There are many reasons why Denmark is a great place to live and work, and the 27% rule is one of the reasons Denmark attracts highly skilled employees from abroad.
The 27% rule refers to a special tax regime for highly paid inbound expatriates and researchers recruited from abroad. Through an application to the tax office, employees may elect to be taxed at a rate of 27 % on employment income and other cash allowances, for up to 84 months (persons liable to tax under the 27% tax scheme must also pay social security contributions amounting to 8%. This means that employees covered by the scheme may have a total minimum tax of 32.84 %). All other income, including benefits in kind other than a company car and free telephone, are taxed at the ordinary rates.
The employer may be Danish or a foreign company or an institution with business premises in Denmark, or a foreign company with operations in Denmark.
Conditions for expatriate taxation
- The employee is hired as a researcher with research qualifications, or the job is genuine research work.
- The employee is recruited to a specialized or managerial position (key employees)
- As of 2021 employees must earn a minimum of DKK 69,600 gross per month, before the deduction of Danish tax, social security contribution and any pension contributions.
- The employee must become a resident or a non-resident for tax purposes in Denmark in connection with the commencement of the employment. The 27 percent tax scheme does not apply to an employee considered treaty tax resident of Denmark performing work outside of Denmark under such circumstances that the right to taxation shifts to another country/territory according to a double tax treaty.
- The employee must not have had full or limited tax liability in Denmark on salary income or income from businesses for up to 10 years before. Nor may one have been stationed abroad by the employing company.
- If the employee has been utilising the tax scheme for a shorter period than 84 months and he/she leaves Denmark, he/she can return to Denmark at a later point and continue to utilize the 27 % tax scheme for a total up to 84 months – provided that the other requirements are still met upon their return.
It’s worth noting that if you employ non-Nordic or non-EU labour, you need to ensure that the employee has a valid residence and work permit. You can do so by contacting the Danish Immigration Service for example. You can also find more information regarding work permits in Denmark on our Denmark country page.
How TCP can help
TCP have a fully registered Danish company, TCP APS, that can help you with the employment of skilled labour and also with the application for the 27% tax ruling. Whether you are an individual going over to Denmark to start a new role, or an agency looking to place a skilled temporary worker on site with a client, TCP can help.
Would you like to know more? Call our UK office on: 0044 (0)208 580 0800 or fill in our contact us form here and a member of our sales team will get back to you as soon as possible