Increased taxation of pilots and cabin crew employed by Irish airlines

29 August 2014

The double tax treaty between Denmark and Ireland has been amended resulting in increased taxation of certain pilots and cabin crew employed by Irish airlines.

The governments of Denmark and Ireland have agreed to amend the double tax treaty between the two countries concerning taxation of certain pilots and cabin crew.

Danish resident pilots and cabin crew working for Irish airlines aboard aircraft in international traffic are taxed on their salary in Ireland. Being resident in Denmark, such individuals must also declare the salary on the Danish tax return.

In order to avoid double taxation, the Danish tax is reduced according to the method specified in the double tax treaty. The amendment to the double tax treaty between Denmark and Ireland changes this method.

As a result, the affected pilots and cabin crew will be required to pay tax in Denmark on top of the tax already paid in Ireland. The total tax on their salary will equal ordinary Danish taxation with a marginal tax rate of approx. 56 pct. This is a significant tax increase compared to the current situation only comprising Irish taxation with a marginal tax rate of 41 pct.

The amended double tax treaty enters into force subsequent to approval by the respective parliaments of Denmark and Ireland. It is expected that the amended double tax treaty will take effect from 1 January 2015.

BDO offers tax advice to pilots and cabin crew seeking to avoid the effects of the amended double tax treaty between Denmark and Ireland.

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.