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Denmark – New Law Approved Revising Special Expatriate Tax Scheme

Denmark – New Law Approved Revising Special Expatriate

This report covers the passage in to Danish law of legislation revising the Danish special tax scheme for expatriates.

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On 29 November 2018, the bill on revising the Danish special tax scheme for expatriates was passed by the Danish government.1

Although the legislative text was split into two different bills, the wording of the law on the Danish special tax scheme was not amended as compared to the wording of the bill originally presented by the government.

For prior coverage, see GMS Flash Alert 2018-135, 19 October 2018.

WHY THIS MATTERS

The new rules should make it easier for employers and their employees to apply the Danish special tax scheme.  The new rules should also make it more “predictable” – considering the prior uncertainty from the tax authorities – for employers and their employees to determine if they will meet the requirements for applying the scheme.

Further Details

The key changes that enter into force as of 1 January 2019, are as follows:

  • An employee will be able to apply the Danish special tax scheme even when he/she is hired by a Danish branch or permanent establishment within the same legal entity as the former employer.  This also applies where the employee is hired by a Danish parent company after a previous employment with a foreign branch or permanent establishment within the same legal entity of the Danish parent company.
  • An employee will be able to apply the Danish special tax scheme even when he/she – due to parental leave – has had a period with a reduced salary or no salary.  This period will be excluded from the calculation of whether the employee meets the salary requirement.
  • An employee will be able to apply the Danish special tax scheme even when he/she has received a bonus (or similar) payment which has been paid out after the termination of an employment period where the employee was subject to taxation under the Danish special tax scheme, and where the bonus (or similar) payment therefore has been taxed according to the ordinary Danish tax rules.  Such a bonus (or similar) payment will therefore not disqualify the employee for applying what potentially remains of his/her period on the Danish special tax scheme. The Danish special tax scheme can be applied for up to 84 months.

KPMG NOTE

Employers should take stock of their expatriates into and out of Denmark, evaluate their circumstances, and determine whether policies and procedures concerning those expatriates need revising in light of the new rules.  It is advisable, where employers have in-house tax professionals or external tax service providers, that they consult with them to strategize next steps.

FOOTNOTE

1  For the legislation (in Danish) on amending the Danish "special tax scheme" – Lov om aendring af kildeskattelovenclick here (PDF 112KB).

The information contained in this newsletter was submitted by the KPMG International member firm in Denmark.

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Flash Alert is an Global Mobility Services publication of KPMG LLPs Washington National Tax practice. The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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