Changes to law about tax relief in Denmark

With a new judgment rendered in December 2023 the application of Ligningsloven (LL) clause 33A has changed. LL clause 33A is often used in foreign based projects and employments and is therefore relevant for many of our clients, who have employees staying outside of Denmark for periods of time.

Be mindful when applying Ligningslovens CLAUSE 33A

According to Ligningsloven clause 33A, in broad strokes, a person who resides outside of Denmark for at least 6 months, without break to this time period for reasons other than those related to trips directly necessary for the employment to Denmark, holidays, or similar at a maximal total of 42 days, can receive tax relief for the amount that is taxed relatively to the foreign salary.

With a new case law, the scope of the rules are limited to ‘stays abroad’ only when these are in relation to work/employment. In essence this means that where the law previously could be applied widely across a range of cases of which personal reasons for opholde sig outside of Denmark, now the reason must pertain to work or employment related reasons.

The case in short

In a new case with judgment rendered in December 2023 the Danish National Tax Board (DNTB) could not confirm that the requester could receive tax relief on salary income for the work done outside of Denmark, as the National Tax Board found that the relocation was grounded in a personal desire to live and work temporarily in Indonesia.

The details of the case

The requester and her spouse each own 45% of a company, in which the requester is the CEO. The requester travelled to Indonesia with their family for 11 months in order to expand the markets as a retailer of products from a different company. While in Indonesia the oldest children would attend school. DNTB confirmed that the requester retained full tax liability in Denmark as the requester still had housing available in Denmark, since they did not sell or rented out their house for 3 years without the ability to cancel the contract. 

Furthermore, DNTB confirmed that requester is regarded as taxibly domiciled to Denmark while in Indonesia according to the double tax treaty between Denmark and Indonesia, and that the requester only had permanent residence in Denmark since the house in Indonesia was only to be temporary, the centre for both business travel and private vacation within a predefined period of time. 

DNTB could not confirm that requester could receive tax relief on salary income for the work done outside of Denmark, as the National Tax Board found that the relocation was grounded in a personal desire to live and work temporarily in Indonesia.

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