The Danish expatriate tax scheme(Taxwatch (Tax news in english))
09-09-2009 14:49
Af
Anders Kiærskou
The special tax scheme for foreign researchers and key employees provides opportunity for employees recruited abroad to be taxed at 25 % for up to 3 years or, alternatively, at 33 % for up to 5 years if certain conditions are met.
To utilize this special tax scheme for employees recruited abroad, the employer must be Danish (Danish branches of foreign companies are also accepted).
In a recent case before the National Tax Board an employee was recruited by a Danish subsidiary of a foreign company where the employee worked. The National Tax Board determined that it was insufficient for the employee to have a secondment contract with his foreign employer. The condition that the employer should be Danish required the Danish subsidiary to enter into an employment contract with the employee.
BDO’s opinion
The decision shows how important it is to review that all conditions are met when applying for the special tax scheme.
Besides the requirement that the employer should be Danish, the employee’s average monthly salary must be at least 63,800 DKK (2009) after deduction of Danish or foreign mandatory social security contributions (approximately 69,500 DKK including Danish social security contributions). The salary requirement does not apply to approved researchers.
Further, the employee must meet several conditions which basically are:
- Tax liability as a resident or as a non-resident on salary income must commence concurrently with the start of the employment in Denmark
- The employee must not in the 3 years preceding the employment in Denmark have been a tax resident or have been taxed in Denmark as a non-resident on salary income, including salary as hired-out-labour, director’s fee, pensions, public allowances, business income or similar remunerations.
- No employment in the company or group within 3 years before moving to Denmark or one year after ending a previous period with Danish tax liability.
- During the employment under the special tax scheme or within the preceding 5 years, the employee may not hold 25 % or more of the share capital or hold the majority of the voting power in the employer company or - if the company is not incorporated - have a controlling influence on the employer.
- The employee may not have been abroad as a Ph.D.-student paid by Danish public funds in the 3 years prior to commencement of the employment in Denmark.
Questions to this article can be directed to Anders Kiærskou at AEK@bdo.dk
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