Non-Danish businesses liable to pay tax in Denmark

A non-Danish business is liable to pay tax in Denmark if it has a permanent establishment in the country. See what a permanent establishment is.

Non-Danish businesses liable to pay tax in Denmark must withhold tax on pay to the their employees working in Denmark. The tax, which must be declared and paid to the Danish Tax Agency (Skattestyrelsen), consists of:

• Labour market contributions (AM-bidrag)
• A-tax (tax deducted from income at source)
• Labour market supplementary pension (ATP), if relevant

It must be declared in E-income (eIndkomst) under the business's Danish CVR no. (business reg. no.). See the section “Duty to withhold tax for non-Danish businesses liable to pay tax in Denmark".

Non-Danish businesses not liable to pay tax in Denmark

Non-Danish businesses without a permanent establishment in Denmark do not have to declare and pay A-tax and labour market contributions to the Danish Tax Agency. The rules on when non-Danish businesses must withhold ATP are described at www.ATP.dk.

Employees must pay tax on the salary earned in Denmark, if they are or become resident or stay in Denmark for more than 183 days within a 12-month period. They must register using form 04.063.

If the non-Danish business makes labour available to a Danish business or to a non-Danish business with a permanent establishment in Denmark, and this is categorised as hiring-out of labour, the business will be responsible for declaring and paying labour market contributions and A-tax from the first day of work in Denmark, regardless of whether the employee has a Danish CPR number (civil reg. no.).

Non-Danish consultants sometimes carry out their business in their home country through their own business. They must be considered employees of the Danish business, if they work for the business on the same terms as the business's employees. This is assessed on the basis of the criteria used for assessing whether a person is an employee or a self-employed person. They are liable to pay Danish tax on the fee paid for their work, and the Danish business must withhold labour market contributions and A-tax, as for the business' own employees.

Registering as a non-Danish business in Denmark

You register your business at http://www.virk.dk.

Businesses without a permanent establishment must be registered in RUT (Register of Foreign Service Providers) at http://www.virk.dk.

Full tax liability

A non-Danish person running a business in Denmark will become fully liable for tax, if he or she becomes resident here or stays here for a period of at least six months, including short stays abroad for holiday or the like. Read more about tax liability.

All income and expenses must be entered on the tax return, regardless of where they were earned or incurred.

If you are also resident in another country and are liable to file a tax return there as well, you can obtain tax relief in one of the countries. The general rule is that you pay tax on the profits from business activities in the country of work and tax on other income in the country to which you have the strongest ties.

Limited tax liability

As a self-employed person without permanent residence in Denmark, you have limited tax liability if you have a permanent establishment in Denmark. This means that you are liable for tax on profits made in Denmark.

Registering as a self-employed person with full or limited tax liability

To be a self-employed person with a permanent establishment in Denmark, you must obtain a Danish CVR number (business reg. no.) to be registered for VAT, among other things. You register by completing the form Registration of non-Danish Company - Start 40.112 at www.indberet.virk.dk. After that, you need to get a Danish personal tax number and a preliminary income assessment (forskudsopgørelse), which calculates your personal provisional tax.

The Danish rules governing when a person is considered an employee or a self-employed person are more restrictive than in some other countries. For this reason, you are advised to check whether you are considered to be an employee and not a self-employed person under the Danish rules.

You will be regarded as an employee, if you are paid for personal work in a business where you work according to the employer's directions and for the employer's account and risk. This means that the Danish employer you contract with must withhold A-tax and labour market contributions for you as for its Danish employees.

Examples: You work alongside the business's employees erecting a wall, tweaking an IT system, cutting meat, packaging goods or driving the business' delivery vans. Maybe you also represent the business in dealings with its customers. You may in other contexts be a self-employed person in your home country, but under the Danish rules, you are considered to be an employee of the Danish business you are working for.

Read more about your business status for tax purposes.

As a non-Danish business or self-employed person liable to pay tax in Denmark, you must withhold labour market contributions and A-tax for your employees according to the same rules as apply to Danish businesses with employees. You must withhold tax from the employees' first day of work in Denmark.

You must declare the tax in E-income and pay it into the business's tax account. The employees' personal tax number and tax card must be registered to be able to declare their pay. Otherwise, you must withhold 8% in labour market contributions and 55% in A-tax. You can help your employees register by having them complete and submit form 04.063.

If an employee, in exceptional cases, does not have a CPR number (civil reg. no.), you must make a declaration provisionally to E-income using name, address, country code, date of birth, gender etc.

Read more about reporting pay in E-income.

If another non-Danish business has made labour available to you, you must withhold labour market contributions and A-tax in accordance with the rules on hiring-out of labour. If the employee stays in Denmark less than 183 days within a 12-month period, you must complete form 01.010. Payment information is provided on the form. If the employee stays in Denmark longer, he or she must be registered using form 04.063, and you must withhold tax in E-income according to the same rules as apply to your other employees.

The Danish rules governing when a person is considered an employee, a self-employed person or a person working through his own business are more restrictive than in some other countries. For this reason, you must check whether a sub-contractor is considered an employee under the Danish rules. If the sub-contractor is paid for personal work in your business, where he is working according to your directions and for your account and risk, he is an employee. This means that you must withhold A-tax and labour market contributions as for your Danish employees. Read more about your business status for tax purposes.

Examples: A non-Danish person is working alongside your employees erecting a wall, tweaking an IT system, cutting meat, packaging goods or driving the business's delivery vans. Maybe he also serves customers in your shop on your behalf. He does not run a greater financial risk than your employees, as his work and responsibility cannot be separated from your own employees' work and responsibility. He may in other contexts be a self-employed person in his home country, but under the Danish rules, he is considered to be an employee of your business, and you must withhold A-tax and labour market contributions as for your own employees.