Working in Denmark? Are You Tax Aware?

Given the close proximity and strong business ties with the UK, Denmark is an attractive location for UK companies to operate in. But what some companies may be unaware of is that, when undertaking work in Denmark, whether this be offshore or onshore, the UK company and its employees may have resultant Danish tax liabilities.

Recently, we have seen instances of clients receiving letters from the Danish Tax Authorities, SKAT, requesting that a Danish Corporate Tax Return is filed for the year ended 2020 which indicates that SKAT are taking a closer look at non resident companies undertaking work in Denmark. Failure to submit returns and make payment of any resultant liabilities can result in penalties and give rise to other associated issues.

In Denmark, where a UK resident company is providing an offshore service, a Danish Permanent Establishment (PE) can be created from the very first day of the work being performed, meaning that the UK resident company can be liable to Danish Corporate Income Tax (CIT), and the employees to Danish Personal Income Tax (PIT), at the very outset.

In addition, there will be considerations as to whether such Danish taxes suffered can be relieved against home country taxes, to minimise double taxation. Further, failure to submit returns and pay resultant liabilities can result in penalties and give rise to other associated issues.

If you have recently received such a letter and require advice in determining whether there is a requirement to file a Danish CIT Return, or indeed require assistance in the preparation and filing of a Danish CIT Return, we would be happy to assist.

AAB have significant experience in advising companies that have, or are considering, working in Denmark. We can advise how exposure to Danish taxes can either be mitigated, or incorporated into costings, and work with clients to ensure they are fully aware of the exposure to Danish taxes they will face as a result of their work in Denmark thus avoiding any nasty tax surprises.

If you require support in this area, please contact Ruth MacNamee or your usual AAB contact. To find out more about AAB’s International Large Corporate Team, please click here.