Cross-border commuters

What do the cross-border commuter rules give you?

With limited tax liability, you can only deduct expenses linked to the salary you earn in Denmark, plus a few other items such as unemployment insurance fees and interest on loans secured on Danish real property. If you opt for grænsegængerreglerne (the cross-border commuter rules), you get broadly the same deductions for personal and family expenses as someone who is fully tax liable.

If you were only tax liable for part of the year, the rules also give you a personal allowance for the full year. If you are married and living with your spouse at the end of the year, you can be taxed jointly, subject to certain conditions.

• Private interest expenses, including interest on loans for a home abroad that you live in yourself
• Transport deduction for the journey between home and work
• Contributions to private pension schemes
• Maintenance and child support payments
• Donations to approved charities

How is the 75% test calculated?

At least 75% of your total income must be salary or self-employment profit that Denmark has the right to tax. Your total income is calculated under Danish rules and includes income from your country of residence and any other country.

The calculation follows special rules and does not match your ordinary taxable income. Investment income, rental income or a pension in your country of residence can take you below the threshold, even if almost all your salary comes from Denmark.

The double tax treaty decides which working days Denmark may tax. Days working from home or travelling to other countries can move part of your salary out of Danish taxation, and therefore out of the income that counts towards the 75%.

How and when do you opt in?

You opt in actively when you file your tax return for the income year, and the conditions are assessed year by year. Qualifying in one year does not automatically qualify you the next.

You can include the deductions in your forskudsopgørelse (preliminary income assessment) so that the right amount is withheld from your first payslip. If the 75% test turns out not to be met at year end, the extra deductions fall away, which can leave you with tax to pay.

Whether the scheme pays off depends on your deductions in that specific year. It is worth calculating before you opt in.

Common pitfalls for cross-border commuters

The commuter rules are a tax matter. Social security follows its own rules and may point to a different country than tax does, so the two have to be assessed separately.

• Income in the country of residence rises during the year, and the 75% threshold is breached without anyone noticing.
• Days working from home are not recorded, so the split of salary between the countries cannot be documented.
• Interest on the home in the country of residence is deducted in both countries.
• The deductions stay in the preliminary income assessment even though the conditions are no longer met.