Amendment of the foreign researcher tax scheme as per 1 January 2017

By Søren Narv Pedersen, Mia Boesen


In December 2016, the Danish Minister of Taxation presented an amendment regarding the so-called foreign researchers tax scheme specified in section 48(E) of the Danish Taxation at Source Act. This amendment, which entails a relaxation of the previous rules, has been adopted and came into effect on 1 January 2017.

Generally, the amendment entails that that employees based in Denmark can use the scheme although a part of the salary is subject to taxation abroad.

It is thus possible for the employee to remain covered by the tax scheme for foreign researchers, if an employee works less than 30 days outside Denmark within one calendar year. This also applies, even if the taxation right passes to another country during this short period of time pursuant to the double taxation agreement.

In the calculation of the 30 days, all working days are considered as full working days. Half working days will thus count as full working days. The new rules will therefore mean that the tax amount paid in accordance with the tax scheme for foreign researchers can be reduced by the foreign tax paid of the annual salary.

This was not possible according to the previous rules, pursuant to which it was a requirement that the employee which was fiscally based in Denmark and did not perform work outside Denmark in situations causing that the taxation right of the salary passed to a foreign country in accordance with the double taxation agreement.

This caused that employees who worked in a Danish branch (fixed business premises) of a foreign headquarter would not be able to apply the tax scheme for foreign researchers, if the employee had more than one working day at the headquarter (i.e. outside Denmark), The same applied if an employee at a Danish headquarter performed work in the company's branch (fixed business premises) outside Denmark, and the taxation right of the salary passed to this country in accordance with the double taxation agreement.

Based on this, the rules have now been relaxed in order to accommodate such inflexible situations. The amended rules will have great significance for international and global companies in which employees often work in different countries during short period of times.