SKAT’s tax scheme for foreign researchers and key employees: facts clarified and myths debunked

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UPDATE [22 January 2018]: It has just come to my attention that as of 1 January 2018 a person coming to Denmark who qualifies for the special tax scheme described below can benefit from the scheme for seven years, rather than the five years that was the rule from 2011 through 2017. Anyone just arriving in Denmark or currently under the original five-year scheme qualifies for the extra two years. Under certain conditions the qualifying employees may choose to pay tax at a rate of 27% plus labour market contributions, totalling 32.84%. (It used to be 26% and 31.92% – the one percentage point increase helps the government finance the two-year prolongation of the scheme.)

I haven’t been able to find the information that describes why this change came into effect, but Magnus Vagtborg (see below) has written a very short article about it for his clients. In order for high income professionals to qualify, their gross income must amount to a minimum of DKK 65,100 in 2018 (DKK 63,700 in 2017) per month after deduction of ATP contributions. Researchers’ conditions do not differ from what is stated later in this article. While this information has been updated for employers in Denmark on the SKAT website (see here), the information for employees – or potential employees – is still outdated. Go figure.

Denmark has the highest average income tax rate among OECD nations – 32.25% for a one-earner married couple with two children or 36.19% for a single earner without children (2016 figures) [1]. While the tax system is progressive and income tax revenues contribute to the services that all Danes benefit from at one time or another, including health care, education (up to and including university), child care, elderly care, and unemployment, the range of tax rates from zero to 55,38% can seem daunting, especially at the upper end of the range [2].

As I have written in previous posts, Danish companies lack highly skilled professionals and the government has passed several initiatives to make the country more competitive in attracting experienced foreign workers to Denmark. One of these is the ‘tax scheme for foreign researchers and key employees’, which gives researchers and highly paid foreigners working in Denmark a special tax rate of 27% + a labor market contribution (LMC) of 8% – an effective tax rate of 32.84% – for a period of maximum 84 months, without any other deductions allowed [3]. The tax scheme, which was first for a period of 36 months, was extended to a general regime of 60 months on 1 January 2011 and then to 84 months on 1 January 2018.

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Attention fellow expats! Xpat Network North to offer diverse program of events through June 2014

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Kirstine Då, who is project coordinator for International Citizen Service, announced yesterday the upcoming schedule of events organized by Xpat Network North (XNN), for which Aalborg Kommune has recently taken over responsibility. The program includes a variety of activities for expats in the North Jutland region and all are invited to join those that interest them. Below is the program as it stands; I will also include individual events in my ‘recent & upcoming in Aalborg’ series shortly before they take place. Please note that if you are on Facebook but not already a member of FB’s Xpat Network North group, you may send a request through the site to join.

Date Time Event Description Location Registration Cost
25 April 16:00-18:00 Go to the movies at the library Danish film with English subtitles will be shown Small cinema at Aalborg Main Library Check XNN’s Facebook page for more info Free
29 April 17:00-19:00 Tax seminar Hints and tips on taxes in DK, with focus on the forthcoming tax return (selvangivelse); run by Magnus Vagtborg of United Tax Network AKKC (Aalborg Kultur og Kongrescenter) Europa Plads 4, 9000 Aalborg Email Kirstine Då by 22 April Free
6 May 16:30-17:30 Guided tour at the library Learn about all the facilities and services available to you at the main public library Aalborg Main Library Check XNN’s Facebook page for more info Free
9 May 17:00-??? Casual social get-together Meet Kirstine and other expats for a chat and a drink John Bull Pub Just show up Pay for your own drinks and food
21 May 16:30-19:45 Family sports event Parents and children ages 5 and up get together and learn new dance moves with an English-speaking instructor. There will also be a chance to enjoy a soft drink and a sandwich with other families after the dancing session. Tårnhøjhallen in Aalborg Øst More information to come Free
4 June 17:00-?? Casual social get-together Meet Kirstine and other expats for a chat and a drink Folkets Parlament Just show up Pay for your own drinks and food
12 June 16:30-19:30 An evening on ‘the weirdness of Danes’ Puzzling and funny aspects of Danish culture and norms will be highlighted and participants will work together on a task Not yet known More information to come Small fee