New tax treatment of expat benefits
Tax return assistance is a taxable benefit
Several 2021 tax controls by the Danish Tax Agency have indicated a changed approach to taxation of expat benefits – in particular tax liability on employer paid tax return assistance, including reporting obligation for the employer
27 April 2022
We have recently observed that the Danish Tax Agency has carried out tax controls where focus has been on the services, which the employer provides to employees who are expatriated to Denmark. Several 2021 tax controls have specifically focused on these "mobility services" and the conclusions from these reviews indicate a changed approach – in particular regarding the assessment of tax liability on tax return assistance.
In Deloitte, we believe that the Danish Tax Agency's approach and practice has now become sufficiently clear so that we can specifically inform that the following services should be regarded as a taxable benefit (non-exhaustive list):
- Tax return assistance
- Long Term Incentive Plan assistance (related to tax return)
- Services rendered to family members of the employee
- Et al.
With the tax liability also comes a reporting obligation to eIncome. Specifically, this means that tax return assistance provided for the income year 2021 – and which is paid to external adviser in 2022 – must be reported to eIncome in the month in 2022 in which the expense is incurred. The same applies to other "mobility services" such as return trips during the expatriation, 48E applications, entry and exit meetings, residual tax calculations, etc., unless the calculation is made for the sake of the employer in connection with agreed net salary and adjustment of gross salary.
At the same time, we also want to mention that there are still many employer paid services that are tax free – depending on the nature of the employment contract. But for employees that are temporarily seconded to Denmark (where the original employment relationship abroad is retained during the assignment with the (temporary) Danish employer) – following services are still considered tax free (non-exhaustive list):
- Shipment of household goods
- Departure and return tickets incl. family
- Relocation assistance (certain settling in/departure services)
- Language training
The above raises several issues to be considered:
- How to report this?
- Who is to cover the income taxes that arise from the taxable services?
- Does this need to be addressed in existing and/or future contracts?
- Should existing mobility policies be reviewed?
If you would like to discuss this – please reach out and we will be pleased to assist. We can provide a full detailed list of taxable/tax-free benefits/services tailored to your company, if needed.
Dansk version her.