Contracting in Denmark – overview for UK contractors
Of all the EU countries that UK contractors will regret losing their instant access to once their EU citizenship expires on October 31st(officially at least), Denmark has to be right up there.
It’s sheer attractiveness as an overseas contracting location to Britons needs no introduction, writes Nikolas Papageorgiou, EU country manager at overseas contracting solutions firm Access Financial.
Denmark for contractors: in an economic nutshell
In fact, only last month, despite Brexit supposedly sapping all our energies and willingness to travel to, let alone work in an EU nation, one ContractorUK reader wanted the lowdown for a contract in Copenhagen!
And in an economic sense, it’s no surprise. Denmark’s economy posted a surprisingly strong growth rate in the second quarter this year, with manufacturing and exports showing resilience right in the face of a global slowdown.
Denmark’s GDP rose 0.8% in the second quarter, according to a trend indicator from Statistics Denmark. The economy grew 0.1% in the first three months of the year, according to final estimates from the country’s statistical agency.
What are the benefits of working in Denmark as a contractor?
The top three benefits of working in Denmark which contractors most often report, are:
- High quality of life
- The country consistently ranking in the top echelon of ‘Best Countries to Live in’ lists, such as this business-led one from April (which puts Denmark in first place).
- Solid, thorough social security protection
What about worker take-home pay in Denmark?
The maximum salary retention you can achieve in Denmark can reach between 65% and 75% of your gross income if you are an expatriate, and it depends on the type of contract that you hold.
What are the levels of taxation in Denmark?
| Local taxes (Danish Krone) | Rate |
|---|---|
| Income Tax (average) | 24% of the taxable income |
| State Taxes | 12.16% of gross income |
| Top Tax | 15.0% of gross income exceeding DKK 513,400 |
| Labour Market Tax | 8% of gross income |
What are the Social Security Requirements of Denmark?
Employer contribution:
| Employer contribution towards Social Security | Annual (in DKK) |
|---|---|
| Contribution to maternity fund | 950 (£109) |
| Labour Market Supplementary Pension (ATP) | 2,272 |
| Labour Market Occupational Disease fund (AES) | 368 |
| Employer's Reimbursement System (AUB) | 2,866 |
| AFU | 4.5 |
| FIB Finance Contribution | 585 |
| Total Contribution | 7,045.50 |
Employee contribution:
Employees are liable to pay a supplementary pension contribution (ATP) of DKK 94.67 per month. This is deductible for income tax purposes
How do I register locally in Denmark? What local registration do I need?
To live and work in Denmark legally as an EU national, you only need to register at the local town hall. If you are a ‘third country’ national, you need a valid work permit sponsored by a local employer.
Can I use my limited company in Denmark?
Working in Denmark using your own Limited Company solution is possible for individuals from the EU and EFTA Member States.
So you have your limited liability company in the United Kingdom. You will act as a sole shareholder and the remunerated director of the UK limited company, drawing a local salary and paying Danish taxes on the salary. The balance of the company income will be taxed in the UK according to the UK corporate taxation laws.
What is the Expat Tax Scheme?
A popular option when contracting in Denmark is the country’s Expat Tax Scheme (ETS). This offers expat workers an alternative to paying tax at progressive rates. The benefits, if a contractor qualifies, are considerable. The ETS flat rate of income tax is 32.84%, which is highly favourable compared with Denmark’s top marginal rate (including payroll taxes) of 56.5%. To qualify for the ETS-package, the contractor must meet the following requirements:
- Not have paid normal income tax in Denmark within the last 10 years
- Have an average monthly salary of minimum €8,775
- Have an employment contract in Denmark
- The contract must not run longer than seven years
- For qualifying foreign contractors, the ETS is usually the preferred method for working in Denmark.
Conclusion
Finally, while the country does not feature in our (2018) table of best-paying contractor nations, or the most lucrative, Denmark holds a strong allure for many British contractors with its business culture, high standard of living, together with a more relaxed, family-orientated lifestyle. It’s an allure that many Britons (and Copenhagen-based companies) will be hoping is not tarnished by whatever temporary work and residency arrangements are put in place post the UK’s withdrawal from Europe, on Oct 31st or not.
