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Global Mobility Services, Taxation of International Assignees Country – Denmark

Global Mobility Services, Taxation of International Assignees Country – Denmark

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Global Mobility Services, Taxation of International Assignees Country –

People and Organisation

Global Mobility Country Guide (Folio)

Last Updated: 2017 This document was not intended or written to be used, and it cannot be used, for the purpose Menu of avoiding tax penalties that may be imposed on the taxpayer.

Country: Denmark

Introduction: International assignees working in Denmark 4 Step 1: Understanding principles 5 Step 2: Understanding the Denmark tax system 9 Step 3: What to do before you arrive in Denmark 18 Step 4: What to do when you arrive in Denmark 23 Step 5: What to do at the end of the year 25 Step 6: What to do when you leave Denmark 26 Step 7: Other matters requiring consideration 28 Step 8: Special tax regime for expatriates 31 Appendix A: Tax rates 2017 33 Appendix B: Income tax calculation for 2017 34 (single taxpayer) Appendix C: Income tax calculation for 2017 35 (married couple) Appendix D: Income tax calculation for 2017 36 (single taxpayer/expatriate scheme) Appendix E: Double-taxation agreements 37 Appendix F: Denmark contacts and offices 38

Additional Country Folios can be located at the following website: Global Mobility Country Guides

Global Mobility Country Guide (Folio) 3

Introduction: International assignees working in Denmark

This folio serves as an introduction to the Introduction International Co-operation principal provisions governing direct Denmark, and the Faroe In language as well as in culture, taxation of individuals and is designed to constitute the Kingdom of Denmark. Denmark is closely related to the inform both the foreign employee and other and is his/her employer about the most common Denmark covers an of 43,000 sq. km also a member of the Nordic issues relating to transfers to Denmark. It and consists of the peninsula of Jutland Council and the only reflects Danish as of 1 and 406 islands of which the Islands of of Ministers. January 2016 as the Danish tax rules are Zealand and Funen are the biggest. The amended on a continual basis. population is slightly more than 5.6 million The purpose of Nordic of whom 25% live in the co-operation is to harmonise Only the tax rules, which apply to of the capital, . legislation in the member Denmark, including the continental shelf, countries (, , are described. The taxation systems for Greenland covers an ice- area of , , and Denmark), Greenland and the are not 410,450 sq. km and has a population of to lower tariffs and to covered. Nor are the special rules approximately 57,500. The principal promote the free movement addressed, which apply to individuals is Nuuk with its 16,000 inhabitants. of labour. engaged in pilot studies, or the exploration The Faroe Islands cover an area of and extraction of hydrocarbon. Denmark has also been a member 1,399 sq. km and has a population of of the (EC) since The various rules are described separately. approximately 48,500 inhabitants. 1973. The membership does not In some cases, only one rule applies, but in The principal city is Thorshavn with its include the Faeroe Islands and many cases a number of rules will apply. 19,900 inhabitants. Greenland. Denmark has opted A number of issues can be extremely The Political System out of the EU in the fields of important when planning an assignment to and home affairs, the Denmark is a constitutional Denmark. The Danish tax rates are high common security and defence and the present is Queen and the tax system is very complex. The policy, the EMU and the Margrethe II. information given in this folio is not of the European intended to be comprehensive and before The Danish (Folketing) has one Union but has entered into any is taken further information and chamber with 179 members including 2 separate agreements in more detailed advice should be sought by members from the Faroe Islands and 2 some areas. consulting us. Please find office members from Greenland. Currency and contact Both the Faroe Islands and Greenland persons in Appendix F. The Danish currency is krone have extensive home rule with local and øre. 1 krone is 100 øre. government and responsible For more information see for local legislation. www.nationalbanken.dk.

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Step 1: Understanding basic principles

The scope of taxation in 6-month period, short stays 8. Danish limited tax liability is Denmark outside Denmark due to relevant for: holidays, etc., are included, 1. An individual may be taxed whereas stays abroad due to – Salary for work in Denmark: employment may interrupt performed in Denmark the 6-month period. and paid by a foreign – As having full tax employer with no legal liability to Denmark; 5. Individuals who are resident venue in Denmark in Denmark are subject to full where the employee – As having limited tax liability to Denmark; or tax liability, i.e., liable to tax stay in Denmark for on their worldwide income, more than 183 days – According to special unless the individual is within 12 months; expatriate rules. considered to have the centre of his/her interests – Salary for work Full tax liability in another country, according performed in Denmark to a double residence clause and paid by an 2. A person becomes fully tax in a relevant double employer with a legal liable by taking up residence taxation treaty. venue in Denmark; in Denmark or staying in Denmark for more than 6. A person who is fully tax – Certain other types of 6 consecutive months. liable in Denmark will as a personal income main rule be taxed according including directors' 3. Residence in Denmark is to the ordinary tax scheme by fees, deemed to exist if an up to 51.95% (55.8% distributions and social individual acquires a home including AM-tax). A number security benefits; in Denmark and takes up of deductions are applicable residence there. Generally, – Remuneration covered and the effective tax rate is taxation commences from by the special rules on therefore lower in most cases. the date of arrival. hiring out personnel; Limited tax liability 4. An individual who does not – Income arising from a set up residence will become 7. A person not liable to full tax business subject to full Danish tax liability may become limited with a permanent liability from the first day of tax liable to Denmark. establishment his/her stay if he/she stays in Limited tax liability is in Denmark; Denmark for a period of at restricted to income from

least 6 consecutive months. Danish sources. When determining the

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– Income from property whole year. If the person is 12. A ruling from the Court of located in Denmark; limited tax liable to Denmark Justice of the European during part of the year, the Union (the "Schumacker – Dividends from Danish person can choose a ruling") states that a person companies; personal allowance. who has earned most of – Royalty income from his/her salary in the country Special expatriate rules in which he/she is considered Denmark; non-resident (limited tax 10. According to the special – Under certain expatriate tax regime, the tax liable to the country) should be allowed the same circumstances, rate on salary income is deductions on his/her taxable remuneration for reduced to a flat rate of 26% advisory activity. (31.92% including the labour income as a fully tax liable person in the same country. tax) for 5 years. No 9. A person with limited tax Denmark has altered its deductions are allowed. liability to Denmark will as a internal regulations in main rule be taxed by up to 11. For hired out personnel the accordance with this ruling. 51.7% on income from taxation on salary income An individual with limited tax sources in Denmark. may be reduced to a flat rate liability to Denmark and who Deductions related to the of 30% (35.6% including the earns 75% of his/her global work performed are allowed. labour market tax). No income in Denmark can apply There is a personal allowance deductions are allowed. these rules. if the person is limited tax liable to Denmark during the

