TaxWatch:

The taxation rules for frontier workers

29 March 2021

Tanja Stocholm, Director, Tax |

Employees who live abroad, but work in Denmark for a Danish employer, are subject to limited tax liability in Denmark. They must therefore submit a Danish tax return as a limited taxpayer each year before the first of July.

As a general rule, the limited taxpayer must only deduct directly related costs in the annual tax return, and they are entitled to a standard deduction in relation to the current period, if they have worked in Denmark for a part of the year.

In addition, people with limited tax liability on wage income are also entitled to transport deductions and deductions for membership fees to approved Danish unemployment insurance and labour unions. The latter, however, presupposes that you do not receive a deduction for these on the foreign tax return.
 

Deductions if you are a frontier worker

Employees residing abroad should calculate how large a share of their total annual income comes from Denmark.

If at least 75% of an employee’s annual global income comes from Denmark, the person in question can choose to be taxed according to the rules for frontier workers, which makes it possible to obtain the same deductions as persons who are fully liable to pay tax in Denmark. This can be, for example, interest expenses and family expenses such as child support, service deduction, etc. In addition, you can use any spouse’s standard deduction if your spouse does not have an income for taxation in their home country.

If you want to use the rules for taxation in accordance with the rules for frontier workers, you must state this on your Danish annual tax return.