The Crossbord® Inbound Expat Tax Regime Service
Navigating the complexities of international tax regimes is essential for companies recruiting foreign talent to Denmark. The Danish Inbound Expat Tax Regime is a service that caters directly to employers and employees interested in the tax scheme for researchers and highly paid employees, known as “forskerskatteordningen” in Danish. It offers significant benefits for eligible employees, allowing them to enjoy a favorable tax rate. At Crossbord, we seamlessly integrate this regime into our payroll services, providing proactive and comprehensive solutions as part of The Crossbord Solution. As cross-border tax experts, we ensure that both employers and employees fully leverage the opportunities available under this regime.
What is the Danish Inbound Expat Tax Regime?
The Danish Inbound Expat Tax Regime or the tax scheme for researchers (and highly paid employees), known as “forskerskatteordningen” in Danish, is a special tax scheme designed to attract highly skilled foreign professionals and researchers to Denmark by offering a reduced tax rate. Under this regime, eligible employees can benefit from a lower tax rate of 27% (+ market labour contribution) for up to seven years. This provides a significant incentive for both employers and employees, reducing overall tax burdens and enhancing Denmark’s attractiveness as a work destination.
Key Benefits:
Eligible employees pay a reduced rate of 27% on gross income (+ 8% Labour Market Contribution), resulting in an effective tax rate of 32.84%.
The scheme can be applied for up to seven years.
Facilitates the recruitment of top international talent by offering competitive tax benefits.
Conditions for Key Employees (High-Earning)
To qualify for the expat tax regime, employees must meet several criteria:
The employee must have a minimum gross monthly salary of DKK 75,100, excluding contributions to Danish pension schemes, equivalent to an annual salary of DKK 901,200 (2024). This ensures the scheme is targeted at high-earning professionals.
The employee must not have been tax resident in Denmark or subject to full Danish tax liability for the ten years preceding their employment.
The employee must not have had, within the last 5 years prior to employment, any direct or indirect involvement in the management, control, or significant influence over the company.
The employee must have a direct employment relationship with the Danish company, and the salary must be paid out by a Danish payroll.
The employee must not be taxable to another country with taxation rights granted to said country for 30 days in a calendar year.
Employer Requirements
Employers must adhere to specific conditions to utilise the forskerskatteordning for their employees. These include:
The employer must have a permanent establishment in Denmark or be registered as a Danish resident employer.
Employers are responsible for notifying the Danish tax authorities (Skattestyrelsen) about the employee’s eligibility for the scheme within one month of the employee starting work in Denmark.
Employers must maintain proper documentation and records to substantiate the employee’s eligibility and compliance with the scheme’s requirements.
These conditions ensure that both employees and employers fully comply with Danish tax regulations while benefiting from the expat tax regime.
Challenges of the Expat Tax Regime
While the benefits of the expat tax regime are clear, navigating the application process and meeting the eligibility criteria can be complex. Common challenges include:
It is crucial to align the employee’s start date with their tax residency status to ensure eligibility.
Employment contracts must meet specific salary thresholds to qualify.
Frequent travel for work can affect the employee’s status under the scheme, necessitating careful planning and documentation.
The expat tax regime is limited to certain types of income, requiring careful consideration of what is and isn’t taxed under the scheme.
It is only possible to be covered by the tax scheme for researchers once in a lifetime, however; it is possible to split the 7 year period into several periods as long as the conditions for being covered by the scheme are met for each individual period.
Crossbord’s Solution
At Crossbord, we proactively identify opportunities to utilise the expat tax regime as an integral part of our payroll service. Our approach includes:
We collect and assess all necessary documentation to evaluate eligibility.
Employment contracts must meet specific salary thresholds to qualify.
We handle the digital submission of applications to ensure a streamlined and efficient process.
We ensure that payroll systems are updated to reflect the tax benefits, offering seamless integration with existing payroll structures.
Flexibility to Meet Diverse Needs
Crossbord’s expertise extends beyond integrated payroll services. We offer tailored solutions to support companies with existing payroll departments that lack in-house expertise. Our services can also be utilised independently, providing direct support for the expat tax regime without requiring full payroll integration.
Your Benefits When Choosing Crossbord
Partnering with Crossbord provides your company with numerous advantages:
Proactive Tax Advisory
Our team of cross-border tax experts ensures that tax opportunities are not only identified but optimally utilised.
Comprehensive Expertise
We manage complex issues related to tax obligations, double taxation agreements, and deductions for foreign social security.
Efficient Processes
Our streamlined approach to year-end statements and tax returns minimises administrative burdens and maximises compliance.
To explore how Crossbord can assist your company in leveraging the Danish Inbound Expat Tax Regime, contact us today for a consultation. Our experts are ready to guide you through the process, ensuring compliance, and maximising tax benefits for your international workforce.
the Danish Inbound Expat Tax Regime
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