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13. A special employment The sum of taxable income from 2011 only double tax deduction of 8.75 of the is the same for individuals treaties apply. gross income applies for with either full or limited employees and self- tax liability. Municipal income 24.91% employed individuals. taxes (excluding church tax) on The deduction is limited 15. The different types of income are as follows: taxable income, at DKK 30.000 (2017). approximate rate (country average The rules are described in – Personal income: for 2017) further detail below. mainly salary and employment-related Health tax 2.0% Types of income benefits, self- Labour market tax 8.0% employment income 14. When assessing the tax and pension income; taxes: under the ordinary tax Base tax on personal 10.8% scheme, the following – Capital income: income (+ positive types of income apply: mainly interest net capital income) income and expenses; – Taxable income; Top tax on personal 15.0% – Taxable income: the income (+ positive – Personal income; sum of the above net capital income) in adjusted for certain excess of DKK – Capital income; 479,600 (2017) itemized deductions; – Share income; – Share income: 16. In addition to the above, – Property income. dividends and capital impose a gains on shares; special church tax on has been members of the Danish State abolished as of 1 – Property income: Church (Lutheran). The tax January 1997. income from property. varies between 0.4% and 1.3%, and the average church The taxable income is Methods of calculating tax is 0.87% (2017). When the sum of: tax 2017 registering in Denmark, all Personal income Individuals working and living in individuals are registered as Denmark are subject to state taxes, members of the Danish State - Social security contributions municipal tax, health tax, labour Church unless they explicitly market tax and church tax. The state otherwise. - Labour market tax municipal tax rates are laid down by 17. Total income tax is reduced +/- Capital income municipal councils and may vary. by the tax value of a personal - Itemized deductions As of 1 January 2008, the labour allowance of DKK 45,000 market contribution was changed (2017), amounting to a tax = Taxable income from a social security contribution value of approximately DKK into an income tax. In 2010 both 16,970 in 2017. double tax treaties and social security agreements apply, however,

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18. The marginal tax rate cannot The tax year and exceed 51.95. However, annualization labour market contributions, share tax, property value tax 22. The tax year runs from 1 and church tax are not January to 31 . If comprised by this rule. Net an individual is subject to capital income is taxed at a either full or limited tax rate up to 42% (2017). liability only for part of the calendar year his/her income 19. The same calculation method will be annualised. The is used for fully and limited person may choose to use tax liable persons. his/her actual income during the calendar year instead of Appendices B and C illustrate the annualization. These how taxes are calculated. rules imply that the 20. In principle, married couples allowances in the various tax brackets will be pro-rated are taxed separately. Each based, on the number of days spouse must file an individual annual tax return indicating in the year the individual has been taxable in Denmark/or personal income, capital on the actual income earned income and deductible expenses in the same way as in Denmark. for single persons, even if Tax Treaties their income is zero. 23. If income is taxed in 2 21. Nevertheless, negative countries, double taxation taxable income as well as relief is granted, either in personal allowances may be accordance with tax treaties transferred from one spouse or according to internal to the other, and the Danish provisions. thresholds for computation of surtax will reflect the married 24. Appendix E lists the countries couple's total income. This with whom Denmark has only applies to married entered into double taxation couples when both spouses agreements. live in Denmark. The allowances related to the top tax cannot be transferred from one spouse to the other.

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Step 2: Understanding the Danish tax system

Taxation of withholding tax on the same even if the car has been employment income terms as the salary. available for just one day during a month. 25. All types of remuneration, Fringe benefits whether in cash or in kind, 27. Managing directors, 29. As from 36 months after the earned by an individual who first registration of the car, is fully liable to Danish tax, controlling shareholders and the basis for the calculation is constitute taxable income. other employees with considerable influence on reduced by 25%. The This rule applies minimum basis for the regardless of: their remuneration are taxed on free accommodation at a calculation remains DKK – Where the is value approximating market 160,000. performed; value. For property rented by 30. Example: the employer for other – Where the employer employees, the value is Car value at DKK 500,000 is resident; equivalent to actual paid. The taxable value of free 25% of 300,000 75,000 – Whether or not the heating and electricity is income is remitted 20% of 200,000 40,000 assessed as actual employer- to Denmark. 150% of the paid expenses. environmental 5,000 26. Employment income includes surcharge 28. An employee is taxed on the base salary, housing and Taxable income 120,000 living allowances, home leave value of the private usage of a company car. Regardless of allowances, tax equalisation actual use, the taxable value payments (to be grossed up, 31. The taxable value of the if paid net), commission, is calculated as a fixed percentage of the car's employer-provided telephone sickness and holiday pay, original purchase price (for is DKK 2,700 per year (2017). holiday allowances, bonuses, This amount applies per and benefits in kind, such as leased vehicles the list price). The minimum basis for the person and not per employer-provided calculation is DKK 160,000. . Spouses receive a accommodation, car, 25% reduction for joint telephone, and school fees. The value is fixed at 25% of the list price of the first DKK income exceeding DKK The taxable value of a 300,000 and 20% of the 3,400. company car provided by a remainder. The employee will Danish employer is subject to be taxed by 1/12 each month

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32. An interest-free loan or low liability. The concept of "work 39. The 6-month period is not interest loan provided by an force hire" implies that the interrupted by stays abroad employer to an employee is employee continues to be due to holidays, etc. considered part of his/her employed by the employer in However, the period will be remuneration and is taxable. the home country, but is interrupted if the stay abroad Health insurance and hired out to a business involves a work assignment. medical treatment is subject enterprise in the host country to taxation. - under terms similar to a Pension disbursements and normal employment yield on pension schemes 33. As a rule an option to relationship. 40. Monthly payments from purchase/subscribe for Danish pension schemes to company shares at a price 37. The enterprise in the host the insured individual, below market value results in country is, therefore, deemed his/her spouse, or heirs, are a benefit taxable like any to be the employer for tax considered to be the other remuneration from purposes. In order to be recipient's personal income, the employer. covered by the work force regardless of whether he/she hire rules, first and foremost is fully or limited tax liable. 34. Indemnities received due to it must be evaluated whether termination of employment, Apart from the standard tax the activity may be seen as an rates a special pension tax of as well as certain presents integrated activity of the 4% is payable (each year) if and bonuses, are enterprise in the host taxable income. the pension exceed DKK country(the deemed 388,200 (2017). Net remuneration employer). Employees who are hired by a Danish 41. A duty of 40% is payable on 35. During an assignment to enterprise under a work force lump sum payments at Denmark, an international hire arrangement are taxed in pensionable age, in the case assignee often receives a net Denmark at a flat rate of 30% of disablement or death. Tax salary, i.e., his/her employer of the gross remuneration etc. treaties concluded with pays his/her salary as well as (35.6% including labour Denmark may exempt income taxes due. The market tax). No deductions overseas recipients from application of various are allowed. Danish tax; however reimbursement methods such Denmark does not renounce as loan-bonus, one-year 38. The work force hire tax rate the 40% duty, as this duty is rollover and deferred bonus only apply to employees who not covered by any of the are not allowed. Taxes paid are not liable to either existing treaties. have to be included in the ordinary limited tax liability employee's taxable income by or full tax liability in 42. An individual who is fully applying the current year Denmark. Consequently, if liable to Danish tax must gross-up method, which may the stay in Denmark is include payments from result in a very high final expected to exceed 183 days foreign pension schemes in taxable income. within 12 months or 6 his/her taxable personal consecutive months, it may income if these are paid on a Work force hire not be possible to use the regular basis after retirement. 36. The work force hire scheme is work force hire tax rate. a separate Danish limited tax 43. Payments from pension plans or life insurance plans, which

