Tax in brief – Taxation in Denmark and abroad
The best tax solution with regard to your pension scheme generally depends on how you will be taxed while you are on secondment.
1. Taxation in Denmark and abroad
Especially if you are going to live abroad for a long period of time.
The pension scheme is changed into a non-deductible pension scheme since you will not be able to benefit from the Danish tax deduction rules when you are liable to pay tax abroad. When the contributions have been non-deductible, you do not have to pay tax on the benefits when they become payable.
Effective from 1 January 2010, the Danish principle that benefits under a pension scheme are taxable if the contributions have been tax-deductible has been extended to also include tax-deductible contributions abroad.
Therefore, we recommend that you do not exercise any right to deduct pension contributions in the country in which you are on secondment and that the contributions are not deducted from your salary before tax is deducted.
It may be necessary to document that you have not had any tax deduction while you were on secondment – otherwise you will still have to pay tax on the benefits.
We recommend that you use an audit declaration, which you will find on www.skat.dk (go to Individuals – Forms and select form 07.062). You can also choose to obtain the documentation from the tax authorities in the country in which you are on secondment.
2. Taxation in Denmark
This is relevant if you are going to live abroad for a short period of time.
The pension scheme remains unchanged as you are still liable to pay tax in Denmark and can therefore still exercise the right to deduct contributions.
3. Exemption from pension investment returns tax
Everyone who contributes to a pension scheme pays 15.3 per cent tax on the pension investment return. Such tax is charged by the pension company, which will inform you every year of how much you have paid.
When you live abroad, you can apply for exemption from paying such tax. You need an application form from Skattestyrelsen. If you meet the conditions, you will receive a tax exemption declaration, which you must send to us. Use our vat reg. no. when you fill in the form. The vat reg. no. is 24 26 05 77.
Remember that it is your duty to notify us when you move back home to Denmark.