Taxes in Denmark

[expat]

There was a recent thread about rates in DK, but can anyone tell me about taxes etc in DK? What's the total bite for a contractor sort of income (social contributions, compulsory non-refundable pensions, the lot)?

Are there any choices about how you operate? What consequences would that have on net income?

PS I am not currently resident in the UK, in fact technically not resident anywhere. I am not trying to evade taxes, I only say that because any modus operandi based on UK residency (Ltd Co etc) wouldn't apply to me unless I became UK-resident first.

PS yes I searched first, and googled for the Danish tax office, which is kind enough to do pages in English (I've even heard that you can get a call centre where they speak good English), but I ca't work out the bottom line.

[tim123]

I have no personal experience, but I have been told that unless you use an offshore scheme (such as the one you will find advertising if you click the Overseas Guide link on the right - not that I have any experience of that particular scheme) you lose about 65% of your money.

It's a very high Tax, high NI country with no scope for genuine tax mitigation by foreigners.

Are you going for the same jobs as me :-)

tim

[expat]

... you lose about 65% of your money.

Bloody Hell! In Switzerland my total tax bite (not including compulsory holiday and pension contributions, which I can get back monthly on application or at the end) is 26%. So I'd need more than double the rate to take home the same.

Are you going for the same jobs as me :-)

tim

Dunno :-) Considering that I drink too, I don't know if I can afford to think about going there.

[threaded]

I live and contract in Denmark. The tax you pay can be really quite variable depending on circumstances and you really won't know until you get into it. Nominally for foreigners it is about 60%.

If you have a PhD like what I have you can get a lower rate of 25% for the first 3 years, and supposedly you don't have to pay the difference back afterwards which is true, but is a Danish version of the concept 'truth' which escapes most foreigners, also an odd concept of 25% as well. Really it is about 45% and you can't claim against it also the local kommune will claim the difference back after 3 years because the state didn't and you still can't claim expenses against it. So it can be more expensive than paying the proper tax and a really scary bill, 20%s for the last 3 years + interest + fines, can land on you door step after 3 years with like 7 days to pay. Now Danes have this blind spot for anything with "Special Pris" written on it, and so accountants will recommend this, even if it is not the most efficient and potentially disastrous...

Now for the 60% one, you can claim for lots of things: child support, MIRAS, travelling expenses etc. which I have seen one contractor use to push his tax down to 15%.

If you run your own businesses based in Denmark, you can use brollies in quite clever ways. In fact one accountant here in Denmark gave an example on television of how he paid absolutely no tax by selling umbrellas between various brolly companies. They have a special law in Denmark for taking the p1ss out of the tax office on TV and they sent him to jail for it. But the brolly scam is still in operation and used extensively by the Danish business community. You'll generally find a Danish business family will own a restaurant, car dealership, employment agency, travel agency and bookshop as well as the core business. If you look out for it you'll spot the travel agency + attached bookshop combo quite easily on the high street now I've mentioned it: that one is part of a VAT scam involving office supplies for the other companies. The other reasons for this combination are quite involved, but results in a really low tax bill, I understand one lot paid the equivalent of 50p one year and last year the government ended up giving them money.

So all in all, if you are a young single man, you'll be stung quite badly by the tax, if you have lots of kids from previous marriage(s) and a house(s) you'll be OK. If you have a good few business interests it is one of the better tax havens to live in.

[expat]

I live and contract in Denmark. The tax you pay can be really quite variable depending on circumstances and you really won't know until you get into it. Nominally for foreigners it is about 60%.

....

So all in all, if you are a young single man, you'll be stung quite badly by the tax, if you have lots of kids from previous marriage(s) and a house(s) you'll be OK. If you have a good few business interests it is one of the better tax havens to live in.

Thanks. Well as usual I don't seem to qualify for any of the good bits. Not young but at the other end (kids grown up & left). House-buying not on the cards. No wish to set up business there, just do a contract. Not a "researcher". Expenses to be paid but gosh look what happens to the rest!

So I really do have to double my rate in order to stand still. God! If I want to see Denmark I could do 3 months work in Switzerland and then 3 months not working in Denmark, for the same net result.

[expat]

...you can get a lower rate of 25% for the first 3 years, and supposedly you don't have to pay the difference back afterwards..... [but] the local kommune will claim the difference back after 3 years because the state didn't.

Yeah there are some unexpected traps in taxation. For exxample I worked last year in Switzerland but still paid tax to France as well as Switzerland because I was still officially resident in France. But of course I got a credit against French tax of the amout paid in Swiss tax.

OK? Yes, but Switzerland has a tax-free allowance for foreign workers. Result: less tax paid to CH, so less credit off French tax, so more French tax paid.

[threaded]

If your potential place of work is near a border then you'll find many of your colleagues take advantage of this.

At my clients in the Copenhagen area many of the higher level staff live in Sweden and commute to Denmark or claim to.

[expat]

If your potential place of work is near a border then you'll find many of your colleagues take advantage of this.

At my clients in the Copenhagen area many of the higher level staff live in Sweden and commute to Denmark or claim to.

Why does this make a difference? Don't you pay Danish tax on all Danish-sourced income anyway?

What if you were resident elsewhere and spent limited time in DK?

[threaded]

This one is to do with buying a car and local taxes. Taxes for buying cars in Sweden are much much lower than Denmark, a car will typically be about a third the price in Sweden compared to Denmark.

Housing and local taxes are also much cheaper in Sweden.

[NeilJ]

I live and contract in Denmark:

If you are here for less then 3 months you don't even have to tell them you are here. Over 3 months - you need a residents permit - less than 6 months no taxes to be paid if you employer is not Danish.

If you earn more than about 60000 DKr a month then you can get the 25% flat tax for 3 years. You need to find an umbrella in Denmark to run through - I think one the UK umbrella compnaies offer this. www.sketenty.dk will do this for about 4000 Dkr a month.

If you are an approved researcher under the OCED terms (this does not include normal SW development) then you can get 25% flat tax for ever. This generally covers biomed stuff.

Otherwise operate through JSA, Global K, Albany, Connexion etc. etc. and they will pay you a salary on which you pay full Danish taxes on (45 to 60% of your salary) and then pay you a bonus (i.e. the rest) at the end of the contract once you go home. Total hit of about 30 to 35% including their fees.

See Copenhagen Capacity for the expat tax rules:

http://www.copcap.com/composite-2524.htm

there is also the labour hiring rule - for non reisdents of 30%

http://www.skat.dk/display.aspx?oID=...0457&indhold=1



Neil