Denmark: Personal Taxation
Special Expatriate Tax Regime
This page was last updated on 9 September 2019.
A person is subject to Danish tax if they are resident there and is presumed to be resident there if they spend more than 183 days in the country in the tax year. Personal tax rates in Denmark are very high, with a further levy for social insurance contributions. (Note however that Denmark has one of the best human development index scores in the world and is one of the best places to live in.)
These tax rates are a disincentive to some and can be problematic for employers who require skilled foreign labour. Accordingly the government introduced a special expatriate tax regime. Some types of foreign employee, mainly scientists and key employees, can choose to pay a flat 27% rate of tax on their whole income for the first 7 years (84 months) of their employment in Denmark. Including this makes for a total tax rate of 32.84%.
The special expatriate tax scheme applies to all kinds of cash remuneration and reimbursement of private expenses, including relocation allowance and school fees, the taxable value of a company car and use of a telephone. All other income, including benefits in kind, are taxed at ordinary rates.
A ‘labour market contribution’ of 8% is levied on gross income in addition to the 27% income tax, regardless of whether the employee is covered by a foreign social security scheme. This means that the effective tax rate paid by an expat employee is 32.84% – though this is considerably better than the rate that would be paid otherwise.