Denmark is a popular work country for contractors looking to move abroad. Around 10.1% of the Danish population are immigrants or descendants of immigrants. The International affairs magazine, Monocle, cites Copenhagen as the most livable city in the world and it is certainly a country “on the up”.
The Danish economy is in an upswing, with a mix of stable and sustainable economic policies supported by a high degree of labour-market mobility. Employment in Danish markets is rising and is expected to continue on this trajectory due to economic growth projected to strengthen further in 2018. With a strong commitment to social security spending, Danish people also enjoy high living standards and well-being.
WHAT ARE THE BENEFITS OF WORKING IN DENMARK?
The top three benefits of working in Denmark are:
- It has excellent employment opportunities.
- It is a strong welfare state.
- It offers the opportunity for a well-balanced family and work life.
MAXIMUM SALARY RETENTION IS IMPORTANT TO ME; HOW MUCH WILL I TAKE HOME?
Maximum salary retention depends upon the way a contractor chooses to work in Denmark. There are many factors such as the type of income earned, residential status, marital status, number of dependents, duration of the contract, applicable allowances and deductions among others.
Employed contractors typically retain between 57% and 65% of their income, while those operating through their own personal services company (PSC) retain around 63% to 74%.
WHAT ARE THE LEVELS OF TAXATION IN DENMARK?
Denmark has a progressive tax up to 55.8% (including state taxes, health and other taxes). Denmark has a special tax regime for expatriates who pay a flat tax rate of 31.92% (including 8% labour market contributions), subject to certain conditions. Corporate income taxes are 22%.
CAN I PAY MY TAXES BACK AT HOME BECAUSE MY STAY IS LESS THAN 183 DAYS?
If you live and work in Denmark for less than six months (183 days), you need only pay tax on your Danish sourced income. If you stay for more than 183 days in Denmark, then you need to pay income tax on your worldwide income. This may be affected by the double tax treaties between your home country and Denmark.
WHAT ARE THE SOCIAL SECURITY REQUIREMENTS?
The Danish social security is financed primarily through ordinary tax revenue. All individuals working in Denmark, resident and non-resident, are mandatory members of the Danish social security scheme, and thereby obliged to pay into the labour market supplementary pension (ATP).
Social security contributions are deductible for income tax purposes. The employer’s contribution is fixed at DKK 6,884 and employees are liable to pay a supplementary pension contribution (ATP) at DKK 1,135.80 a year. Exemptions from the Danish social security scheme may be obtained if there is a totalisation agreement between Denmark and the home country.
HOW DO I REGISTER LOCALLY IN DENMARK?
All residents in Denmark are legally required to hold a Central Person Register (CPR) number as part of the Danish Civil Registration System. This includes anyone intending to stay in Denmark for more than three months. CPR numbers are also required for a range of important benefits including opening a bank account, obtaining a Danish phone number, taking out insurance, paying taxes, and receiving a salary.
To apply for a CPR number, contractors must demonstrate that they have the right to live and work in Denmark. EU/EFTA citizens can simply obtain a registration certificate from the International Citizens Service or at the State Administration main office. Non-EU citizens will need to apply for a valid residence and work permit from the Danish Agency for International Recruitment and Integration (SIRI). Access Financial can work with contractors to ensure appropriate permits and registrations are in place.
IS THE PROCESS FOR CLAIMING EXPENSES DIFFERENT IN DENMARK? WHAT’S COVERED / NOT COVERED?
In general, an employment allowance is available for any individual engaged in active employment. This allowance amounts to 8.05% of the income with a top rate of DKK 30,000 (2017).
Contractors in employment can deduct travelling expenses from home to work. Expenses related to the performance of the work may be deductible from the taxable income if they exceed a basic amount of DKK 5,900 (2017). Expenses incurred due to double-household and home travel during temporary assignments away from the ordinary place of work are also allowed as a deduction.
CAN’T I JUST USE MY OWN COMPANY?
Working under your own personal services company is completely acceptable in Denmark. At Access Financial we offer a PSC service that ensures both your company and you are working compliantly in Denmark. We can help you register your company in Denmark and can support you through the tax return and filing process.
THERE ARE TWO WAYS TO WORK IN DENMARK: EMPLOYMENT OR PSC. WHICH SOLUTION IS BEST?
At Access Financial we offer local employment and PSC solutions for contractors. Dependent on the way you work, you may find you maximise your salary retention on either solution. Working as an employed individual can be beneficial if you are eligible for the 26% special expat tax regime. However, using your own PSC allows you the flexibility to choose your own salary and to contract through your PSC in other countries as well.
For more information on the benefits of employment, please read our previous article, 3 Reasons Why You Should Choose Employment Over Self-Employment When Working in Denmark.
All contractors have their own individual circumstances, and these will often determine which solution best suits their needs. For example, non-EU citizens require a valid work and residence permit to be able to work and live in Denmark. In some instances, Access Financial can provide sponsorship for work permits and non-EU citizens can also work in Denmark through our local employment solution.
When you contact us to discuss your situation, we can go through the options and advise which solution is the best choice for you.
WHAT STEPS DO I NEED TO TAKE TO BE COMPLIANT?
When you partner with Access Financial, you provide us with your information and requirements, and we do the rest. As mentioned above, local registration is slightly more complicated for non-EU/EFTA nationals, but rest assured that Access Financial can help you every step of the way and will take care of all the formalities on your behalf.