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taxes For Members

How foreigners in Denmark can pay a reduced flat tax rate

The Local Denmark
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How foreigners in Denmark can pay a reduced flat tax rate
Researchers and highly paid foreign employees in Denmark can pay a reduced tax rate with no deductions for a limited time, if they meet set criteria. Photo by Trent Erwin on Unsplash

Foreign residents who are hired as researchers or highly paid employees in Denmark can be offered the option to be taxed under a special reduced rate for a limited period.

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Researchers or highly paid employees from outside of Denmark who are hired by Danish companies or educational institutions can choose to pay a lower tax rate for a limited number of years under a scheme known as the Tax Scheme for Researchers.

Under this scheme, the tax rate paid by the researcher (or employee) is 32.84 percent for a period of 7 years (or 84 months).

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The 32.84 percent rate, which is comprised of a gross tax rate of 27 percent plus labour market contributions, is significantly lower than the regular Danish income tax rate, which is around 45 percent for the average income but can range from 38 percent to 52 percent, depending on the various tax rates and subsidies that might be applicable under individual circumstances.

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People who pay tax under the Tax Scheme for Researchers are not eligible for any subsidies that can apply for regular taxpayers, for example deductions for commuting or pensions contributions.

Both the employer and the employee have to fulfil set criteria to be eligible for the tax scheme.

Staff who are nationals of non-EU countries must also be approved for a Danish residence and work permit. The procedure for this is separate to the tax scheme and is processed by the Danish Agency for Immigration and Recruitment (SIRI).

A number of schemes are available through which researchers and highly skilled employees can apply for a Danish work permit. These included (but aren’t limited to) the Fast Track Scheme and the Residence permit for researchers.

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Researchers

Researchers cannot qualify for the scheme if they have been liable to pay tax in Denmark (either full or partial tax) within the last 10 years. However, a limited amount of guest lecturing restricted to a 12-month period can be accepted.

They must also move to Denmark no more than a month before taking up their research position.

Researchers’ qualifications must be approved by a public research institution or Denmark’s Independent Research Fund (Danmarks Frie Forskningsråd).

Finally, the researcher must actually be involved in research as part of their role in Denmark.

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Highly paid employees

As with researchers, people who want to opt for the Tax Scheme for Researchers as a highly paid employee must not have been liable to pay tax in Denmark (either full or partial tax) within the last 10 years. They may not be tax liable in Denmark before they begin the job for which they want to pay tax under the Tax Scheme for Researchers.

They must also move to Denmark no more than a month before taking up their research position, the same rule that is applicable for those in research jobs.

They are also barred from having a prior senior role in the company which hires them in Denmark: they are ineligible for the tax scheme if they have been directly or indirectly involved in the management or control of the business within the last five years.

Their average monthly salary (as of 2023) must be at least 72,500 kroner after deduction of contributions to Denmark’s labour market pension fund (ATP), an obligatory tax.

The 7 years or 84 months can be distributed among different work periods, but the criteria for the scheme must be fulfilled again if the researcher or employee changes contract (for example, by changing employer).

You can read about the scheme and access the application forms on the website of Denmark’s tax authority Skat.

More general information about the scheme can be found here.

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