A new way of calculating taxes benefits individuals working abroad

28 November 2014

A new way of administering the personal allowance when calculating Danish taxes benefits certain Danish resident individuals working abroad part of the year.

Approximately one year ago, the Danish tax authorities stated that a new way of administering the personal allowance when calculating Danish taxes would be introduced.

The amended way Danish taxes are calculated benefits certain Danish resident individuals working abroad.

The change was initiated by the European Commission, who approached the Danish government in the spring of 2013 expressing that - according to the opinion of the European Commission - Denmark was not in compliance with EU law due to the way the personal allowance was administered when calculating Danish taxes.

The personal allowance is a feature of the Danish tax system that reduces the calculated Danish taxes. It is automatically applied during the tax calculation. Due to the way the Danish tax calculation is performed, certain Danish resident individuals working abroad part of the year have not benefited completely from the personal allowance.

According to the European Commission, this constitutes a restriction of the unlimited movement of individuals, labour and capital. According to EU law, the member states are generally not allowed to impose such restrictions.

Now, the Danish tax authorities have adjusted their IT-systems in order to comply with EU law and the affected individuals should automatically receive new statements of taxable income reflecting the changes for 2010, 2011, 2012 and 2013 if applicable.

If you have doubts whether you are affected by the above, BDO can assist you in determining whether this is the case and – if so - assess whether the changes have been applied correctly to your statements of taxable income.

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.