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are only payable at death, are 48. Penalty interest paid in share income does not generally not subject to connection with late payment exceed DKK 5,500. income tax. of taxes is non-deductible. 53. Dividends paid to 44. Furthermore, before 49. Deduction of interest shareholders not resident in retirement the income tax expenses covering a period of Denmark are subject to the liability does not include more than 6 months and same initial 27% withholding increments on certain life falling due more than 6 tax as dividends paid to insurance schemes or other months before the end of that residents. According to pension plans while period must be allocated to double taxation treaties the insurance/pension holder the period to which the entered into between was not fully tax liable to expenses relate. Denmark and a number of Denmark, e.g., where countries, a part of the deductions have been granted Dividends withholding tax may be for premiums paid by the 50. Dividends from shares are claimed back by non-resident individual or where paid by subject to a special taxation shareholders. The tax an employer, the premiums as so-called share income. authorities have issued have been excluded from Share income also includes special forms for taxable income abroad. realised capital gains on this purpose. shares. Accordingly, capital Taxation of investment gains should also be income considered when computing 54. Generally speaking, Denmark 45. Income on deposits, the total share income. The imposes tax on capital gains bonds, securities, and other rules regarding taxation of arising from the sale of outstanding amounts is capital gains on shares have private (non-business) assets usually taxable in the been changed recently, and other than , art, income year in which it falls some transition rules apply. and an individual's due and is included in the primary and secondary computation of the 51. As of 1 January 2017 residences. capital income. share income is taxed at the following rates and 55. Capital gains on assets other 46. Interest received from the tax brackets: than shares are taxed as tax authorities in connection capital income. with the reimbursement of Share income (DKK) % Bonds and claims excess taxes and duties is 0 – 51,700 27% non-taxable. 56. Apart from the following Above 51,700 42% exceptions, capital gains Interest expenses realised on other bonds and 47. Interest expenses are For married couples the tax other claims are considered deductible without limit from brackets are doubled. taxable income. Unless the capital income and are individual's profession is the 52. On dividends from Danish generally deducted in the trading of securities, the companies a tax of 27% is year in which they fall due. income is taxed as withheld at source. Dividends capital income. from Danish companies need not be declared if the total

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57. Capital gains on bonds and Shares Stock options other claims in Danish 62. Net gains on shares - quoted 64. In Denmark, tax legislation currency issued before 27 or unquoted - are taxed as distinguishes between January 2010 are exempt share income at the rate of agreements (incentive from taxation if the interest 27% on the first DKK 51,700 schemes) according to which at the time the claim was (2017) received during the the employees in the issued equals or exceeds an year as dividends and capital company receive: officially fixed minimum. gains from the shares and Losses on these bonds and 42% on the remainder. – Options (the employee other claims in Danish For married couples the is given the right to currency are not deductible thresholds are DKK 101,200. purchase reacquired or for tax purposes. Capital treasury shares) and gains on bonds and other 63. The treatment of losses warrants (the claims in Danish currency depends on whether the employee is given the issued after this date are shares are quoted right to subscribe for taxable income and losses are or unquoted. newly issued shares); deductible for tax purposes. Quoted shares – Convertible debt 58. Capital gains on bonds and Losses on shares quoted on a instruments - the other claims in other regulated market can be offset employee grants the currencies are exempt from against gains - dividends and capital company a loan and taxation if the individual's net gains - on other quoted shares receives a convertible gain on such bonds and within the same year. Any unused bond. At exercise the claims does not exceed the losses may be carried forward for an loan may be repaid or equivalent of DKK 2,000 p.a. unlimited period of time. If the tax- converted into newly If the limit of DKK 2,000 is payer is married, any unused losses issued shares; exceeded, the gains are can also be offset against the – The right to buy shares taxable in their entirety. spouse’s gains on quoted shares. in the company 59. Capital gains on bonds and Unquoted shares (at a favourable other claims may also be acquisition price). Losses on unquoted shares can be taxable if the acquisition of offset against gains - dividends and the bonds or claims is financed by loans. capital gains - on both quoted and unquoted shares within the same 60. As a main rule losses on year. If the total annual share bonds and other claims in income becomes negative, the tax foreign currency are value of the loss on unquoted shares deductible as negative (27%/42%) may be deducted from capital income. the ordinary income taxes of the person liable to taxation. Losses on debt 61. In general, losses on debt are not deductible.

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65. The most common financial 69. The employee is required to Real property instruments are options and report the value of the option 73. In general, one or 2 family warrants. In the following, on his annual tax return in houses (including freehold have outlined the main issues May of the year following the flats) and that arise in connection with exercise date. may be sold without the grant of options or triggering tax liability if the 70. When the employee sells the warrants to employees. owner has lived in the underlying shares he/she is Taxation of options and liable to taxation on any property for at least part of the time of ownership, and warrants capital gains. The capital gain he/she is not professionally 66. For options vested on or after is calculated as the difference between the sales price and engaged in buying and selling 1 1999 and warrants property. vested on or after 1 January the fair market value of the 2001 the taxable event is shares at exercise. Taxation 74. Taxable capital gains from deferred until exercise. Please is outlined above under the sale of other property note that we have only section 62. acquired after 1 January 1999 described the rules as they are taxed either as personal 71. If certain conditions are apply after these dates. If fulfilled, the employer and income or capital income. information is required employee may agree to use a regarding options vested 75. Special transitional rules special set of rules which apply to profits on property prior to this date, imply that taxation will be please contact acquired before 1 January deferred until the point in PricewaterhouseCoopers. 1999 and sold in the 1999 time when the acquired income year or later. 67. The value of the shares are sold, and the option/warrant is treated as whole gain is then taxed at Deductions and allowances part of the employee's low capital gains tax rates. If against taxable income remuneration, and any these rules are used, the 76. A number of non-interest bargain element of the option employer will lose the right of related deductions are is taxed (at exercise) with a deduction for available to the personal income tax of up to the option/warrant expense. individual taxpayer. 51.95% (55.8% including AM- Please note that this rule has tax) (2017). been abolished as from grants 77. Apart from the special made 21 2011 deduction available to certain 68. The bargain element of the or later. A similar rule is expatriate personnel, most option is determined as the applicable for grants made deductions are closely linked difference between the fair after 1 July 2016. to expenses incurred. market value of the underlying shares at exercise 72. The gain – calculated as the 78. Apart from pension and the exercise price. difference between the sales contributions, the deductions price and the exercise price – mentioned in the following is taxed as capital gains on are not deductible in top tax shares outlined above under and therefore have a lower section 62. tax value in comparison with a marginal income tax rate of 51.7%. The actual effect will

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vary with the level of 82. Furthermore, under certain established with a Danish local taxes. circumstances, salary earners' pension fund, an insurance expenses related to the company, or a financial 79. Some of the deductions are performance of their work, institution are tax- exempt if restricted to individuals who entertainment expenses, made by the employer and, are subject to full Danish tax technical literature, work within certain limits, tax liability who are not fiscally clothes, etc. are deductible deductible if made by the domiciled in another country from taxable income if they individual. according to a double tax exceed a basic amount treaty and who are not taxed (DKK 5,900 in 2017). 88. As a general rule, deductible in Denmark of less than 75% contributions per year to a of the yearly income. 83. Other non-reimbursed pension plan may not exceed expenses incurred when DKK 53,500 (2017) if paid by Salary earner's deductions travelling for the employer the individual into a private 80. Salary earners may deduct may be deductible. pension plan. Where the following expenses from contributions are paid by the their taxable income: Double household employer (regardless of 84. A married assignee with a whether the contributions are – Travelling expenses time-limited employment financed through a reduction from home to work; whose spouse remains in the of taxable salary) these home country may be eligible contributions are also subject – Travelling expenses necessitated by several for a double-household to a general ceiling of DKK deduction. The deduction 53,500 (2017) unless it is a different workplaces; amounts to DKK 400 per lifelong pension plan. – Contributions to week or actual expenses with

unemployment the proper documentation. 89. Due to special regulations applicable in connection with insurance, later , the membership fees to Moving expenses professional 85. Expenses in connection with contribution paid by/for an expatriate to a Danish associations; an assignment may be deductible from ordinary pension plan should never – Union subscriptions. taxable income, provided that exceed 20% of the total the expatriate continues to remuneration including 81. A deduction is granted for work for the same employer. pension contributions. daily travel to and from work in excess of 24 km, regardless 86. If an employer reimburses 90. Capital pension plans do not of the type of transport used. business related moving give a possibility for The general deductions expenses, which are deductions anymore as from (2016) are: supported by vouchers, the 2013. Instead a new non- reimbursement is not taxable. deductible plan has been Distance Deduction introduced through a change 0 - 24 km Nil Contributions to of law. pension schemes 25 - 120 km DKK 1.93 per km 91. Contributions to a foreign

87. Contributions to a lifelong pension scheme may be tax 121 km + DKK 0.97 per km annuity pension plan exempt/tax deductible.

