Secondment

Tax on foreign income

If you earn income abroad while maintaining Danish tax residency, you are generally subject to Danish tax on this income. However, you can usually credit the foreign tax against your Danish tax. For example, if you earn DKK 500,000 in the UK, where 33% income tax is withheld, you only pay Danish tax on the difference between the Danish tax rate and the UK tax paid. This is called tax relief under the credit method.

Exemption relief

If you are employed by a foreign-based employer or work abroad for af Danish employer and are on assignment for more than six months, you may qualify for exemption relief under Section 33A of the Danish Tax Assessment Act (Ligningsloven § 33A). Key requirements include:

• The employer must be stationed abroad or, if it is a Danish-based employer, there must be a clear business interest in the secondment.
• You must be abroad for at least six months.
• During any six-month period, you cannot spend more than 42 days in Denmark, including travel days. For example, arriving in Denmark at 23:59 counts as one full day.

Assignments across multiple countries

You can be assigned to several countries without having to spend six months in each. You may also work for multiple employers and have multiple assignment periods. Careful planning is required, and any applicable double taxation agreements must be taken into account.

Tax relief under the exemption method

If you qualify under the assignment rules, you may also be able to use the exemption method for tax relief. Your foreign income is included in your Danish global income, but the portion of tax attributable to that income is not paid to Denmark.

Example:

• Assignment: 9 months in Germany, 3 months in Denmark.
• Income: DKK 1,000,000 in Germany, DKK 200,000 in Denmark.
• Global income: DKK 1,200,000.
• Total Danish tax: 50% of DKK 1,200,000 = DKK 600,000.

Under the exemption method, you do not pay Danish tax on the portion corresponding to the German income (DKK 1,000,000), which in this example reduces Danish tax by DKK 500,000. The German income still counts for determining your tax progression, so you are taxed in Denmark as if earning DKK 1,200,000, but only proportionally on the Danish portion.

Important considerations

It is not always straightforward to determine whether the assignment rules apply. Many choose to obtain a binding ruling from the Danish Tax Authority to clarify whether Danish tax applies to a particular income.

Contact us if you need guidance on tax issues related to international assignments or possible alternative solutions.