Expertise
Employees on assignment abroad
For companies sending employees abroad for shorter or longer periods, and for HR and payroll teams who need tax, withholding and social security to fit together.
An international assignment creates obligations for both the employee and the employer before, during and after the assignment.
We coordinate payroll, reporting, tax and social security, including cases where previous arrangements need correcting.
How we can help
- Taxing rights before the assignment
- Shadow payroll and reporting
- Net salary agreements
- Tax, social security and A1
- Return home and subsequent years
Which country may tax the salary during the posting?
As long as the employee keeps a home in Denmark, they usually remain fully tax liable here. Whether the work country may also tax the salary is decided by the double tax treaty.
Under most treaties, the country of residence keeps the taxing right if the employee spends less than 183 days in the work country within the relevant period, the salary is not paid by an employer there, and it is not borne by a permanent establishment in the work country. If just one condition is not met, the work country can tax from day one.
Several countries treat it as hiring-out of labour when a posted employee in reality works for a local company. The 183-day rule then offers no protection, even for a short stay.
When can the employee get relief under section 33 A?
If the employee works abroad for at least six months and spends no more than 42 days in Denmark within a six-month period, relief can be granted on the Danish tax on the salary under section 33 A of ligningsloven (the Danish Tax Assessment Act). Weekends and holidays in Denmark count towards the 42 days, and the employee must be liable to tax in the work country.
Relief is full if the work country has the taxing right under the treaty, or if there is no treaty. If Denmark has the taxing right under the treaty, relief is half. Special rules apply to, among others, work on board ships and public-sector employees.
If the 42-day rule is breached, relief for the period can be lost. Travel days and time spent in Denmark should therefore be recorded as they happen and be possible to document.
What does the employer need to do in payroll?
If the employee remains fully tax liable in Denmark, you generally continue withholding A-skat (income tax) according to the tax card. Section 33 A relief or relief for foreign tax is built in through the employee's forskudsopgørelse (preliminary income assessment), so the tax card is correct. AM-bidrag (labour market contribution) is only withheld if the employee remains covered by Danish social security.
If the work country also taxes the salary, you may have to register and withhold tax there while the Danish payroll continues. Net pay agreements and posting allowances have to be calculated in both systems, so the employee neither pays twice nor too little.
Anyone who fails to withhold correctly is generally liable for the shortfall, unless they can show that they were not negligent.
What should you watch for when the employee returns?
Bonuses, share-based pay and holiday pay earned during the posting may be fully or partly taxable in the work country, even if they are paid after the return. Conversely, foreign tax that was overpaid has to be reclaimed abroad.
- The A1 certificate expires while the employee is still posted.
- Days spent in Denmark are not counted, and section 33 A is breached without anyone noticing.
- The posting is extended without reassessing the 183-day rule and social security.
- The work country's requirements to register and notify posted workers are overlooked.
Frequently asked questions
What is the 183-day rule?
The rule appears in most double tax treaties. Salary for work in another country is only taxed in the country of residence if the employee spends less than 183 days in the work country in the relevant period, and the salary is neither paid by an employer in the work country nor borne by a permanent establishment there. In many countries' practice, the rule offers no protection in hiring-out situations.
What is the 42-day rule?
It is a condition for relief under section 33 A of the Danish Tax Assessment Act. The employee may spend no more than 42 days in Denmark within a six-month period, and holidays and weekends count. If the limit is exceeded, relief for the period can be lost.
Should we keep withholding Danish tax during the posting?
Generally yes, if the employee remains fully tax liable in Denmark. Relief and credit for foreign tax are built in through the preliminary income assessment, so the withholding is correct. If the employee is covered by social security in the work country, no AM-bidrag is withheld.
How long can an employee be posted under Danish social security?
Within the EU, the EEA and Switzerland, for up to 24 months with an A1 certificate from Udbetaling Danmark. Longer periods require a special agreement between the countries. Agreements with countries outside Europe have their own rules.
Who is liable if too little tax was withheld?
The employer is generally liable for tax that should have been withheld, unless it can show that it was not negligent. The employee's final tax is still settled in their annual tax assessment.
What does this mean for you?
This page is general. Your own situation may be different, so talk to us before you act on it.