Taxation when working in Norway

26 June 2015

It can be difficult to get an overview of which tax rules that apply when working abroad. This is emphasised by a recent ruling from the Danish Supreme Court.

The deadline (1 July 2015) for filing the Danish tax return for individual tax payers having worked abroad during 2014 is rapidly approaching. However, many are unaware of the tax rules that apply in their situation. Even the Danish tax authorities sometimes seem puzzled by the complexity of the rules as evidenced in a recent ruling from the Danish Supreme Court.

The case concerned a doctor resident in Denmark who had worked occasionally in Norway for the Norwegian “Rikstrygdeverket”.

The doctor had neither paid Norwegian or Danish income taxes on the remuneration he had received from Rikstrygdeverket as it was the opinion of both the Danish and the Norwegian tax authorities that the other country was allocated the right to tax the income according the double tax treaty between the two countries.

The main question before the Supreme Court was whether the double tax treaty prevented Denmark from taxing the income.

The Supreme Court concluded that the Norwegian tax authorities had deemed the income to be business income according to domestic Norwegian tax law. Hence, the right to tax the income was allocated to Denmark according to the double tax treaty.

The Supreme Court ruled that the double tax treaty did not prevent Denmark from taxing the income.

The reason was a special provision in the double tax treaty that allocated Denmark a subsidiary right to tax the income in these cases where Norway – due to domestic Norwegian law - did not tax the income.

The Supreme Court further ruled that taxation of the income in Denmark was not in violation of firmly established administrative case law even though the Danish tax authorities had not taxed this type of income for years. Hence, the Danish tax authorities had not exercised inaction that could be ranked alongside a decision or acknowledgement that this kind of income would not be taxed.

The fact that the Danish tax authorities had not taxed this kind of income for years – likely due to unawareness of the applicable tax law in these cases - does emphasize the complexity of the tax rules that apply to individual tax payers working abroad.

However, in the eyes of the law, unawareness of the applicable rules rarely absolves the taxpayer from liability.

If you have worked abroad and need tax advice in this respect, BDO can help you.

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.