The Cross-border Agreement between Denmark and Sweden

The Cross-border Agreement modifies the Double Taxation Agreement among the Nordic countries. However, the Cross-border Agreement specifically applies to the relationship between Denmark and Sweden. This agreement alters the jurisdiction that has the right to tax a salary when the salary is earned by an individual working in both countries.

When is the Cross-border Agreement relevant ?

The Cross-border Agreement for the Øresund region is relevant for you as a Danish employer when:

  • You have hired an individual living in Sweden
  • The individual already works / or would like to work from home (in Sweden)
A professional working from home is caught in a humorous situation during a virtual meeting. They are dressed in business attire from the waist up, but their red pajama bottoms reveal the relaxed home environment. An orange cat adds to the comedy by playing with the pajama’s drawstrings. The scene is complete with a home office setup, including a wooden desk with a computer, and a wall clock indicating it’s 8 o’clock.

Worth keeping in mind

  • An individual, working from their home office in Sweden for a Danish employer, will be considered as working in Denmark from a double tax perspective if they typically perform their work in Denmark (physically).
  • This individual must pay taxes in Denmark as though they were physically working there.
  • The term “usually working in Denmark” is defined as working a minimum of 50% of the time over a three-month period. Sporadic business trips and holidays will typically also be considered as work carried out in Denmark.
  • However, the agreement does not apply if the work in Sweden is performed at an office location owned by the employer. Similarly, if the work is carried out in a location that is a permanent establishment, the agreement does not apply.

Employer obligations

As a Danish employer, you are obligated to report the salary paid to an individual on a monthly basis. If the individual is covered by the Øresund agreement, or is physically working in Denmark, you also have a responsibility to withhold Danish taxes.

Even if the individual is not covered by the Øresund agreement, you are still required to report the salary paid. However, it will likely be reported as tax-free. Therefore, no taxes should be withheld when the individual is not physically working in Denmark. This is subject to a specific evaluation in each case.

Social security

The primary rule on social security is as follows:

  • An individual is generally covered by social security in the state where they are employed. If an individual works in multiple states, they are socially secured in their home country if they work there at least 25% of their time.
  • However, for individuals covered by the Øresund agreement on social security, it is possible to apply for a ruling to increase this 25% threshold to 50%, aligning it with the taxation requirement.

To ensure clarity on which country’s social security legislation covers your employee, a request (A1) should be submitted to the authorities. Crossbord can assist in evaluating your employee’s social security status and in submitting an A1.

How can Crossbord assist in cases like this?

‘The Crossbord® Solution’ is perfect for such cases. This solution involves the following steps:

  • We evaluate whether the employee(s) can apply the Cross-border Agreement, and we clarify your obligations as an employer when the employee(s) can and cannot apply the Cross-border Agreement.
  • We onboard the employee(s) into the Danish tax system and provide a comprehensive briefing about the Danish tax system to ensure the employee feels secure about their tax situation.
  • We assist you, as an employer, with the necessary updates and amendments to your payroll process, depending on the outcome of the tax evaluation.
  • We provide year-end tax support for the employee(s) to ensure they have paid the correct taxes in both Denmark and their home country.

Get the Crossbord® Solution

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