Denmark: Special Expatriate Fiscal Regime

In Denmark personal tax rates are notoriously high, with a further levy for social insurance contributions (in 2008, this was 8% of the gross income plus a fixed monthly contribution). A person is subject to Danish tax if he is resident there and is presumed to be resident there if he spends more than 6 months in the country in the tax year. These tax rates are a great disincentive and provide a very real problem to employers who require foreign skilled labor.

Accordingly the government introduced a special expatriate tax regime which has the following characteristics for those who qualify:

• The personal income tax rate will be fixed at 25% for the first three years, or 33% for a period of five years, with a further contribution for social insurance. Employer social insurance contributions are negligible.
• Generally only foreign temporary employees recruited abroad can qualify for this special tax treatment, although by way of exception Danish employees working abroad may also qualify provided they did not go abroad specifically to apply for this scheme.
• The special tax treatment will only be granted for 6-36 months, as mentioned above, within a 10-year preiod.
• The employee gross salary must not be less than DKK63,800 (in 2009) per month after deduction of social insurance contributions. By way of exception this rule does not apply if the employee is engaged in approved research and development projects.