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Contributions can be tax rates are taxable income. The The 183 days' rule exempt/tax deductible if the employee may instead be 99. As a principle rule the right to insurance company/financial entitled to a tax deduction of tax salaries for personal institution fulfil certain the fixed rates up to an services is granted to the conditions, and the pension amount of DKK 26,800 country in which the work is saver enters into a special (2017). Reimbursement of performed (“physical agreement. According to this business related expenses presence”). Nevertheless, agreement Denmark shall be supported by vouchers is tax- according to the 183 days’ considered country of source exempt. rule incorporated in most of in relation to Denmark’s the double taxation treaties, taxation of pension payments 96. Other allowances paid by an employer to cover expenses, Denmark waives the right to and taxation of the yield. tax salaries received by which an employee has expatriates performing work 92. If a foreign employer makes defrayed during the contributions in the name of performance of his/her work in Denmark, if: the expatriate, the latter must are generally taxed up to a – The recipient is present include the amount in his/her maximum rate (51.95% - in Denmark for a Danish taxable income, if the 55.8% including AM-tax in period not exceeding conditions above are 2017), whilst the employee 183 days in the not fulfilled. may claim deductions for calendar year expenses at a lower value 93. According to special rules in concerned (in some dependant on local rates. treaties the 183 days’ some double taxation rule is not a tax year treaties, contributions to Double taxation other foreign pension rule, but a current 12- Taxation treaties month rule), and; schemes may be tax 97. To avoid double taxation on deductible in Denmark. It is – The remuneration has often a prerequisite that the income, Denmark has concluded double taxation been paid by or on individual has joined the treaties with a large number behalf of an employer scheme prior to arrival who is not a resident in in Denmark. of countries. Appendix E lists the treaties that include Denmark, and; remuneration regulations. 94. Mandatory contributions to a – The remuneration is pension scheme in the home not borne by a country may be deductible if 98. Double taxation may also occur in relation to permanent the employee is still a . To establishment or a member of the social security fixed place of business, system in the home country. counteract this situation Denmark has concluded which the employer Allowances treaties with the other has in Denmark. 95. Allowances for travel Scandinavian countries, 100. Some treaties already include , , expenses may be tax-exempt special work force hire rules and the US. for the employee if paid out stating that the country in in accordance with rates fixed which the work is performed by the central tax authorities. has the right to tax the Allowances exceeding these remuneration, irrespective of

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the 183 days’ rule. Denmark 105. The Danish social security 110. The annual contribution to considers a situation as work system is residence based and the maternity fund is DKK force hire if covered by the financed primarily through 750 (2017) for each monthly wording in the second ordinary tax revenue. As of 1 paid full-time employee. circumstance listed above, January 2008 the labour irrespective of whether the market contribution was 111. Danish social security treaty specifically mentions changed from a social contributions, and in some this. Only Switzerland is security contribution into an cases foreign social security exempt. Therefore, in a work income tax. However, both contributions paid by the force hire situation Denmark Danish tax treaties and social employee, are deductible will usually tax the security agreements applied from personal income for remuneration. until the end of 2010. As of 1 tax purposes. January 2011, only tax EU Nationals 101. In order to avoid taxation in treaties apply. Denmark according to the 112. EU nationals and individuals 183 days’ rule it is a 106. All individuals who are from countries with which prerequisite that the covered by social security in Denmark has concluded a expatriate is not deemed to Denmark must pay labour social convention may be be resident in Denmark. market supplementary exempted from Danish social pension (ATP). contributions for a period of 102. The 183 days’ rule should be time, provided that the social considered carefully when 107. The ordinary contribution to legislation of the country in planning assignments in the Labour Market question applies during the Denmark. Supplementary Pension same period. Non-EU (ATP) is calculated with 103. An individual who is nationals are not covered by reference to the weekly or the EU regulations. considered resident in monthly hours of work rather another country may be able than the salary earned. For 113. Social security contributions to obtain exemption from full-time employees the made by an employee, who is Danish taxes on certain contribution is DKK 94.65 fully liable to Danish taxation foreign income, even if fully per month (2017), and the and fiscally domiciled in tax liable in Denmark. employer pays twice this Denmark according to the Internal Danish amount, i.e. DKK 189.35 per double taxation treaty in or exemption month (2017). question, to the social authorities in another 104. In addition to treaties, 108. Furthermore, the employer country and which are Danish domestic legislation must pay for the employee’s mandatory according to EU contains credit provisions to work and accident insurance. regulations or a social be granted on income taxes convention concluded 109. As of 1 2016, paid abroad, or exemption between Denmark and the with progression on salary common fund for maternity benefits has been introduced. country or origin maybe earned abroad. A number of deductible for income Employers who are not conditions apply. tax purposes. comprised by collective Social contributions agreements must contribute In general to the fund.

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Other nationals 116. The Danish social security rates in 2017 are: 114. Employees from a non-EU country with which Denmark Social security annual rates has not concluded a social convention will be liable to Employee: pay social contributions Labour Market 1,135.8 in Denmark. Supplementary DKK Pension (2017) Unemployment insurance Employer: 115. An individual is considered insured for unemployment Contribution to 750 DKK benefits only if he/she is also maternity fund a contributing member of a Labour Market 2,271.6 recognised Danish Supplementary DKK unemployment insurance Pension (2017) scheme. For EU and EEA Industrial injuries 5,000 DKK () insurance, nationals who do not estimated* maintain social security Other public social 5,300 DKK coverage in the home country security schemes, during their stay in Denmark, including it may be necessary to join a estimated Danish unemployment amounts insurance scheme during the *Please be informed that the estimated period of expatriation to industrial insurance may vary, ensure future coverage in depending on the field of work the their home country. insured employee is employed within, the number of employees the employer intend to insure, the specific insurance company, etc.

