Foreign pension schemes(Taxwatch (Tax news in english))
16-06-2010 07:20
Af
Anders Kiærskou
Contributions
From 2008, you can be granted a tax exemption or deduction in Denmark for your contributions to a foreign pension scheme which you have taken out in another EU or EEA state. The tax exemption means that contributions paid into your pension scheme by your employer are not included in your taxable income.
You can be granted a tax exemption or deduction for your pension scheme contributions if your pension scheme is approved by SKAT. For a pension scheme to be approved, you must be resident in Denmark for tax purposes or be taxed as a cross-border worker, and you must accept being taxed on income from your pension scheme in Denmark - even if you go on to live in another country.
The pension scheme must be taken out with a pension provider in an EU or EEA member state (except Lichtenstein) and it must correspond to a Danish tax-privileged scheme.
The pension provider must meet the requirements which are placed on Danish pension providers and must undertake the same obligations.
Both you and your pension provider can apply for approval of your pension scheme by SKAT.
Returns
From 2010, you only have to pay tax on the returns from your pension scheme assets if you live in Denmark and are domiciled in Denmark for tax purposes. This means that you will not have to pay tax on such returns if you are domiciled abroad.
Disbursements
You can avoid paying tax on pension scheme disbursements which corresponds to contributions which you have not offset against your taxable income in Denmark or abroad. This applies to Danish as well as foreign pension schemes.
In order to avoid paying tax on disbursements, you must be able to document that you have not been granted an exemption or partial or full deduction for your contributions against your taxable income in either Denmark or abroad.
Migrant workers
Special rules apply for migrant workers who come to Denmark from another country to work. As a migrant worker, you can under certain conditions contribute to a pension scheme in an EU or EEA member state (except Liechtenstein) for a period of up to 60 months and be entitled to a tax exemption or full tax deduction against your taxable income for the contributions made during this period. Also, you do not have to pay tax on the annual returns from your pension scheme assets.
Once you have been liable to tax in Denmark for more than 60 months, you are no longer considered a migrant worker, but a resident of Denmark. This means that you are no longer eligible for the tax deductions granted to migrant workers.
In this situation you can apply to have your pension scheme approved as a tax-privileged scheme which entitles you to a deduction or you can transfer your pension scheme to Danish or other foreign pension scheme under which you would be entitled to a deduction under the Danish rules.
Questions can be addressed to Anders Kiærskou at aek@bdo.dk
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