The Danish 26 pct. tax regime for inbound expatriates – Minimum salary requirement for 2016

18 december 2015

A minimum salary requirement must be met in order to utilise the Danish 26 pct. tax regime for inbound expatriates. The salary requirement is adjusted on a yearly basis.

From 1 January 2016, the minimum salary requirement is increased from DKK 61,500 to DKK 62,300 a month.

The minimum salary requirement must be met after deduction of the employee’s part of “ATP” which constitutes the employee’s contribution to Danish social security. The employee’s contribution to ATP is also increased from 1 January 2016 – from DKK 90 to DKK 94.65 monthly.

Hence, the monthly minimum salary requirement constitutes DKK 62,394.65 for employees covered by Danish social security.

Background

Due to the high rates of individual income taxes in Denmark compared to many other countries, a special Danish tax regime exist in order for Danish businesses to attract skilled labour from abroad.

This scheme allows employees recruited abroad to relocate to Denmark and be taxed in Denmark on cash salary and certain benefits in kind from a Danish employer at a total flat rate of 31.92 pct. (8 pct. gross tax and 26 pct. tax on the remaining amount).

Certain conditions apply in order for an individual to be taxed according to the scheme. One condition is that the employee obtains a minimum monthly salary unless if he works as a certified researcher.

As explained above, the minimum salary requirement is increased slightly each year.

Should you require assistance, BDO can help you or your business in any matters related to the Danish 26 pct. tax regime for inbound expatriates.

The above article is taken from tax:watch, our electronic English newsletter on Danish Tax and VAT matters. tax:watch is issued on the last Friday of each month and is free of charge.