117. For a further presentation on Danish social security, please visit pwc.com/socialsecurity

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Step 3: What to do before you arrive in Denmark

Work and residence permit 120. If you are an EU/EEA EU member states Nordic nationals national, a registration 122. EU nationals are from the certificate should be 118. Citizens of Finland, Iceland, countries , , granted if: Norway or Sweden may , , enter, stay and work in – You have a paid ; (only the Greco-Cypriot Denmark without a work and territory), the Czech residence permit. If residence – You carry out an , Denmark, , is taken up in Denmark, the independent business Finland, , Germany, authorities (Folkeregistret) in Denmark; , , , must be notified within 5 Italy, , , – You are going to study days of entry. , , the in Denmark , , EU/EEA nationals , , , – You are entitled to , , Sweden and 119. EU/EEA nationals do not remain in Denmark the . need a work permit. An after the end of an EU/EEA national can freely employment or Non-EU nationals stay in Denmark for up to 3 independent business, 123. Non-EU nationals may stay months from the date of for instance, if you in Denmark on a arrival without a residence reach the age of 67 business/tourist visit for up permit, or 6 months if years or become to 3 months or for the period seeking employment. If the disabled; stay is intended to last for indicated on a required visa. more than 3 months, an EU – You have sufficient 124. Non-EU nationals will have registration must be applied funds to provide to apply for a residence and for yourself; for. The application must be work permit before they filed with the local authorities 121. The immediate family may arrive in Denmark. The (Statsforvaltningerne). also be granted a residence application can be filed with permit. Family members the Danish Immigration under the age of 21 are authority in Denmark, a usually not required to have Danish consular office or residence permits. embassy in either the applicant’s country of origin or in a country where the

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applicant has lived (legally) – Perform independent company and compliance in for the past 3 months. business activities; respect of working environment, work In general – Render services. conditions, immigration 125. A work permit must be regulation etc. The 129. If the individual is a scientist, applied for even if the a , an entertainer, a advantages when using individual will be working in this scheme is: representative on a business Denmark for less than 3 trip, or if he/she installs, – The employees may be months. There are several maintains or repairs possibilities when you need a able to start working in machinery, equipment, etc., residence and work permit. Denmark shortly after or instructs others in the use a application has been The most relevant of machinery, he/she may not possibilities when you submitted, provided need a work permit. already have a job offer in that they stay legally in However, the individual may Denmark. Denmark are need a visa. mentioned below. – The permit will not 130. The residence permit may be 126. Residence and work permits lapse during short repealed if the permit holder stays abroad. are usually granted to: loses his job, or if he is unable – Individuals who have to support himself. The Other Schemes in Denmark specialist status; authorities are also able to 134. As per 1 July 2002 non-EU withdraw a residence permit nationals have the possibility – Students, trainees; if the permit holder is of obtaining a residence considered to be a danger to permit and work permit – Foreigners who were the public health and safety. once Danish nationals. based on their education. The rules apply for 131. Travels abroad for a individuals working within – Any family member consecutive period of 6 (spouse or children months - in some cases 12 job areas where there is a lack of qualified individuals. under the age of 18) months - will result in the accompanying the repeal of a residence permit. 135. The rules imply that if an individual can be A work permit will granted a residence individual applies for a automatically be annulled residence and work permit in permit valid for the when the residence permit order to start working within same time as the main is repealed. applicant. one of the approved job Fast-Track areas, the authorities will use 127. Children under 18 can receive a simplified procedure: 132. A fast-track scheme has been a residence permit when – living with the parent who introduced 1 January 2015. There will normally be no hearing of labour has custody of the child and 133. Companies wanting to use organisations or where the parent has the fast-track scheme need to other parties; obtained a residence permit. obtain a fast-track certificate. In order to do that a number – The permit can be 128. It is necessary to apply for a of conditions must be fulfilled issued for a period of work permit in order to: such as more than 20 4 years; – Obtain employment; employees in the Danish

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– Any family member Besides the governmental Valuation on arrival (spouse or children fees, there are also fees which 141. The market value of the under the age of 18) have to be paid at the individuals' assets and accompanying the Embassy when submitting an liabilities on the date when individual can be application or when he/she takes up residence granted a residence obtaining permission. and becomes fully tax liable permit valid for the Biometric features to Denmark will be same time as the main considered to constitute the applicant. 139. Biometric features acquisition sum for Danish (fingerprint, photo and tax purposes. 136. The list of approved job areas signature) for non-EU and educations in which citizens above 18 years old 142. The taxation of capital gains there are a shortage of must be given as part of the on certain assets depends on qualified individuals, process. how long the individual has change from time to time. owned the assets and will be Biometric features must determined on the basis 137. It is also possible to receive a be given at the of the historical work and residence permit if Danish immigration acquisition date. the individual has been authorities/Danish offered a job with a yearly Embassy/consulate/ 143. The market value of quoted salary of DKK 408,800 VFS center. shares on the date residence (2017). However, the salary is taken will be the value and working conditions must The Immigration authority quoted on the relevant stock follow the standard of Danish does not handle the case until exchange on that date. work requirements and the biometric features have match the education of been given. 144. The market value of the individual. non-quoted shares must Employment contracts be evaluated. Governmental fees 140. In Denmark, a written 138. The Governmental fees cover employment contract 145. The value of share options the handling process at the specifying the rights and must be evaluated. immigration authorities in obligations of both the 146. The valuation on arrival is Denmark. The fees are employee and the employer is not restricted to shares, but in the range between mandatory. Denmark has will apply to all the DKK 1,735 – 6,300 per comprehensive legislation individuals' assets and person/permit (2017). protecting employees and no liabilities whether situated in deviation from the rules to Denmark or abroad. the detriment of the employee is allowed. 147. Special rules apply to depreciable assets.

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Importing personal subject to Danish a. Establishing a possessions taxes (please refer to section permanent residence Arriving from an EU 163 for car registration tax). in Denmark. However, if you bring your own vehicle to Denmark, and b. Moving to Denmark as 148. When arriving from an EU it has been registered a consequence of country there are no import (authorised for use on public . formalities to consider. This roads) in another EU implies that the personal c. The possessions are member state, the vehicle will possessions of EU nationals inherited according to not be subject to VAT, interstate succession or are free from customs duties provided that the vehicle has and VAT in Denmark testamentary driven more than 6,000 km although not including cars. succession. and the vehicle is more than The personal possessions of 6 months old. d. Students move to non-EU nationals who have Denmark to study. been domiciled in another EU Arriving from outside country prior to arrival in the EU 150. "Personal possessions" are Denmark are also free from 149. Provisions relating to defined as movable property customs duties and VAT exemptions from customs and household furniture and provided that the goods have duties, excises and VAT effects, including motor been subject to customs duty comprise "personal vehicles (ref. section 150-152 and VAT upon arrival in the possessions" in certain etc.) for private use, pleasure EU or have been bought situations. These are when boats and private aircrafts. within the EU. Cars are

Global Mobility Country Guide (Folio) 21

151. The exemptions will usually (b) The goods must be of the car and have used the be granted if certain imported no later than 4 car for at least 6 months prior conditions are met: months after the wedding to your arrival in Denmark day, and not earlier than and you have stayed outside (a,b,c,d) You import the articles 2 months before the fixed the EU territory for a 12 for your private use; wedding date month period prior to your arrival in Denmark. At the (a,b) You were resident in a (b) The value of each present time of import you must non-EU country for a must not exceed continuous period of at therefore submit a foreign EUR 1,000 certificate of registration to least 12 months; the customs authorities. (a) The possessions must be (a) The personal belongings imported no later than 12 Exemption can only be granted if the car is used for have been in your months after the date private purposes. possession and have been when your actual used by you for at least 6 residence is established, months before arrival; for 153. If you lend, hire out or and not earlier than 6 transfer your car to a third at least 12 months after months before your party within 12 months after moving to Denmark you arrival in Denmark. may not sell, rent out or importation the exemption previously granted will be hand over the belongings (a,b) If the goods arrive before cancelled. The same your arrival in Denmark, (c) The possessions must be the authorities will ask provisions apply for personal possessions. imported no later than 2 you to provide security years after inheritance for the customs duties 154. There are special rules and excises. (c) Documentation for the regarding registration tax and other taxes on cars; inheritance must be 152. Special conditions apply to see Step 4. presented upon private cars of non-EU importation nationals. Exemption from (b) Documentation for customs duties and VAT is granted only if you submit marriage must documentation that you have be provided been registered as the owner

