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Article:

Do you meet the minimum salary requirement in 2020 for taxation according to the 27-pct. tax scheme for inbound expatriates?

20 December 2019

Anders Kiærskou , Manager, Tax |

A minimum salary requirement must be met when you are taxed on salary from your Danish employer according to the 27-pct. tax scheme for inbound expatriates. The salary requirement is adjusted on a yearly basis.

From 1 January 2020, the minimum salary requirement is increased from DKK 66,600 to DKK 68,100 per month.

The minimum salary requirement must be met after deduction of your contribution to “ATP” which constitutes your Danish social security contribution as employee. Your contribution to ATP amounts to DKK 94.65 monthly.

Hence, the monthly minimum salary requirement constitutes DKK 68,194.65 when you are covered by Danish social security.

The minimum salary requirement must be met according to the employment contract as a monthly average during the calendar year. It is generally not sufficient that your employer pays a bonus to you in order for you to meet the minimum salary requirement, if the amount of the bonus is not stated in your employment contract.

If your average monthly salary according to the employment contract does not meet the above stated minimum salary, a solution could be for you and your employer to conclude an addendum to the existing employment contract before 2020 in order for the salary to be raised to meet the minimum salary requirement applicable from 1 January 2020.

Background

Due to the high rates of individual income taxes in Denmark compared to many other countries, a special Danish tax scheme 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 32.84 pct. (8 pct. gross tax and 27 pct. tax on the remaining amount).

Certain conditions apply for an individual to be taxed according to the scheme. One condition is that the employee obtains a minimum monthly salary unless he works as a certified researcher. As explained above, the minimum salary requirement is increased slightly each year.

Should you require assistance, BDO can assist you or your employer in all matters related to the Danish 27 pct. tax scheme 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. Please sign up here.