Secondment to Denmark(Taxwatch (Tax news in english))
07-04-2010 07:35
Af
Hans-Henrik Nilausen
When employees are seconded to work in Denmark a lot of questions need to be addressed with regard to taxation and social security.
No Danish tax liability
Short term employees seconded to Denmark by their foreign employer with no permanent establishment in Denmark will not become tax liable, unless they stay in Denmark for an uninterrupted period of more than 6 months or if the establish residence here.
Danish tax liability
Employees seconded to Denmark can become either limited or full tax liable to Denmark. In both cases they are taxed with the ordinary Danish tax rates with up to 51.5 %.
Limited tax liability
Employees who do not become fully tax liable to Denmark, see below, and become limited tax liable, if they perform work in Denmark for a Danish employer or a foreign employer with a permanent establishment in Denmark. The tax liability is limited to income from Danish sources such as for instance their salary.
Full tax liability
Employees seconded to Denmark become fully tax liable to Denmark on their world wide income
• if they establish residence in Demark or
• if they stay here uninterrupted for more than 6 months
However, if the seconded employee, maintain the permanent residence in the home country and Denmark has a tax treaty with their home country, Denmark will only tax income from Danish sources such as for instance their salary.
Special expatriate tax regime
If certain conditions are fulfilled, full or limited tax liable seconded salary earners may choose to be taxed under the special Danish expatriate tax regime - also known as the 25%33 % tax regime. The rules only apply to researchers or highly salaried employees with a yearly salary of more than DKK 833.400 in 2010. The minimum salary demand does not apply to researchers approved by the Danish authorities.
The special 25 per cent tax scheme may only be used during one or more periods which in total do not exceed 36 months. Instead employees may choose to pay tax at a rate of 33 per cent for a period of 60 months. The choice must be made at the latest before the final date for filing tax returns for the year of taxation in which the employee chooses to be taxed under the special tax scheme for the first time. The choice applies to the entire period during which the scheme is being used.
It is possible to distribute the 36 or 60 months over an unlimited period of time. However, this requires that the employee fulfils all the relevant conditions when entering into new contracts of employment. This means, among other things, that the employee must not have been subject to full tax liability or limited tax liability on earned income and commercial income etc. for a period of 3 years before the scheme may be used again. This does not apply, however, if the tax liability is terminated between two contracts of employment under the scheme or if a maximum of one month passes between the contracts of employment.
Questions can be addressed to Hans-Henrik Nilausen at hhn@bdo.dk
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