TaxWatch:

Working in Denmark while living outside Denmark

03 May 2021

Tanja Stocholm, Director, Skat |
Cecilie Frandsen, Manager, Tax |

Even though you do not live in Denmark, you can still be tax liable of some specific income sources in Denmark. If you work for a Danish employer, you will be tax liable of a part of your salary income.

If the individual does not have a property/home available in Denmark or does not stay in Denmark for more than 6 consecutive months, the individual in question will only be subject to limited tax liability in Denmark. When limited tax liable  you are taxed in Denmark of Danish income sources. If you live abroad and perform work in Denmark for a Danish employer, then you are limited tax liable of salary income for work performed physically in Denmark. Work performed in home country will as a main rule be taxed in home country and not in Denmark. Please note the definition of an employer for tax perspective can be more than the company you have legally signed the contract with. An employer for a tax perspective can also be the company who bear the cost of your salary etc. and benefits from the work you perform.

In this situation a split of the individual’s total salary income is necessary in order for employer to report salary income, withhold taxes correctly and for the employee to file the Danish taxes correctly. Therefore, it is a good idea to ajour a calendar on daily basis and keep this for at least 3 years.

As a main rule salary income is taxed at ordinary tax rates with a tax up to 56%, but if conditions in the Danish special tax regime is fulfilled this scheme can be applied and the individual will pay a flat tax rate of 32,84%. Limited tax liable individuals have the opportunity to be taxed according to a special cross-border rules, if they fulfill certain conditions in the Danish tax law. This set of rules entitle the individual to the same deductions as a fully tax liable individual and therefore it is specifically beneficial for a limited tax liable.

There are other rules regarding the tax liability when it comes to

  • Employees living in Sweden
  • If you are employed by a foreign company and rented out to a Danish business (hiring out of labour tax)
  • Employees working as pilots/stewardesses onboard in international aircraft traffic
  • Sailors.