Instead of the regular income tax, it is possible for experts or researchers, for the first three years of employment, to be taxed at a flat rate of 25%. The flat rate of 25% is levied on gross salary as reduced by ATP contributions, labour market contributions, special pension savings and obligatory foreign social contributions. The tax is levied on the total monetary remuneration without deductions of any kind. Income other than the salary is fully subject to the normal income tax liability.
When the three-year period covered by the 25% tax scheme ends, the employee may continue to stay and work in Denmark up to 48 months. During this extension period, the employee is subject to normal taxation as a resident. In certain cases, one may have to repay the tax savings obtained under the 25% scheme. For example this applies to key employees who remain in Denmark for more than four years after the end of the three-year period with tax reduction.
The 25 % tax scheme is applicable to individuals who become residents for tax purposes on the occasion of taking up employment in Denmark with a resident employer or with a Danish permanent establishment of a non-resident employer and to non-resident employees engaged in an approved research project.
To benefit from the 25 per cent tax rate, some conditions must be met by the employer, the employee and the employment. For example it is required that;
- the employee has not been subject to tax in Denmark during a period of 3 years prior to the employment in Denmark,
- the monthly pay for key employees must be at least DKK 63,800 (2010) after deduction of ATP payments, labour market contributions, special pension savings and any obligatory foreign social contributions,
- the employee does not participate, and has not participated, directly or indirectly, in the management, control or capital of the employer during the employment or during a period of 5 years prior to the employment.
On the other hand, the last condition regarding co-ownership also implies that, for example, a manager or director who is not or has not been a co-owner of the employing firm may use the scheme. For information on whether or not the 25 % tax scheme applies to you, please contact Inwema ApS.
Work force hire
Special rules apply to foreign employees who are not subject to full tax liability in Denmark, but who have been hired out to a Danish enterprise to carry out work in Denmark. International wok force hire is the term used when a foreign enterprise makes staff available to carry out work for a Danish enterprise and the powers of instruction and the responsibility/risk for the results produced by the employee's work, rest with the Danish enterprise.
Employees having residence abroad, who is hired out by his foreign employer to a Danish enterprise, has a limited tax liability in Denmark. The tax rate is 30 per cent of gross pay, including the value of tax-free benefits such as free or paid board and lodging, but exclusive of labour market contributions and SP. Foreign employees working in Denmark for a Danish enterprise must pay labour market contributions and special pension savings unless they are socially secured in their home country.
This form of taxation is final, which means that the employee is not required to file an income tax return. The Danish enterprise will withhold the tax before paying the foreign enterprise.
If the employee is liable to pay full tax in Denmark, one will be taxed in accordance with the general Danish rules.
Please do not hesitate to contact us if you need assistance or have any questions, comments or requests regarding the content above. 
|
