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Expat Scheme for Researchers and Key Employees
Researchers and highly-paid employees, who are recruited abroad, have the possibility to be subject to a special tax scheme in Denmark under certain conditions. The tax scheme is known as the researcher tax scheme. The scheme allows for a gross tax of 27% + AM contributions, totaling 32.84%. of the total salary for 7 years. The special tax scheme means that foreign researchers and employees have the opportunity to obtain special favorable tax terms by working in Denmark. Therefore, companies and public institutions have the opportunity to attract and retain highly qualified research and key employees from abroad.
The minimum wage in Denmark
The employee must, on average, have a guaranteed salary of at least DKK 70,400 (2022) per month (after deducting ATP contributions). Be aware that there are certain pitfalls. For example, if the employee did not earn holiday pay during the first year, the employer must be aware that the employee will not be able to meet the minimum wage requirement, if the employee's monthly salary is equal to the minimum wage and the employee takes holiday at his own expense.
The special requirement for the size of the salary does not apply to approved researchers.
Deduction
No deduction can be made in the income covered by the researcher tax scheme. It is permissible to deduct other income from the taxpayer, except for the costs of acquiring, securing and maintaining the remuneration directly related to the income taxed under the researcher tax scheme.
Other conditions for using the scheme
The other criteria are as follows:
- It is a condition that the employee is a resident of Denmark for the income covered by the research tax scheme. As soon as the right to tax is transferred to another country, the requirement is no longer fulfilled; and the employee is excluded from the scheme. In addition, the employer must have a permanent establishment in this country.
- The employee must not have been fully taxable to Denmark within the last 10 years prior to employment or have been limited to tax on personal income. However, if the employee has previously been covered by the scheme and subsequently relocated, he or she can return to the scheme and use the remaining part of the 84-month period. It should be noted that researchers can make use of the scheme, even though they have been taxable to Denmark on salary income in connection with shorter stays as guest lecturers and the like. at a university or other research institution within the past 10 years.
- The employee must not have had direct or indirect part of the management, control or significant influence on the company in which he or she is employed within the last five years prior to employment.
- Researchers employed at public research institutions determine the institution's management whether the applicant's qualifications as a "researcher" can be approved. While for researchers employed at other public institutions and private companies, it is the State Research Council (the Danish Free Research Fund) that determines whether the applicant's qualifications as a "researcher" can be approved.
- There are stricter rules, when you are covered by the scheme. For example, no more than 1 month can elapse from the termination of employment with taxation under the research scheme and until a new employment relationship begins. If the criterion is not met, he or she is excluded from the scheme.
Our advice
It should be noted that the above criteria are not adequate. All areas and situations are not described above, and we advise you to seek personalized advice. The rules on deductions can be waived, if they have other income to be taxed under the general rules, and at the same time do not directly relate to the income taxed under the researcher tax scheme.
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