Special measures to encounter full tax liability and special regimes due to Covid-19

Special measures to encounter full tax liability and special regimes due to Covid-19

The Danish Parliament has voted through L199, which enacts a number of counter measures for individuals, who are affected by Covid-19. The purpose of the legislation is to encounter the effects under the current legislation in terms of tax liability as well as various tax regimes, which depends on certain foreign or domestic activities.

Non (Danish) tax residents, who have been working from a place of living in Denmark due to Covid-19

If you have a place of living at your disposal in Denmark, you are only liable to pay taxes to Denmark (resident taxation) if you take up stay in Denmark, which is not due to holiday or similar. A minor degree of unplanned work is typically accepted, but generally it should be avoided. During the Covid-19 pandemic, individuals living abroad have potentially been stuck or ordered to stay in Denmark and as a result they have been working from e.g. a summer house or other places of residence, which means that they would be fully liable to pay taxes to Denmark as a result of this.

The initiative contains rules that makes it possible for people, who would otherwise enter into full tax liability, to elect limited tax liability on wages and remuneration earned during the “corona”-stay in Denmark. You are eligible if you have stayed in Denmark in the period 9th of March until 30th of June 2020.The evaluation of taxation right should still be considered. Thus, if you normally reside in a state where Denmark has concluded a double tax treaty (DTT) based on the OECD Model Tax Convention, there is a strong likelihood that the income will not be taxable to Denmark (requires less than 183 days in a twelve-months period, the absence of a PE and absence of an employer).

Danish employees seconded from Denmark to other countries

Danish expatriates, who are working in other countries under the 33A-relief are also included in the initiatives. The focus has been on the time-limited threshold, meaning that if the expatriates stay in Denmark and thereby overrun the rules of 6 months/42 days, they will not be excluded from the 33A-relief in the period from 9th March until the country in which the secondment takes place reopens – though, not later than the 30th of June 2020. The employees are allowed to work in Denmark during the stay in Denmark, and the salary income earned in the period will be taxable to Denmark.

Employees on the researchers and highly paid tax scheme (KSL §48E-F)

Employees will not be excluded from this special tax scheme because of prolonged stay in either Denmark or outside of Denmark in the period from 9th March until the 30th of June 2020. Other requirements are also impacted, as a potential reduction of salary in the mentioned period will not give rise to exclusion of the highly paid tax scheme. Thus, employees on the highly paid tax scheme will be treated gently in regards to prolonged stay, tax liability and salary requirements because of the impact of the Covid-19 pandemic.  Furthermore, an extension is provided to people on the scheme, who may have lost their job as a result of Covid-19 to find new employment under terms that comply with KSL §48E-F. The deadline is the 1st of August 2020, where there is normally only one month to acquire a new position under §48E.

Link to government fact sheet

Contact us