Contract in Denmark

**BlasterBates** · 2 May 2011, 14:36

Take advice in Denmark and expect to tax it there. If you run it through your UK Ltd, no matter how short the contract is there will be a risk that the Danish authorities will tax you. It is always tempting to avoid the bureacracy of registering yourself in a foreign country, but is often a very expensive mistake.

The 6 month tax residency rule which is similar in all European countries only applies to personal taxation not business taxation. The expectation is that anyone working in their country MUST tax it there as well.

Many contractors run their foreign contracts through their UK Ltd and then face charges of tax evasion.

If you tax the contract in Denmark, it probably won't be taxed again, and if it is it will only be the difference between the rates, if the Danish tax rate is lower, which it might well be if you do a short contract.

I've worked in several European countries, and there is usually no great hassle in registering yourself in another EU country, that's what local accountants are for.

**daq** · 2 May 2011, 15:56

So keep MyCo..?

Thanks.

Ammo correct to think you are saying operate through my uk ltd company but declare any income to the Danish revenue?

Also can anyone recommend a Danish accountant/specialist I could use?

As you say, I would rather do this right the first time rather than sort out a mess later on.

D.

**SueEllen** · 2 May 2011, 16:25

Originally posted by daq View Post

Thanks.

Ammo correct to think you are saying operate through my uk ltd company but declare any income to the Danish revenue?

I suggest you do a google search.

Some of the Nordic countries have tax advise in English from their own taxmen and make it very clear what you can and can't do like here - SKAT: Selvbetjening og information til borgere og virksomheder

Plus there are other tax advise sites that can help.

For example:

Special expat tax regime has been changed from 1. January 2011.

New expats arriving in Demark in 2011 may benefit from 26 % gross taxation on their salary for 5 years and may also remain in Denmark after the 5 years period of time without any retroactive taxation.

Tax in Denmark - Special expat tax

BTW I am aware that there are only two Nordic countries that allow you to use a UK limited company as long as you stay under the 183 day rule and Denmark isn't one of them.

**BlasterBates** · 2 May 2011, 16:33

Originally posted by daq View Post

Thanks.

Ammo correct to think you are saying operate through my uk ltd company but declare any income to the Danish revenue?

Also can anyone recommend a Danish accountant/specialist I could use?

As you say, I would rather do this right the first time rather than sort out a mess later on.

D.

It isn't quite so simple. You would need to set up a completely seperate branch, defacto a separate company registered in Denmark.

The branch would have to have a completely different set of accounts. This branch would not be taxed in the UK.

In other words probably not worth it as you would probably have as much expense setting up a branch as a new company.

Running your own co. is very much a British way of contracting, often in other countries there is a different way, for example in Germany freelancer.

I wouldn't know which would be the best way in Denmark, but I think you are probably going to be best off with a management co, umbrella. Now be careful, as many umbrella co's operate tax evasion schemes, choose a management co that is above board.

**BlasterBates** · 2 May 2011, 16:40

Check this link out. In fact for a short time it does look like setting up a branch of your Ltd is worth while.

But make sure you do set up a branch properly. You probably need help from a Danish accountant.

IT Contracting in Denmark - A FREE guide for IT Contractors and Anyone else Moving to Denmark to Live and Work

Also bear in mind after 6 months you become fully tax resident. A 5 month contract would be better than say a 7 month contract, where they start to expect you to pay more tax and possibly social security. The personal tax rates above a certain level are pretty eye watering, so I would advise against any long term contract.

...again just to reiterate, just because you will be there less than 6 months doesn't mean you avoid tax altogether, still set up your branch, but if you are there less than 6 months you'll probably avoid quite a bit of extra tax, and it sounds quite reasonable.

**daq** · 3 May 2011, 08:02

I'd seen the recommended sites but it's good to have some validation. The Danish govt sites are still a bit daunting (to me). They do seem to be keen to get you to set up your own ltd. co. (and who can blame them) but the implications seem too great for a short term gig.

I'm keen on the foreign branch idea - as you say Blaster it seemed not worth it at first glance but further reading last night suggests it's no more onerous than setting up a MyCo over here.

Had a call from an umbrella provider a few minutes ago. Will see how that turns out and update the thread when I decide as it might be useful for others.

Any recommendations for Danish accountants/legal will still be happily received.

One thing that has struck me is that noone seems very keen on Denmark - particularly the Danish.

Thanks again and any other advice is welcome.

D.

**Olly** · 3 May 2011, 09:14

Are you sure you can't benefit from the

"Special expat tax regime has been changed from 1. January 2011.
New expats arriving in Demark in 2011 may benefit from 26 % gross taxation on their salary for 5 years and may also remain in Denmark after the 5 years period of time without any retroactive taxation."

mentioned earlier? That sounds like a pretty good deal to me. I'm guessing there's some sort of social security / NI component on top but if an umbrella can handle it all then it would be interesting to hear the take home % especially as it could well be all above board.

I might have a gig in Copenhagen coming up and I'm really hoping I get it. I've asked for a high hourly rate to reflect the increased costs so I wouldn't be out of pocket compared to the same gig in the UK.........I hope!

**daq** · 3 May 2011, 09:40

I've contacted a tax specialist in Denmark so am hoping to find out the Special Expat tax rate and the practicalities of setting up a branch as I think that the two go hand in hand and it looks like the best option.

The umbrella quote doesn't look feasible to me - 60% retention. I've only skimmed through it but it looks like I'd be worse off than taking a junior role here in the UK.

I've sent you a PM Olly. Feel free to disregard it...

Dan

**SueEllen** · 3 May 2011, 13:22

In regards to NI/Social taxes it really depends on how you are set up and where you have worked and lived before.

There are legit ways of paying your social tax/NI in the last EU country you worked and lived in if it is cheaper, and can prove ties to that country.

Contract in Denmark