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Taxation aspects of international researchers' employment by AU

With effect from the 2018 fiscal year, the Danish Parliament (the Folketing) has adopted amendments to the Danish researcher taxation scheme.

General rules concerning researcher taxation

As a general rule, employees from abroad must pay tax in Denmark on their salary from employment by Aarhus University (AU) in connection with the performance of their work in Denmark.  There may be exceptions to this, for example if the provisions of a double taxation convention prevent Denmark from taxing the salary.

Full or limited taxation liability

To be eligible for the researcher taxation scheme, the researcher must have either full or limited tax liability in Denmark.

Full tax liability in Denmark arises on gaining a place of residence in Denmark or on staying in Denmark for a consecutive period of at least six months (full tax liability arises as from the commencement of the stay).  

Limited tax liability in Denmark arises when the researcher does not have a place of residence in Denmark and stays in Denmark for less than six months.

Conditions

The most important conditions to be eligible for the researcher taxation scheme are:

  • The researcher may not within the last ten years prior to employment have had full or limited tax liability in Denmark concerning salary, etc. This does not apply, however, if the employee was eligible for taxation under the researcher taxation scheme under the previous employment agreement and the tax liability expired at the same time as the previous employment.

  • Guest lecturers and similar persons who, within the past ten years during one or more periods with a total duration of no more than 12 months, have had limited tax liability in Denmark concerning their salary as guest lecturers will be eligible for the special researcher taxation scheme under any subsequent employment agreement. Research is considered to be covered by guest lectureships and similar activities.

  • Guest lecturers and similar persons who, within the past ten years, have been fully tax liable in Denmark as a consequence of staying in Denmark for more than six months, and whose stay at a Danish university is financed exclusively from international funds, are not required to fulfil the requirement not to have been fully tax liable in Denmark during the past ten years.  The period of full tax liability may have had a total duration of no more than 12 months. Research is considered to be covered by guest lectureships and similar activities.

  • The tax liability to Denmark will commence in connection with the commencement of employment. (A stay for up to one month before commencement of employment is accepted.)

  • In accordance with the Job Structure for Academic Staff at Universities, the researcher must be employed in a position at a minimum of assistant professor level at the time of employment.

  • In accordance with the Ministerial Order on approval of researchers , in order to achieve approval of his or her qualifications as a researcher the person in question must be able to document qualifications equivalent to the level for employment at assistant professor or a higher level, or at researcher/project researcher or a higher level. Approval as a researcher under the rules for taxation of researchers requires academic qualifications at PhD or an equivalent level, cf. the circular on the Job Structure for Academic Staff at Universities. Under the Ministerial Order, research and development work comprises activities as defined by the OECD (see the aforementioned link to the Ministerial Order).

                                                                                          

Taxation period and taxation level

Under the researcher taxation scheme, as from the 2018 fiscal year the salary is subject to gross taxation at 27% for up to 84 months (seven years), instead of the normal income tax rate. On the other hand, employees will not be entitled to any deductions from their salary income, nor to any personal allowance when the tax is calculated. Gross tax including contributions to the Danish social security scheme amounts to 32.84%.

Provided that the general eligibility conditions for the researcher taxation scheme are fulfilled, the extension of the researcher taxation period by 24 months may be used by researchers who:

  • As at 1 January 2018 are currently eligible for the previous researcher taxation scheme. The taxation rate increases from 26% to 27% as of 1 January 2018, however.

  • Researchers who as at 1 January 2018 have not used the 60 months under the previously applicable rules, will be transferred automatically to the rules for 84 months and a tax rate of 27%.

Researchers who as at 1 January 2018 have used the 60 months cannot be transferred to the new scheme.

After the expiry of the researcher taxation period, the employee will be subject to taxation according to the general Danish tax rules.

For further information concerning taxation under the researcher taxation scheme, see the guide in Danish or English from SKAT (the Danish Customs and Tax Administration).

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