Article:

Danish tax exemption when working abroad

26 April 2019

Anders Kiærskou , Manager, Tax |

In a recent ruling, the National Tax Tribunal overruled the Danish Tax Agency and allowed an individual taxpayer exemption from Danish tax on salary earned abroad

In the case before the National Tax Tribunal, the taxpayer had worked abroad for an employer and later worked abroad again for another employer.

Between work for the two employers, the taxpayer had stayed in Denmark within the maximum allowed 42 days in any 6-months period according to the tax exemption rule.

Specifically, the nature of the taxpayer’s stay in Denmark was subject to dispute during the case before the National Tax Tribunal.

The taxpayer was not employed and did not earn income during his stay in Denmark. Nor did he receive unemployment benefit.

The Danish Tax Agency argued that since the taxpayer was unemployed during the stay in Denmark, he did not qualify for exemption relief on the salary earned for worked performed abroad.

In the opinion of the Danish Tax Agency, it was of no concern that the taxpayer did not receive unemployment benefit during his stay in Denmark.

The National Tax Tribunal disagreed and ruled that the law was to be interpreted so that stay in Denmark, for any reason other than occupational purposes, is allowed under the tax exemption rule.

As the taxpayer had not performed work in Denmark or received unemployment benefit, he qualified for exemption from Danish tax on his salary earned for work performed abroad.

The ruling of the National Tax Tribunal seems correct and is hardly surprising as it seems rather difficult to find a valid legal basis for the argument of the Danish Tax Agency.

Background

According to the Danish Tax Assessment Act, section 33 A, salary earned abroad by a Danish tax resident individual may qualify for tax exemption in Denmark under certain conditions.

The conditions include that the taxpayer spends at least 6 months abroad.

During any 6-month period of the stay abroad, the taxpayer can stay in Denmark (including Greenland and the Faroe Islands) for a maximum of 42 days.

When counting the 42 days, all days spent entirely or partially in the country counts as whole days in the country. Consequently, for example, arriving in Copenhagen Airport late in the evening on Friday and departing early the following Monday morning counts as 4 days spent in Denmark.

Valid reasons to stay in Denmark are necessary work in Denmark directly linked with the stay abroad, holiday or similar. According to the ruling of the National Tax Tribunal, “holiday or similar” is to be interpreted so that stay in Denmark for any reason other than occupational purposes is allowed under the tax exemption rule.

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.