Higher taxes in the UK compared to Denmark(Taxwatch (Tax news in english))
24-02-2010 07:30
Af
Annie Baare
As from the UK tax year beginning on 6 April 2010, the taxes in the UK are increased significantly.
This involves that income up to 34,800 £ (approx. 295,800 DKK) is taxed at a rate of 20%.
Income between 34,800 £ and 150,000 £ is taxed at a rate of 40% and income exceeding 150,000 £ (approx. 1,275,000 DKK) is taxed at a rate of 50%.
The increase in the UK taxes involves, that Denmark becomes very competitive when employees are going to perform work on a temporary basis in another country.
The reason for this is that in Denmark it is possible to choose the very favourable special expatriate taxation involving 25% taxation of salary for up to three years or 33% tax for up to five years. In addition to the 25% or 33% tax, the employee will have to pay 8% in social security contributions. After the first three years or five years, the individual will have to pay taxes according to the ordinary tax rules. Some special rules apply, if the individual decides to stay in Denmark for more than 48 month after the expiration of the period with 25% or 33 % tax.
Highly salaried specialists including soccer players or handball players etc., who obtains a monthly salary exceeding DKK 69,450 in average every month can choose the 25% or 33% taxation.
We have made the following comparison:
|
Yearly salary
in DK
|
Tax and social security
in Denmark in DKK
|
Taxes in the UK
in DKK
|
|
1,000,000
1,500,000
2,000,000
2,500,000
|
310,000
465,000
620,000
775,000
|
341,000
563,000
813,000
1,063,000
|
Please note, that also Danish citizen can choose the 25% or 33% taxation, but the same conditions apply as for all others. This involves that they may not have been taxable to Denmark within 3 years before entering the 25% or 33% taxation of certain income.
In addition the employee will have to enter into an employment agreement with a Danish company or a Danish branch of a foreign company. This means that they cannot be covered by the rules, if they live in Denmark and performs work for a foreign company.
Please find further information on special expatriate tax regime in our publication 25% or 33% tax on www.bdo.dk
Questions can be addressed to Annie Baare at aeb@bdo.dk
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