Do foreign companies temporarily operating in Denmark pay taxes in Denmark?

It is not unusual that businesses or companies in other EU/EEA countries carry out temporary work in Denmark

If you or your business find yourself in this situation, you should be aware that Danish rules may apply, causing taxation and a duty to register with the authorities.

In this article, we would like to provide you with a general overview of the Danish rules and their application, when you work on a temporary basis in Denmark.

What you should know

• You should register with the Register of Foreign Service Providers (RUT), before you start your work in Denmark.
• If you register too late – or provide incorrect information – you may be sanctioned with daily fines.
• If you post workers to Denmark, you should consider which country’s social security rules would apply to your employees while they are in Denmark. It might be expensive for you if you make the wrong assessment.
• If your business is established or registered in your home country, and you temporarily provide services in Denmark, you or your employees may be obliged to pay taxes or VAT in Denmark.

As a foreign business, working temporarily in Denmark you should comply with Danish regulations on occupational health and safety and taxation. In order for Danish authorities to supervise and inspect your business, the first thing you should do is register with the Register of Foreign Service Providers (RUT).

RUT-registration should be done digitally to the Danish Business Agency (www.virk.dk) before you start your work in Denmark. Any subsequent changes (e.g., changes in workplace, new-posted workers, longer work-period, etc.) should be immediately notified to RUT.

After you have notified the RUT, you will be receive your RUT number, which you will need to use later on, when you contact the Danish authorities.

In RUT, you will need to disclose any VAT registration in home country, social security circumstances in the home country of the employees, general company information. The Danish authorities may later check all of this information.

If your RUT-reporting is late or incomplete, you may be sanctioned with a fine of approx. DKK 10,000 – DKK 20,000. In aggravating circumstances, you even receive daily fines (if you fail to report specific information). If your business completely neglect registration even after multiple warnings and fines, the Danish Working Environment Authority (WEA) will request the police to bring charges against your business.

Your company or your employees may be liable to pay Danish tax, if you provide services in Denmark on a short-time basis (usually 6-12 months). Typically, a foreign company and its employees should pay Danish tax and labor market contributions when carrying out building, construction, assembly or installation work in Denmark. The same applies if your employees do not work directly for the foreign company, but are leased out to a Danish company to perform work in Denmark.

Your company should register and pay VAT in Denmark, if you, as a foreign company or self-employed, provide services for private persons in Denmark, provide services to a registered Danish company that is not subject to reverse charge, or hire sub-contractors that are providing services to your company when you are carrying out a task in Denmark. Finally, if you provide services to the Danish market with posted workers, you need to consider the coverage of social security for you and/or your employees.

If your company posts workers to carry out work for a Danish company in Denmark, you will not have to pay social security contributions under the Danish law, as long as your posted workers are already insured under the legislation of the worker’s home country. Otherwise, you should register as an employer in Denmark and pay labor market supplementary pension (ATP) and other labor contributions for your posted-employees.

The way to prove employee’s social security coverage in the home country is to obtain a so-called “A1 document”. As an employer, it is your responsibility that your employee apply for an A1 document in the home country, before the posting period in Denmark starts.

If you are a self-employed planning to work temporary in Denmark, be aware that you should also apply for an A1 document, by contacting your home country’s office for posted workers.

Tax is a complex and ever-changing subject. This article provided a simple overview. You cannot rely on this article as legal advice.

Would you like to hear more about foreign companies’ regulation and taxation in Denmark? Contact us today and find your answers with attorney-at-law Wivi H.Larsen.