Board fee income is the payment that members of a company's board of directors receive for their work and participation in board meetings. This fee can be set as a fixed amount or depend on the company's performance and the board member's contribution. There are special provisions for taxation of board fee income in double taxation treaties.
Frequently Asked Questions About Board Fee Income
What is board fee income?
Board fee income is the payment that a member of a company's board of directors receives for their work and participation in board meetings. The fee can be set as a fixed amount or vary according to the company's results and the board member's contribution.
How is board fee income taxed in Denmark?
In Denmark, board fee income is taxed as personal income when paid by a Danish company – regardless of whether the work is performed in Denmark or abroad. Double taxation treaties typically stipulate that Denmark has the right to tax fees from Danish companies, also for foreign board members.
What tax rates apply to board fee income?
Board fee income is taxed as personal income according to the general rules. 8% labor market contribution must be paid, after which the remainder is taxed as ordinary wage income. The fee is taxed in Denmark if the work is performed for a Danish company, regardless of whether the board member lives in Denmark or abroad.
Why is board fee income considered personal income?
Board fee income is considered personal compensation because the responsibility for the work rests with the individual person – not a company. Only in very special cases, where actual board business is conducted with employees and real operations, can the fee be considered company income.
Can board fee income be recognized as business income?
The fee can be recognized as income in one's own business if the board work is a natural and integrated part of the business activities, for example for lawyers or advisors who perform board work as part of their profession.
Which country has the right to tax board fee income?
As a general rule, board fee income is taxed in the country where the company paying the fee is resident. For a Danish company, this means that Denmark has the right to tax. The geographical location of the meetings is therefore not significant. The decisive factor is that the income can be attributed to Danish income and that the recipient is taxable in Denmark, either fully or limitedly.
How are foreign board members taxed on Danish board fee income?
Foreign board members are subject to limited tax liability in Denmark on fees received from Danish companies.
How do double taxation treaties affect board fee income?
If there is a double taxation treaty (DTT) between Denmark and the board member's home country, Denmark is generally granted the right to tax, while the home country must provide relief for the Danish tax to avoid double taxation.
What if the board member is also taxed in their country of residence?
If the board member is simultaneously taxed in their country of domicile, relief must be requested according to the rules in the relevant DTT.
What are the reporting requirements for board fee income?
The company must report the fee as A-income via eIndkomst and withhold both AM-contribution and A-tax. The board member should subsequently verify that the amount is correctly registered on the annual tax statement.
Disclaimer
As the above is for guidance purposes only, we accept no liability for decisions that may be made based on the above without prior individual advice. We accept no liability for errors and omissions.