Deloitte Insights

Expat scheme

Amendment passed with effect from 1 January 2018

The special Danish tax scheme for foreign researchers and key employees – the expat scheme – is amended with effect from 1 January 2018, so the scheme is extended from five to seven years against the flat tax rate being increased from 26% to 27%.

5 January 2018

On 19 December 2017, the Danish Parliament passed an amendment of the expat scheme in Denmark. The amendment to the act comes into force for the income year 2018 and onwards.

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

Extension of the expat scheme
With the amendment, 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 is extended, the flat tax rate is increased from 26% to 27%. Thus, the taxation according to the expat scheme will, including AM-tax (Danish labour market contribution), 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 – can with the amendment 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 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 have been covered by the expat scheme for five years (the present maximum period)
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.

Individuals – who previously were covered by the expat scheme and have used the current maximum period of five years – will not be able to return to Denmark and work in Denmark utilising the two additional years of the expat scheme.