Technical update on “Øresunds-commuter” for the payroll officers!

The Tax Authorities (“Skattestyrelsen”) have updated their payroll guidelines for individuals comprised by the Oresund Agreement (“Øresundsaftalen”).

Change of payroll reporting required with change tax liability
In brief, Danish employers (and the equivalent) are required to change the reporting methodology, if the employee seizes to be taxable to Denmark under the Oresund-Agreement. We have previously covered the situation here when the guidelines for the agreement were updated. Generally, the situation occurs when the presence in Denmark is limited over a period of three (3) months to the point of which less than 50 % of the work can be considered performed in Denmark.

From 13 to 14 and from 00 to 09
The new guidelines entail that when an employer recognizes that an employee is no longer taxable to Denmark, the reporting should be changed to reflect this and the withholding of tax should seize. If the employee should again become taxable to Denmark the withholding should be reinstated from that point in time.

As the employee?
The employee should be on the lookout for these changes as it will likely affect their yearend statement in both Denmark and Sweden. There will be a minimum requirement to report the distribution of taxable income (typically based on days worked) between Denmark and Sweden to assert the total taxable income in Denmark and the corresponding relief in Sweden.

Other issues
In addition to the above, the employee and employer should be aware of the potential presence of permanent establishment in Sweden and also the potential shift in coverage of social security – a change from Danish coverage to Swedish coverage can prove to be a significant additional cost for the employer as Sweden applies 32,45 % on the gross salary compared to the Danish flat rate of approx. DKK 5.000 – DKK 10.000 per employee per year.

We remain at your service for analysis of the tax and social security liability, adjustment of process and assistance with compliance, if required.