The latest news about the Danish tax system brought to you by Bachman/Partners Law Firm.

New double tax treaty between Denmark and France

The Danish Ministry of Taxation has announced that a new double tax treaty between France and Denmark has been signed.  

The new treaty will benefit Danish companies and individuals based in France. Especially retired Danish individuals who want to spend their retirement in France will avoid double taxation of their pensions.

The Danish Minister of Taxation also expects that the new agreement will make cross boarder businesses more flexible.

The content of the agreement has not yet been published. Entry into force is expected to be 1 January 2023.

Bill on taxation of financial companies and limitation wage deduction

As a part of a new pension initiative, where certain Danish citizens have the opportunity for an earlier retirement, The Danish Ministry of Taxation has proposed a new bill that imposes the financial burden of the pension initiative on financial companies.

The proposed bill imposes an increased corporate tax rate on financial companies. The ordinary corporate tax rate in Denmark is 22 percent. Financial companies will be imposed a surcharge of 4 percent. I.e. a corporate tax rate of 26 percent for financial companies.

Furthermore, the proposed bill limits the tax deductions on wage costs in excess of 7.5 million DKK per Employee. It is not a ceiling on the wages but a limit to the employer’s deduction on wages.

The proposed bill is expected to provide an annual tax revenue of 750 million DKK.

The Special Tax Scheme for Researchers

Danish law offers a lucrative incentive scheme where researchers and highly paid employees, that employers recruit from abroad, under certain conditions can choose to apply the special tax scheme for researchers and pay a gross tax of 27 percent of the salary for seven years.

One of the conditions for the application of the scheme is that the employee must have an average annual salary of at least 70,400 DKK (2022) within the calendar year – the so-called remuneration requirement. The average amount is adjusted annually, and therefore the employee’s salary must follow the development of the average remuneration rate.

The Eastern High Court has changed the practice for when the remuneration requirement is met. It is no longer a condition that the remuneration requirement is met at the entry into a new income year. Therefore, if you are already covered by the special tax scheme for researchers but no longer meet the remuneration requirement, you can enter into a supplementary salary agreement during the income year so that the average amount is met.

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