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Step 4: What to do when you arrive in Denmark

Registration in general 157. If you are liable to taxation 159. When you bring a private car 155. If you intend to stay for a according to the general rules into Denmark you must period of 3 months or more on tax liability, you must file inform your local customs (6 months if within EU/EEA a preliminary tax return on office and submit a or Nordic countries), you the basis of which the tax special form. must notify the municipal authorities will issue a 160. According to customs authorities (Folkeregistret). A preliminary tax assessment (forskudsopgørelse). If you legislation you must inform and other the tax authorities if you identification papers must be are paid from abroad a come to Denmark with cash presented. Married couples number of giro payment forms will be enclosed to amounts, travellers cheques must submit a marriage or the like that have a value certificate. You should ask for make payments on account. exceeding EUR 10,000. a receipt of your notification 158. If you have a Danish and for a personal employer, the tax card Establishing residence registration number. Once attached to the assessment 161. If you do not reside you have registered yourself, must be handed over to your permanently in Denmark and you should make sure you employer so that he/she can have not stayed here for the establish a NemID, a calculate the withholding tax. previous 5 years, you may NemKonto (dedicated bank You will always have to hand require a permit from the account to be used for over your tax card unless the Ministry of Justice to buy transfer of money from the employer already has property in Denmark. A Danish authorities) and a obtained the tax card secondment to Denmark for a Digital mailbox (to be used by electronically. This is mainly few years does not constitute the Danish authorities). the case when your employer permanent residence for 156. Once you inform the is Danish. If the Danish these purposes and a work municipal authorities of your employer does not receive the permit must be obtained. arrival, you should be tax card, the employer is However, under certain included in the general obliged to withhold 8% AM- conditions EU nationals are Danish health insurance tax and 55% withholding tax allowed to buy property in scheme. You should receive a (effectively 58.6%) of the Denmark without a permit national health insurance gross salary after social from the Ministry of Justice. security contributions, where card giving you access to free medical treatment from applicable. doctors and in hospitals.

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Child benefit An application for the benefit 106,600 and 150% of the 162. In 2017, a tax-free child must be submitted to the value in excess of this. benefit of DKK 11,184 per municipal social authorities. Various deductions apply to environmentally acceptable annum is payable to the custodial parent of children cars and cars with adequate aged 7-14 (inclusive) if the Car registration safety measures. parent is fully tax liable to 164. A special registration tax is 168. The registration tax, which Denmark and is not covered levied on all cars used in must be paid on used cars by the social security system Denmark, whether privately upon arrival, is calculated in the home country. The owned or made available for according to special annual benefit for children use to the expatriate. regulations on the basis of the aged 0-2 is DKK 17,964 and 165. Individuals who reside in sales price for a similar used for children aged 3-6 DKK Denmark as well as foreign car in Denmark. This 14,220 and is paid on a residents who stay in calculation is made by the quarterly basis. For children Denmark for more than 183 Danish tax authorities or by a aged 15-17, the amount is days within one year and who company with license to do DKK 11,184 per year. want to use their car in so. Please note that an inspection of the car must be 163. Since 2011, the maximum Denmark must register the made in Denmark child benefit can only be paid car in Denmark. If the upon import. out to a parent who have expatriate has no residence in lived or worked in Denmark Denmark or is seconded to 169. If your stay in Denmark is for 2 years within the last 10 Denmark for less than 183 anticipated to be temporary years before the period of days within one year, there (2 to 3 years), you may obtain payment. For EU nationals a might be exemptions. A permission to pay period of work performed in permit is needed in that case. registration tax by quarterly the home country may be 166. You must either register your instalments. An interest of taken into account. car in Denmark or hand over the tax calculated is payable. The permission is approved If these criteria are not met, the licence plates to the for a maximum of 2 years. the child benefit may be paid . Accordingly, the The permission might be out according to the registration tax payable on prolonged every second year. following ratios: an imported car may be extremely high. We kindly If the permission is not – After 6 months of refer to section 146 regarding prolonged, you may either re- residence or work in bringing your own car from export the car from Denmark Denmark: 25% another EU member state. or pay the remaining registration tax. – After 12 months of Customs duty and VAT are normally charged on vehicles residence or work in 170. As an owner of a Danish Denmark: 50% imported from non registered vehicle, you must EU countries. – After 18 months of notify the registration office residence or work in 167. The registration tax for new and hand over your licence Denmark: 75% cars is calculated as 105% of plates to the police when you the normal import value leave Denmark and dispose including VAT up to DKK of your residence. When you

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re-export your Danish registered car, you might be entitled to a refund on part of the paid registration tax. Please note that the authorities may demand a vehicle inspection of the car.

171. All cars registered in Denmark must be insured against third party risks.

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Step 5: What to do at the end of the year

Tax return assessment is not based on 180. Individuals who have been any review of your tax return. liable to Danish income taxes 172. The tax year ends on 31 A significant number of tax for more than 2 years prior to December. The collection of returns are later audited the income year in question taxes is based partly on the for possible errors may not need to file a reporting from the taxpayer and corrections. preliminary tax return if no and partly on the compulsory changes from past years reporting from employers, 176. When you receive your tax are anticipated. and financial assessment the tax institutions. The tax authorities will repay any 181. Individuals who have not authorities will notify you overpaid taxes plus interest. been tax liable for a whole concerning the information Residual taxes up to DKK year during a period of at already available to the tax 19,600 (2017) will be least 2 years need to file authorities. included in the year's preliminary tax returns. provisional taxes plus a 173. The tax return including all penalty interest which is Capital gains tax necessary additional higher than the day-to-day 182. Capital gains tax on gains information should then be interest. realised in a calendar year submitted to the authorities falls due for payment in 3 by 1 May and no later 177. If your final tax liability instalments in , than 1 July. exceeds your provisional tax October and November of liability by more than the 174. If you make a voluntary the following year. above, the excess amount is payment before 31 December due in 3 instalments in in the income year in Final year September, October and question, you can avoid 183. Individuals leaving Denmark November along with paying interests. If you pay have to file a tax return at the a surcharge. before 1 July in the year normal deadline (1 May in following the income year, Preliminary tax return the year following the year of you will have to pay interest and assessment departure). Income in the of the amount of unpaid taxes year of departure must be 178. Provisional taxes are until the day you pay (the pro-rated in the same way as withheld or collected on the day-to-day interest). If you in the year of arrival. basis of estimated income for pay after 1 July a higher the current year. penalty interest should be paid calculated based on the 179. Accordingly, a preliminary amount of unpaid taxes. tax return must be filed with the tax authorities before or 175. The tax authorities will send during the income year you a tax assessment based in question. on the tax return. It should be noted that this first

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Step 6: What to do when you leave Denmark

