No excuses on your tax obligations as an expat in Denmark

Moving to Denmark for the first time with an intention of living for a longer time and earning an income? Then you better pause for a minute and stop thinking just about how life will be so interesting. Denmark is for sure a beautiful country for expats, not until you have run-ins with the Danish tax agency known as Skattestyrelsen

The Danish authorities can bluff about any other thing but not crime, security, health and tax issues. As you may already know, Denmark is a social democracy. As a result, vulnerable people get help through social security. To support such a system, people who have an income in Denmark must pay up their fair share to keep the system running. Whether working in Denmark or having a business, your tax obligations must be clear from the word go.

Generally, people who have an income from rentals, work, business or any other have a full tax obligation in Denmark unless clearly stated otherwise. Failure to honour your tax obligations will make the tax agency follow your case and it’s not amusing. They trust people to be truthful with their tax declarations but are very much aware that some naughty ones will always play games. It is such cases of deliberate tax evasion. although rare. that the tax agency punishes punitively to act as an example to any person with such thoughts.

Some daredevils take black jobs (jobs which workers do not declare taxes on) but this is a great offence. An employer and employee who engages in black jobs in Denmark risks high handedness and strict punishment from the authorities. In short, tax crime in Denmark doesn’t pay. One way or the other, they will catch up with you. The sooner you clear your tax information and make the correct declarations, the better your life will be in Denmark. 

Be mindful and deliberate  when moving to Denmark

Moving from your country to live in a completely different country is not a walk in the park. Most people cannot know how complex this can be. Therefore, before moving, you must have a clear purpose for moving. Such a reason must be something that will act as a motivator when things get complicated.

When it comes to moving into Denmark, which is officially the 10th competitive world economy, a few tips are necessary. The citizens of Denmark thrive in their celebratory high standard of living. The Danish economy also has a potential of providing extensive government welfare provisions

Basically, Denmark has become a nation of net immigration and most of the immigrants are from Europe. What this means is that Denmark welcomes a reasonable number of expats frequently. As an expat you need a tax guide that would give you directions through your tax obligations.

A Guide to Expat tax in Denmark

Denmark ranks among the freest in the Index of Economic Freedom and the Economic Freedom of the World. Even at that, when you are planning to stay for a while or more than 6months, when you work while in Denmark you are tax obligatory. There is therefore no need to worry as an expat in Denmark. 

The tax Samaritan country guide will offer a general review of Denmark’s tax environment. Additionally, it gives an expounded explanation on how Denmark’s tax will impact your home country’s expatriate tax return as an expat in Denmark. 

You are aware that as a taxpayer, all the global income is subjected to taxation and accountability. For any expatriate you are obligated to file your tax return annually. In the same way, this is true for Denmark. In Denmark, the tax treatment for different income classes is significantly varied. 

There are some benefits for expats that are tax exempt. However, as an expat, your country captures this as a gross income. For this reason, there are therefore, a number of considerations that relate to expat tax obligations in Denmark. Let’s consider a few of these considerations together. 

Expat Income Taxes in Denmark  

In the same way Denmark residents are subjected to taxation, the non-residents are. The residents are subject to their worldwide income tax whereas the non-residents are subject to tax on the Danish source of income. Well, if you permanently reside or stay in Denmark for more than 6 months then you automatically become a resident.

A general background knowledge is however necessary for this subject. The income tax division. Income tax is divided into a net capital income and personal income. Additionally, to expound more on this, personal income consists of personal income plus or less the net capital income and allowable deductions. 

Therefore, expatriates employed by a Danish resident employer are subjected to a special tax regime. Income from salary is subject to a flat tax rate of 32.84% and this also includes an 8% labour market tax. This is somehow expected to run for an 84month period. After this period, the expatriate faces ordinary income tax obligations. Any other income other than salary earned in the special regime, is subject to taxation at a normal progressive tax rate. 

Tax Year in Denmark

A tax year is normally a calendar year. For Denmark, the tax year is also the calendar year. Before the end of every calendar year, an advance income assessment filing is performed for each taxpayer. At the end of every tax year, you must file tax returns by end of June 

Understanding the Expat Tax Withholding in Denmark

If you are an expat shareholder, then you are subjected to a 27% statutory withholding tax on your dividend income. In many occasions, any person eligible for a lower tax rate treaty files for refund of statutory withholding. This can be possible through tax authorities in Denmark.

There has however been a move to provide a tax relief to prevent expats from double taxation. Denmark has entered into a totalization agreement with other countries. Talk of tax treaties commonly referred to as Avoidance of Double Taxation Agreements . Such an agreement protects expats in Denmark from double taxation. If you qualify for taxation of your income by both your country of citizenship and Denmark, then this treaty will protect you.

For most expats, their Denmark and country of citizenship source of income needs to be articulately reviewed. It is possible through the assistance of international tax specialists. This will help offer an appropriate application towards any treaty benefits.

The Expat tax requirements in Denmark

If by any chance you are working abroad, it is possible that you must meet the filling requirements for meeting your tax obligations. Otherwise, you will not be able to obtain your preferred tax treatments. Tax exemption and foreign tax credit only go to expats with accurately filed tax returns.

The special tax schemes in Denmark, allows for expat researchers and employees to have a chance of acquiring special and favourable tax treatment. This means that any public institutions and companies now have an opportunity to attract and retain highly qualified expat personnel.  

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An avid storyteller and passionate writer with a penchant for letting people know that which they don't know while at the same time telling people more about what they may already have known. At the end, you stay informed, be curious, and get cosy.