A Guide to Getting Paid and Ensuring Tax Compliance in Denmark

One of the first factors one must consider when beginning to work as an internal contractor in Denmark is finding the best-suited contractor engagement structure under which they will work and get paid. International contractors can choose from several avenues that best suit their needs. Some of these options include.

• Operating as a self-employed contractor or freelancer. However, one should note that this option may be more suited to EU citizens than to non-EU citizens because the visa sponsorship requirements for non-EU citizens would make this option more difficult to pursue.

• Establishing a limited company/or using their existing limited company.

• Working with an Employer of Record (EOR) or Contractor Solutions Company - 3C Global Group

It's important to note that contractors must weigh the relevant options according to their needs to determine which is best for them. However, they must also ensure they meet their tax obligations, correctly classify themselves, and understand their liabilities to ensure compliance with Danish law. Get in touch with our team today if you wish to learn more and find the employment structure that best suits your needs.

It is imperative to note that contractors working under their own business entity or as freelancers should retain records of their accounts, including business expenses and invoices issued to clients, under the Danish Bookkeeping Act.

As mentioned, international contractors living in Denmark must ensure they correctly classify themselves and meet their tax obligations to comply with international and Danish tax laws. Depending on what employment structure one chooses. Some key factors for contractors to consider and be aware of include:

• Danish Tax Card: Before commencing work in Denmark, all individuals must obtain a tax card from the Danish Customs and Tax Administration (SKAT). This can be done by submitting a preliminary tax assessment for the remainder of the tax year, which ends on December 31st.
• Filing Taxes: All taxes must be filed accordingly before the May 1st deadline.
• Social Security Contributions: All individuals living and working in Denmark are required to pay a mandatory social security contribution of DKK1,135 per annum.
• Expat Tax Scheme (ETS): Some employed contractors may be eligible for the tax scheme reserved exclusively for foreign citizens employed by a Danish organisation or EOR /contractor solutions company (3CGlobal). This tax scheme can see international workers who meet the eligibility requirements pay a lower tax rate of 31.92% of earnings. To meet the eligibility requirements for this scheme, one must have not been a tax resident in Denmark for at least ten years and earn, on average, DKK61,500 per month.
• Local taxes: One should note the various Danish taxes one who is working in Denmark may be subjected to, including:
  • Municipal Tax: This tax is specific to the region where one lives and can vary across locations. Typically, it amounts to approximately 25% of one's taxable income.
  • Labour Market Tax: This local tax is typically 8% of one's taxable income.
  • State Tax: The national Danish state tax varies between 12.1% and 15% depending on one's earnings.

Unsure of what taxes you must pay? Our team at 3C Global Group works with our clients to ensure they are fully compliant with the tax laws of the country in which they work. We guide our clients through the process, making achieving compliance easy. Contact our team today to learn more.

In Demark, there is only the standard rate of VAT, with some specific goods charged at 0% and select services such as those within the education and healthcare sectors receiving a VAT exemption (However, providers of these services will instead be required to pay Denmark's payroll tax. The standard VAT rate in Denmark is 25%. Businesses in their first-year excess have income exceeding DKK50,000 and will be required to register for VAT. Under Danish law, the contractor should retain all VAT records for six years.

All international contractors and freelance professionals working in Denmark must ensure tax compliance. Many countries use the 183-day rule to help determine where an individual is tax resident and liable for taxation on their worldwide income. Generally speaking, the 183-day rule applies to the number of days within a 12-month rolling timeframe or calendar year an individual spends in that country. One important distinction to note is that the criteria for this varies from country to country. Please check out our article here to learn more about the 183-day rule and how it impacts you. To best ensure compliance, speak with taxation experts before issuing your application. Our team at 3C Global are experts in European tax compliance and can help you ensure you comply with the relevant tax laws.

Navigating tax compliance and payment structures as an international contractor or freelance professional in Denmark is essential. Choosing an employment structure, understanding tax considerations, managing VAT obligations, and ensuring social security and insurance contributions are in order are all crucial steps in compliance with Danish laws and regulations. It's essential for international contractors and freelancers to be well-informed about the requirements and to seek expert guidance when necessary. Whatever your international contracting query, our knowledgeable team at 3C Global Group is on hand to help. Our services are designed to ensure compliance and peace of mind for our clients and contractors. Please do not hesitate to contact us today to get started!

Sign up for our newsletter for the latest industry insights and company news.