General matters 189. As a main rule individuals are 194. A person who gives up full tax 184. When you dispose of your taxed on the unrealised gains liability to Denmark, and who residence and leave on their shares and financial prior to this has contributed Denmark you must notify assets at the time of giving up 20% or more of his/her the municipal authorities full tax liability to Denmark. annual salary to a pension (Folkeregistret) of your scheme managed by the 190. However, generally the change of when employer, will be taxed tax rules are not applicable in you leave. retroactively on the basis of a relation to shares and higher personal income, 185. You must hand in your financial assets owned by including a penalty interest national health insurance individuals who have not per year. The rule applies card (sygesikringsbevis) as been subject to full Danish from the year of departure the scheme only applies to tax liability for a total of 7 and for 4 previous years. For individuals living years within the 10 years some persons this period is in Denmark. prior to termination of full extended to 9 previous years tax liability to Denmark. prior to departure. Transferring personal possessions abroad 191. This exception does not cover Exit taxation on ordinary stock options, 186. When you leave for a non-EU options, etc. pension plans etc. country an export form must 195. We have in the following be completed. No formalities 192. The individual will be taxed outlined the main issues that apply if you are leaving for on recaptured depreciations arise in connection with the an EU-country. Export made while in Denmark on grant of options or warrants duties are not levied in depreciable assets situated to employees. The taxation either situation. abroad. depends on whether the employee has acquired a final Filing a return 193. According to domestic rules it right to the financial 187. When you leave Denmark you may be possible to receive instrument prior to the must file a tax return within respite concerning exit tax Danish tax liability the normal deadline related to shares. However, a commenced or after the date number of conditions and the Danish tax liability Taxation on departure requirements must be commenced. For options and 188. Taxes are levied on the fulfilled. A tax return and an warrants which are not unrealised gains for certain annual list of shares must be vested at exit a part of the types of shares, options, filed with the tax authorities. gain may be taxable in pension schemes etc. Denmark at exercise.

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196. In paragraph 196, the value of the financial – A tax return is filed employee is leaving Denmark instrument is taxed as if it within the ordinary holding vested options that was sold. deadline in May in the were granted to him and year following the vested prior to the 200. The value of the financial departure year. commencement of Danish tax instrument is determined as liability. In paragraph 198, the difference between: – A tax return has to be the employee is transferring filed in the year – The market price of the following the year the out of Denmark holding shares at the date of vested options which have financial instrument is departure, and vested while tax liable exercised or sold. to Denmark. – The exercise price. – Sufficient security need 197. If the employee is 201. The calculated exit income is to be granted to the Danish tax authorities transferring out of Denmark taxed as ordinary salary for the taxes payable if holding a vested financial income. The tax rates vary instrument granted and and the marginal tax rate is the employee is moving to a non-EU country. vested prior to the 51.95% for income exceeding commencement of Danish tax DKK 479,600 (2017). The 203. If the market price of the liability, then exit taxation benefit is subject to payment shares at the time of might occur. of labour market departure from Denmark is contributions of 8% (tax higher than the market price 198. The employee has been deductible) and cannot be subject to unlimited taxation of the shares at the time of taxed under the 26% in Denmark for at least 7 exercise or sale, it is possible tax regime. years during the past to have the tax recalculated. 10 years. 202. Generally, it is possible to ask 204. If the employee returns to for an extension with the 199. If the employee is leaving Denmark without having payment of taxes until the exercised or sold the financial Denmark holding a vested exercise or sale of the financial instrument granted instrument, the tax levied on financial instrument. while he was resident in the employee in connection However, it requires that the with the departure may Denmark, an exit tax is following conditions are met: payable. At the date of be annulled. departure from Denmark the

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Step 7: Other matters requiring consideration

Estate and Gift tax deceased’s spouse, are 210. Gifts or inheritances between 205. Inheritance left by a Danish exempt from the estate tax. unrelated individuals are resident is subject to Danish taxable as ordinary personal 208. Inheritance received by estate tax regardless of the income of a recipient if relatives other than the above he/she is fully tax liable in country of residence of the is subject to a supplementary beneficiary. Inheritance Denmark. estate tax of 25% of the value received by a Danish resident of the assets (after deduction 211. A gift is non-deductible for from a person who was not of the first 15%). The estate the donor. resident in Denmark prior to tax and the supplementary death is not subject to Danish estate tax are not levied on Wealth estate tax except if the the first DKK 282,600 (2017) 212. No wealth tax is levied in inheritance consists of of the estate. Denmark. See below property located in Denmark regarding . or of assets related to a 209. Gifts and donations not permanent establishment in exceeding DKK 62,900 Land tax Denmark. However, if an (2017) to the donor’s close 213. The assessment value of estate is settled before a relatives (offspring and their property is based on the Danish court, the entire descendants, parents and authorities' cash valuation. inheritance will become grandparents) are tax- Tax on land varies between taxable in Denmark, exempt. Gifts to the 1.6% and 3.4% in different regardless of the country of descendants’ spouses, which parts of the country. residence of the deceased and do not exceed DKK 22,000 the heirs. (2017), are tax-exempt. Gifts Property tax and donations to the donor’s 206. Estate tax amounts to 15% 214. A property value tax is levied offspring and their and is levied on the part of on property in Denmark and descendants in excess of DKK abroad. The property value the assets, which falls to the 62,900 (2017) are levied with deceased’s children and their tax is a partial wealth tax a gift tax amounting to 15%. descendants, stepchildren which will be levied along Gifts and donations to the with other income taxes. The and their descendants, the donor’s stepparents in excess deceased’s parents, or the tax is calculated as 1% of the of DKK 61,500 (2016) and deceased’s cohabitant during value up to a ceiling of DKK grand-stepparents are levied the last 2 years of his/her life. 3,040,000 (2017) and 3% of with a gift tax of 36.25%. the remainder. 207. Inheritance and insurance Gifts and donations given in payments, which fall to the close connection to the death 215. There are a number of of the donor may not be exceptions to the main rules. comprised by these rules.

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Royalties 219. With effect from 1 January the wage costs plus the 216. A royalty tax of 30% must be 2013 insurance premium tax net result of the withheld on certain royalty of 1.1% of charged non-life business. payments to recipients insurance must be paid. 223. Payroll tax is deductible from abroad. Royalty is defined as VAT and payroll tax taxable income. consideration for the right to use any patent, trade mark, 220. The Danish VAT rate is 25%. Exchange control Registration with the Danish secret formula, etc., 224. On 1 October 1988 all According to many tax authorities is compulsory if foreign-exchange currency treaties Denmark has either the VAT liable income exceeds DKK 50,000 per restrictions were revoked in waived the right to tax the principle leaving some royalties or accepted a lower year. However, this reporting provisions only. rate. The royalty tax does not registration threshold does not apply for foreign apply to the right to use the 225. Individuals become resident copyright of literary, artistic businesses supplying goods in Denmark for exchange or services subject to or scientific work. purposes when they have Danish VAT. obtained accommodation in Stamp duty 221. Some activities are VAT Denmark and given up their 217. Stamp duty is charged on exempt and you cannot be residence abroad. certain documents. The most VAT registered. On the other common documents liable to 226. According to the rules in the hand, most VAT exempt stamp duty and the rates for Danish Customs Act, you services are comprised by a must inform the tax 2013 are as follows: special payroll tax. authorities if you come to – Deeds on Danish 222. There are 4 methods of Denmark or you are leaving residential property calculating payroll tax Denmark with cash amounts, occupied by the owner: depending on the type traveller’s cheques or the like DKK 1,400+ 0.6%; of business: that have a value exceeding EUR 10,000. – Mortgage deeds: DKK – Associations, trusts, 1,400 + 1.5% of the tourist agencies, etc.: 227. No later than one year after face value of the deed 6.37% (2017) of the entering Denmark the Danish (on Danish property wage costs; Tax Authorities must be only); notified of foreign bank – Financial institutions: accounts and deposits. The – Mortgages on certain 14.1% (2017) of wage foreign bank(s), etc., must movables, e.g. cars: costs; undertake an obligation to DKK 1,400 + 1.5%. notify the Danish tax – Newspapers: 3.54% 218. In general, only duty in authorities of annual interest, (2017) of the sale of connection with land etc., and deposits at the end newspapers; registration of rights is liable of the year. A special form to payment. There is also a – Other (health care, ("Erklæring K") must be filed. If the foreign bank will not duty on insurance private schools, assume this obligation the documents. passenger transport, etc.); 4.12% (2017) of resident, for exchange

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purposes, will not be able to keep the account unless a special need for the account is documented or unless exemption can otherwise be obtained.

