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Article:

New rules on Danish tax residence for individuals are proposed

23 March 2018

Anders Kiærskou , Manager, Tax |

The government proposes to introduce new rules determining when individuals become resident in Denmark for tax purposes.  

The current rules concerning when individuals become resident in Denmark for tax purposes have often been criticised for being outdated, implying considerable estimates and lack of predictability in application.

According to the government, the uncertainty associated with these rules may result in individuals, who live and work in different countries, refraining from performing work in Denmark in order to avoid the risk of becoming resident in Denmark for tax purposes.

Consequently, the rules on Danish tax residence for individuals may constitute a barrier to attracting knowledge and capital to Danish businesses.

The proposed rules imply that an individual will become resident in Denmark for tax purposes, if the individual has a home available in Denmark, and the individual stays in Denmark for more than 90 days within 12 months.

The subjective intention of the individual in relation to the use of the home in Denmark is no longer relevant. The only circumstance that matters is the availability of a home in Denmark suitable for all-year living. Consequently, the current rules’ distinction between all-year homes and holiday homes is irrelevant.

In relation to the proposed threshold of 90 days stay in Denmark, it is no longer relevant to distinguish between whether the stay is for work or vacation purposes. The only deciding factor is, whether the individual has stayed in Denmark more than 90 days within 12 months.

Additionally, it is proposed that Danish tax residence commences from the first day of stay in Denmark for individuals with a home available in Denmark, who are not taxed as residents on their global income in any other country.

The purpose is to avoid that the proposed rules on Danish tax residence may result in situations where neither Denmark nor other countries tax the income of such individuals, even though they have a home available in Denmark.

For most working individuals, the proposed rules will likely be favourable compared to the current rules.

However, Danish pensioners living in France or Spain owning a summerhouse in Denmark may be adversely affected by the proposed rules. This may also be the case for individuals owning a summerhouse in Denmark, who are not taxed as residents on their global income in any other country.
Transitional schemes are proposed to offset the adverse effects for individuals, who are already in such situations, when the proposed rules are set to take effect.

The proposed rules are set to take effect from 1 January 2019 if adopted by the Danish parliament. Changes may occur before adoption.

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. Please sign up here.