A performance-based bonus in a job covered by the expat program, but paid after the expiration of an expat tax period, will no longer eliminate the ability to re-enter the expat program and use the remaining period as of January 1, 2019. A natural person may be taxed in Denmark as fully taxable vis-à-vis Denmark, as a limited liability in Denmark or under special rules for expatriates or rules for the recruitment of workers. There is a totalization agreement between Denmark and the United States. American expats working in Denmark should take into account this agreement and the rules it contains on the system of countries in which they are taxed. One of the factors is whether the taxpayer works for a Danish company or for an American company. Details of this Agreement are available on the U.S. Social Security Administration website. Of course, it`s always a good idea to seek professional tax advice. Denmark has specific legislation on foreign workers working temporarily in Denmark. It is therefore important that the employment contract and all expatriate benefits are structured in a tax-efficient manner before the contract is submitted to the Danish Ministry of Trade and Employment.
Therefore, taxable income consists of personal income plus or minus net capital income or loss and less allowable deductions. A special tax regime applies to expatriates employed by an employer established in Denmark. Wage income is taxed at a flat rate of 32.84%, including labour market tax of 8%, for one or more periods of up to a total of 84 months. After 84 months, the expatriate is taxed in accordance with the normal income tax regulations. Income other than wages earned during the special scheme are subject to tax at normal progressive tax rates. Denmark offers a special tax system for foreign expatriates who are researchers or who are highly paid. During the first 5 years you are in Denmark, you can pay a 26% tax rate on your salary if you meet the qualifications. In addition to the 26% tax rate, you continue to pay the 8% tax on health contributions. The expat tax system can be used for a total of 7 years.
For more information on tax services for expats in Denmark, please contact: With Viking ancestors and a strong sense of style, you may decide that these are the Danes of Denmark among whom you want to live and work. Denmark is known for its mild temperatures, happy people and. high tax rates. Before sailing to this beautiful Scandinavian country, brush up on your knowledge and learn how living in Denmark affects your American expat taxes. As also mentioned in the update, the general conclusion on the new rules is still that we recommend having an employment contract between the Danish company and the employee at the beginning of employment. An international posting to which the Danish company is one of the contracting parties may also meet this requirement. The Foreign Account Tax Compliance Act (FATCA) is an attempt by the US government to track down tax evaders. These regulations require banks and taxpayers to report balances of at least $200,000 at the end of the year or $300,000 at any time of the year.
These thresholds are slightly higher for married expats. If you need to show up, use Form 8938 and file it with U.S. taxes (either on time or if an extension has been requested). Various forms of “tax relief,” such as personal and marital deductions, are available only to “resident” taxpayers. This does not apply to natural persons who are taxed under the special tax regime for expatriates. Tax rates for residents generally also apply to non-residents. A mandatory labour market tax of 8% applies to all wage income. Income tax is calculated on income based on the labour market. As mentioned in the update, the type of employer-employee relationship that is qualified must have sufficient substance, and not all relationships will be qualified.
This means that in the future – and if we try to anticipate the challenges posed by the new rules – we hope that the distinction between employer-employee relationships, on the one hand, which are sufficiently substantial and unskilled extra-professional situations, on the other, will create confusion. Under the special tax regime for expatriates, expatriates employed in Denmark and scientists seconded to Denmark can claim a flat tax rate of 27% on their gross salary for a maximum period of 84 months. A number of conditions must be met, including that the guaranteed monthly salary before deduction of employees` deductible pension contributions must be at least DKK 69,600 (2021) on average for the calendar year. Special rules apply to researchers. The tax rate of 27% is calculated from the cash salary, the telephone/internet provided by the employer, the taxable value of the company car provided by the employer and the taxable health insurance paid by the employer. All other income is taxed according to the normal rules. No deduction from taxed flat-rate income is allowed. The employee`s stay in Denmark may take longer; However, at the end of the 84-month period, the employee`s income is taxed at normal rates. If they meet certain conditions, they can choose to be taxed at a flat rate of 27% on their gross wage income instead of being subject to the general personal income tax rules (see below). Foreign workers have to pay a tax-deductible contribution to the labor market of 8%, resulting in a total tax of about 8%.
