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Expat scheme – bill of amendment

The bill concerns an extension of the expat scheme as well as an increase of the tax rate.

The special Danish tax scheme for foreign researchers and key employees – the expat scheme – is proposed amended, so the scheme is extended from five to seven years against the flat tax rate being increased from 26% to 27%. To gain clarity of the bill’s consequences, read more below.

1 December 2017

On 16 November 2017, the Danish Minister of Taxation introduced a bill concerning an amendment of the expat scheme in Denmark. If the bill is passed, it is expected to come into force for the income year 2018 and onwards.

The bill will not amend the previous conditions for being covered by the expat scheme in section 48E of the Danish Withholding Tax Act; these conditions must, thus, still be fulfilled in order for the rules to be applicable.

Extension of the expat scheme
The bill proposes that the expat scheme is extended from five years to seven years.

Increase of the flat tax rate from 26% to 27%
In order to cancel out that the period of the expat scheme being extended, it is proposed, at the same time, to increase the flat tax rate from 26% to 27%. Thus, the taxation according to the expat scheme will, including AM-tax, increase from 31.92% to 32.84%.

Implications for individuals who per 1 January 2018 are covered by the expat scheme
Individuals – who per 1 January 2018 are taxed according to the rules in the expat scheme, i.e. sections 48E and 48F of the Withholding Tax Act – may, if the bill is passed, be taxed according to the expat scheme for altogether seven years rather than five years. Furthermore, this will lead to any individual subject to the expat scheme being taxed as from the income year 2018 with a flat tax rate of 27% instead of the current 26%. The proposed increase of the tax rate to 27% will apply, regardless of whether the individuals concerned wish to utilise the opportunity for taxation according to the expat scheme for the additional two years (altogether seven years) or not.

Implications for individuals who per 1 January 2018 were covered by the expat scheme for five years (the present maximum period)
The bill contemplates that individuals – who per 1 January 2018 have been taxed according to the rules in the expat scheme for altogether five years – cannot choose to continue being taxed according to the expat scheme. These individuals will then be subject to ordinary Danish income taxation per 1 January 2018.

Moreover, the bill also causes individuals – who previously were covered by the expat scheme and have used the current maximum period of five years – to not being able to return to Denmark and work in Denmark utilising the two additional years of the expat scheme.

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