an entire home) is taxed under kapitalindkomst (capital income) and is not subject to AM-bidrag.

Understanding these exemptions is critical for accurate tax planning. If you classify income incorrectly — for example, treating a B-income as a pension payout — you could either underpay or overpay AM-bidrag, triggering a correction from SKAT.

2026 Reform

As of 1 January 2026, a significant reform to the AM-bidrag system took effect:

• No AM-bidrag until age 18 — Individuals under the age of 18 are now fully exempt from AM-bidrag, regardless of how much they earn. Previously, teenagers working part-time jobs would pay the 8% contribution once their income exceeded a small threshold. Under the 2026 rules, no AM-bidrag is deducted until the calendar year in which you turn 18.
• Simplification for young workers — The reform eliminates the need for teenagers to file for AM-bidrag refunds. Many young workers previously overpaid because employers automatically deducted 8%. Now employers must check the employee's age and skip the deduction entirely for under-18s.
• Impact on families — The reform means teenage workers keep 8% more of their gross earnings. For a teenager earning 50,000 DKK over summer and part-time work, the savings is about 4,000 DKK annually. This is intended to make part-time work more attractive for young people.
• Implementation — Employers update their payroll systems to check age via CPR registry. If an employer mistakenly deducts AM-bidrag for an under-18 worker, the worker can claim a refund via TastSelv.

This reform does not affect anyone aged 18+. The standard 8% rate continues to apply for all other taxpayers.

How It Appears on Your Payslip

Your Danish payslip (lønseddel) must clearly show the AM-bidrag deduction. Here is what to look for:

• Gross salary — Your agreed salary before any deductions.
• AM-bidrag line — A separate line labelled "AM-bidrag" or "Arbejdsmarkedsbidrag" showing 8% of gross salary. Example: if gross is 40,000 DKK, AM-bidrag is 3,200 DKK.
• Tax base after AM-bidrag — The remaining amount (40,000 - 3,200 = 36,800 DKK) on which your A-tax (ordinary income tax) is calculated. This is sometimes called "AM-indkomst" or "grundlag for A-skat."
• eIndkomst reporting — Your employer reports both the gross salary and the AM-bidrag to SKAT via the eIndkomst system. You can view this in TastSelv under "Income."

If you have multiple employers, each deducts AM-bidrag independently. At year-end, SKAT totals all your A-income and applies the correct AM-bidrag calculation. If you have overpaid (e.g., because of the new 2026 youth exemption), the excess is refunded via your tax assessment notice.

Interaction with Tax Assessment Notice

Your annual årsopgørelse (tax assessment notice) handles AM-bidrag in the following ways:

• Pre-filled salary fields — Your total A-income from all employers is shown. The AM-bidrag is deducted automatically from this figure in the calculation section — you do not need to enter it separately.
• B-income calculation — If you have B-income, you reported it in your forskudsopgørelse (preliminary income assessment). SKAT adds the AM-bidrag on this income in the final assessment. If you under-reported, you will owe additional AM-bidrag plus interest. If you over-reported, you get a refund.
• Self-employed calculation — For sole proprietors, SKAT calculates AM-bidrag on the net business profit shown in your accounts. The calculation appears in field 10 of the assessment notice.

Always double-check your AM-bidrag calculation on your årsopgørelse. Mistakes are uncommon because it is formulaic (8% of relevant income), but errors in B-income or business profit classification can lead to underpayment. For a full walkthrough, see our preliminary income assessment guide → and B-income guide →.

FAQs

Is AM-bidrag the same as ATP?

No. AM-bidrag (arbejdsmarkedsbidrag) is an 8% tax on earned income that goes to the general state budget. ATP (Arbejdsmarkedets Tillægspension) is a mandatory pension contribution — a fixed amount per month (currently about 1,130 DKK annually for full-time employees) paid by both employer and employee. They are completely separate systems.

Do I pay AM-bidrag on my SU (student grant)?

No. SU is explicitly exempt from AM-bidrag. However, SU is still classified as A-income for other tax purposes and is subject to ordinary income tax via your tax card.

Can I deduct AM-bidrag from my taxable income for foreign tax credit purposes?

Generally, no. AM-bidrag is a non-refundable contribution, and it is not treated as creditable foreign tax under most tax treaties. However, if you are covered by a double taxation agreement, the classification of AM-bidrag as a "social security contribution" or "tax" depends on the specific treaty clause with your home country.

What if my employer forgets to deduct AM-bidrag?

Your employer is required to deduct and report AM-bidrag via eIndkomst. If they fail to do so, SKAT will assess the unpaid amount on your årsopgørelse and you will owe it directly. You may also face a surcharge if the error is deemed your fault. In practice, the employer is primarily liable, but you should check your payslip each month.

Is there a maximum annual AM-bidrag?

No. Unlike the ATP contribution (which has a fixed maximum), AM-bidrag is a flat 8% with no upper ceiling. The more you earn, the more you pay in absolute terms. There is also no minimum income threshold — even small amounts of earned income are subject to the 8% deduction.