In two judgments of the 2th of February 2024, the Supreme Court found that two taxpayers who wanted to apply for the tax scheme for researchers did not meet the 10-year condition, despite the fact that the taxpayers had de facto relocated from Denmark for more than 10 years. The taxpayers had only reported their relocation to the National Register of Persons but had not informed the Danish Tax Authorities about the relocation.

Researchers and highly paid employees recruited from abroad by an employer can, under certain conditions, choose to apply to be taxed according to the tax scheme for researchers and thus pay a gross tax of 27 per cent and Labour Market contribution on the salary for seven years. One of the conditions for applying the scheme is that the employee must not have been liable for tax in Denmark within the last 10 years.

The cases before the Danish Supreme Court concerned whether the taxpayers met the 10-year condition. In the cases, the taxpayers had relocated from Denmark in 2005 and 2007, respectively. The taxpayers had been residents in Denmark until then, and they were subject to unlimited Danish tax liability. In both cases, the taxpayers had registered their departure with the National Register of Persons. It was undisputed that the taxpayers, at the time of their new employment in Denmark, had not been Danish residents for 10 years.

In both cases, the Danish Tax Authorities had rejected taxation under the tax scheme for researchers. The Danish Tax Authorities also rejected extraordinary reopening of the taxpayers´ tax assessments for the disputed income years.

The Danish Supreme Court found that the taxpayers neither had informed the Danish Tax Authorities about their departure nor that they had ended their residence in Denmark. The taxpayers were therefore still registered as persons subject to unlimited tax liability in Denmark until the unlimited tax liability was automatically changed as of the 2011 income year as part of a deregistration of persons who previously had received a transfer of money from the Danish Tax Authorities but longer met the conditions.

The taxpayers therefore received annual tax statements up to and including 2010, which were considered by the Danish Supreme Court to be valid administrative decisions that had to be taken into account when determining whether the taxpayers had been liable to pay tax to Denmark during the period. The taxpayers were therefore considered to be fully liable to tax in Denmark until the 2011 income year.

The Danish Supreme Court stated that the Danish Tax Authorities were not obliged to make a final tax assessment on their own initiative in a case where the taxpayer had not provided the necessary information for this purpose.

In one of the cases the Danish Supreme Court also had to decide whether there were special circumstances that could justify that the disputed tax assessments could be reopened pursuant to section 27(1)(8) of the Tax Administration Act. This was also rejected, among other things on the grounds that the taxpayer had not provided the necessary information and that it was not due to an error on the part of the tax authorities that the taxpayer continued to be assessed as a person subject to unlimited Danish tax liability.

The rulings emphasize the importance of the fact that a taxpayer’s notification of relocation to the National Register of Persons does not in itself imply that the taxpayer has relocated for tax purposes in the context of the 10-year rule in the tax scheme for researchers. It is the taxpayer’s responsibility to inform the Danish Tax Authorities about relocation, and the taxpayer must also ensure that the relevant information is provided so that the Danish Tax Authorities are able to assess whether the unlimited tax liability has ceased – regardless of the fact that the taxpayer has de facto left Denmark. Thus, it is the formal registration and not the actual relocation that is decisive.

Therefore, it is important to ensure that the 10-year period has passed before moving back to Denmark if you intend to apply for the tax scheme for researcher tax.

Bachmann/Partners Law Firm advises on incentive schemes and all other matters relating to taxes and duties.  

For further information, please contact Christian Bachmann on tel. +45 30 30 45 21 /, Ann Rask Vang on tel. +45 20 94 78 21 / or Peter Hansen on tel. +45 40 32 35 35 /

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