On 14 November 2024 a new Øresund Agreement was adopted, which may affect the approximately 17.000 people who live in Sweden and work or study in Denmark. The agreement entered into force on 1 January 2025 and reduces the previous tax advantages of living in Sweden and working in Denmark on several points.
Below we have compared the previous Øresund Agreement with the main points of the new Øresund Agreement. The main points are:
- The taxation of income from home working changes for public sector employees, so that – like private sector employees – it will in future be taxed in the country of work.
- For students who live in Sweden and study in Denmark, Danish SU (state education grant) will in future be taxed in Denmark. This will make it more expensive for a resident of Sweden to study in Denmark compared with the previously applicable rules.
- People who live in Sweden and have a Danish pension scheme will in future be taxed with PAL tax on the return on the Danish savings.
You can read more about this below:
Taxation of salary for home working
The previous Øresund Agreement
The previous Øresund Agreement was as a general rule based on the principle that commuters pay income tax in the country of work, with the country of residence granting relief by not taxing the salary income or by giving a reduction for the foreign tax.
In addition there was a special rule for private sector employees' home working, under which the country entitled to tax did not change when working from home in one's own residence. This means that the country of work retained the right to tax, even if the person worked from home in their home country. Conditions for this:
- The work constitutes at least 50% of working time over a continuous 3-month period
- The work in the country of residence must not be carried out through a permanent establishment of the employer
The above rule on home-working days only applies to private sector commuters.
For public sector employees who work from home, the portion of the income derived from home working must always be taxed in their home country. This means that a public sector employee who lives in Sweden and works in Denmark, but who works from home in Sweden on individual days, is taxed in Sweden on the portion of the income derived from that home working. This means that they can make use of the deduction rules in both countries by obtaining a deduction for the same interest twice.
The new Øresund Agreement
The new Øresund Agreement changes the rule that the country entitled to tax does not change on home working etc., so that it also applies to public sector employees. This means that commuters who are public sector employees in Denmark, but who live in Sweden, can no longer automatically make use of the more favourable taxation in Sweden when working from home.
In addition, the agreement changes the period over which the extent of home working must be calculated, from 3 months to 12 months, for both private and public sector employees.
It will also no longer be a condition that the home working must be carried out in the commuter's own residence. The commuter is therefore no longer required to carry out the work in their own home, but may carry out the work anywhere in the country of residence.
Taxation of SU (state education grant)
The previous Øresund Agreement
Under the previous rules, Danish SU was taxed differently depending on whether the student lived in Denmark or in Sweden. A student who studies at a Danish educational institution and receives Danish SU, but who lives in Sweden, was taxed on the SU neither in Denmark under Danish law nor in Sweden under Swedish law.
Conversely, students who live in Denmark and study at a Swedish educational institution and receive Swedish SU were taxed on it in Denmark. Had those students instead lived in Sweden, the Swedish SU would have been tax-free under Swedish law.
The new Øresund Agreement
Under the new Øresund Agreement, it becomes possible for the country paying out the SU to tax it. This means that Denmark will be able to tax Danish SU paid to a student who lives in Sweden.
Conversely, Denmark will not be able to tax Swedish SU paid to students who live in Denmark.
Taxation of investment return on pension schemes
The previous Øresund Agreement
Under the previous rules, people were only taxed on the investment return on a Danish pension scheme if they lived in Denmark. This means that people who live in Sweden and have Danish pension savings currently do not pay Danish PAL tax of 15.3% on the return on their Danish savings.
The new Øresund Agreement
Under the new Øresund Agreement, it becomes possible for Denmark to tax people who live in Sweden on the return on their Danish pension savings. This means that a person who lives in Sweden and has Danish pension savings will be taxed in Denmark.
Contact us for advice:
At SkatteInform, we can help assess how the new Øresund Agreement affects your specific situation – whether you are a public or private sector employee, a student receiving Danish SU, or have Danish pension savings.
Sources:
Act on the conclusion of an agreement between the Kingdom of Denmark and the Kingdom of Sweden on certain tax matters
https://www.retsinformation.dk/eli/ft/202412L00032
This article has been written as general information and cannot replace individual advice. We accept no liability for decisions taken on the basis of this article without prior individual advice. Nor do we accept liability for any errors or omissions.