228. The Danish tax authorities must also be notified if you hold shares in foreign deposit. A form (“Erklæring V”) must be filed.

229. Furthermore, information on foreign life and pension schemes must be submitted no later than at the first payment of premium. A special form ("Erklæring L") must be filed.

230. The status of a resident for exchange control purposes is revoked on permanent departure from Denmark.

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Step 8: Special tax regime for expatriates

Expat taxation General conditions obligation to withhold 231. Expatriates and scientists 235. The following conditions and pay taxes to the hired to work for a Danish must be met in order to be tax authorities employer in Denmark can opt able to opt for expat tax: each month; for a special expat tax rate for – The work is expected to a limited period of time, i.e., – The employee must be be performed in up to 60 months. fully or limited tax liable in Denmark. The Denmark. Ordinary 232. A 26% tax rate is calculated tax liability must start business trips, etc., are on cash salary (including at the time when the accepted. However, if employer-paid private employment in the employee is fiscally expenses) employer-provided Denmark commences. domiciled in Denmark and paid telephone, the A short interim period the expat tax regime taxable value of company- in order to settle in cannot be applied if paid cars and employer paid may be accepted. work is performed health insurance. All other However, it is not a outside Denmark in a income is taxed in accordance condition that the way whereby another with normal rules. The labour employee is fiscally country has a right to market tax must also be paid domiciled in tax the income by expatriates who can use Denmark under the according to the the 26% tax regime. provisions of a double relevant tax treaty (a The combined tax rate is taxation treaty; 30 day rule apply then 31.92. though); – The employee must Expenses have no full or limited – The monthly average salary shall exceed 233. Salary-related expenses are tax liability of salary, business income etc. in DKK 63,700 (2017) not deductible from either after deduction for income taxed under this tax Denmark for 10 years pension contributions regime or from other income prior to commencing work in Denmark; and ATP. The salary subject to ordinary taxation. requirement is 234. Other types of income and – The employee's adjusted annually; see expenses, e.g., rental income contract of also Appendix D; must be included in an employment shall be ordinary income tax return. concluded with a The possibility for deducting Danish resident interest expenses is limited. employer. The employer has an

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– The employee must not . In within a period of 3 have, or have had, any order to opt for the scientist years before entering direct or indirect part conditions a formal approval Denmark and still be of the management or procedure must be followed able to use the 26% tax control of the activity and a certification must be regime during a where he/she is or has submitted. The different future stay. been employed during conditions are: the 5 years prior to Tax return entering into the – The salary requirement 237. There are no requirement to contract. The condition does not apply if file a tax return regarding primarily concerns approved as a scientist remuneration subject to the ownership of through a special 26% tax regime, as the tax the enterprise; approval system, but withheld by the employer is a the minimum final tax. Other forms of Special provisions requirement must be income or staff benefits such for scientists and met by scientists as free housing, etc., are similar professions approved in taxed according to ordinary 236. Some conditions do not apply accordance with Danish tax rules. to scientists and similar OECD’s definitions; Consequently, an employee professions approved by a who receives those forms of – Scientists may have a Danish research council or guest stay at a Danish income must file a tax return approved in accordance with accordingly. university of 12 months OECD’s definition on

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Appendix A: Tax rates 2017

Tax rates for 2016 are as follows:

Local taxes Municipal tax (average) 24.91% Health Tax 2% Church Tax (average) 0.871% State taxes Labour Market Tax 8.00% Base tax 10.08% Top tax 15.00%

Tax bands and local taxes are adjusted annually.

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Appendix B: Income tax calculation for 2017 (single taxpayer)

Income tax calculation for 2017(single taxpayer) (Foreign payroll, he/she owns a property in Denmark with a cash value of DKK 1,000,000).

Tax computatoin DKK DKK Salary 550,000 Value of free car 50,000 Ordinary Labour Market Additional Pension (1,136) Labour Market Tax (47,909) Labour Market Supplementary Pension (0) Personal income 550,955 Interest income 20,000 Interest expenses (100,000) Capital income (80,000) Transportation expenses (10,200) Employment deduction (30,000) Non-interest related deductions (40,200) Taxable income 430,755 Local tax 107,301 Health tax 8,615 Base tax 55,536 Top tax 10,703 Tax value of personal allowance and interest compensation (19,675) Property tax 10,000 Total tax 172,480 Labour market tax 47,909 Total taxes and labour market tax 220,390

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Appendix C: Income tax calculation for 2017 (married couple)

Income tax calculation for 2017 (married couple) (Foreign payroll, the married couple owns 50% each of a property with a cash value of DKK 1,000,000)

Tax computation Husband DKK Spouse DKK Personal income (for tax purposes) 550,955 0 Capital income (80,000) 0 Non-interest related deductions (40,200) 0 Taxable income 430,755 0 Local tax 107,301 Health tax 8,615 Base tax 55,536 Top tax 10,703 Tax value of 2 personal allowances and interest compensation ( 38,120) Property tax 5,000 5,000 Total tax 149,036 5,000 Labour market tax 47,909 Total taxes and labour market tax 196,945 5,000

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Appendix D: Income tax calculation for 2017 (single taxpayer/expatriate scheme)

Income tax calculation for 2017(single taxpayer/expatriate scheme) (Danish payroll, 26% expatriate scheme, Danish social security system)

Tax computation DKK DKK Salary 900,000 Value of free car 75,000 Ordinary Labour Market Additional Pension (1,136) Labour Market tax (77,909) Personal income - 26% taxation 895,955 Expat tax (26% x 895,865) 232,948 Net income 663,007

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Appendix E: Double-taxation agreements

Argentina Iceland Portugal Countries with which Denmark currently Romania has double taxation Austria treaties and where Ireland, Rep. of the treaty contains a Belgium Slovak Republic remuneration clause: Bermuda Slovenia Notes Italy * , , British Virgin Islands Jamaica , Bulgaria Sweden ** The former Switzerland Yugoslav Republic Kenya Korea, Rep. of Tanzania *** The Yugoslav treaty comprises ( , P.R. Latvia – ) CIS * Lithuania Trinidad & Tobago

Croatia Luxembourg Cyprus ** Malta Estonia United Kingdom Faroe Islands Finland The Netherlands Germany Greece Norway Yugoslavia *** Greenland Zambia Guernsey Hungary Poland

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Appendix F: Denmark contacts and offices

Contacts Betri Pihl Schultze Copenhagen Tel: [45] 39 45 94 43 Email: [email protected]

Mona Lorentsen Copenhagen Tel: [45] 39 45 33 98 Email: [email protected]

Camilla Tel: [45] 89 32 56 69 Email: [email protected]

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Offices

Aarhus Denmark PricewaterhouseCoopers Tel: [45] 89 32 00 00 Nobelparken

Jens Chr Skous Vej 1 DK 8000 Aarhus C

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