PAYE operation: international employments: Denmark: onshore workers
Subjects needing special care
UK resident employees working onshore in Denmark are not normally liable to pay personal taxes to the Danish Revenue Department unless
- The employee will be present in Denmark for more than 183 days in any twelve month period (this does not mean in a fixed year)
- The employee is paid by a concern that is itself resident in Denmark
However, there are different rules where the employee is part of a hired out labour force that has been hired out by a UK employer.
The remainder of this subject is presented as follows
Hired out labour force working onshore in Denmark
Danish personal taxes can be charged on the earnings of a hired out labour force from the first day of each employee’s arrival if
- A UK employer hires out members of the UK resident labour force
- The terms of hire give the Danish concern the power to direct and control the hired out workers
- The UK employer gives up any responsibility for supervising the work undertaken by the labour force
Hired labour force may also be liable to UK tax
UK employees, who are members of a labour force hired out by a UK employer, remain liable for UK tax on Danish earnings unless the stay in Denmark is more than a full tax year.
Where an employee is liable to UK tax
- The employer must operate PAYE and deduct National Insurance contributions even though Danish taxes are due
- Double Taxation relief is due in the UK on the lower of either the UK or Danish tax paid on Danish earnings
- Relief is due to the employee, not the employer
UK employer may ask for help
If a UK employer knows in advance about how the Danish taxation requirements will affect its hired labour force, you may be contacted for the help offered by HMRC in the CWG2 Employer Further Guide to PAYE and NICs.
If you are satisfied that the overseas tax is correctly due, the employer can be authorised to operate Net of Foreign Tax Credit Relief. Follow the procedures at EP Appendix 5 (PAYE82001).
In cases of doubt or difficulty refer to Personal Tax Customer, Product & Process (PTCPP), PAYE Technical, Shipley for advice.
Delay in UK employer finding out about Danish taxation requirements
For various reasons there may be delay in the UK employer finding out about Danish taxation requirements.
Often a UK employer will only find out about Danish taxation when the labour force is in Denmark. You will not be able to release back to the employer that part of an employee’s UK deductions which are covered by Double Taxation relief. Repayment can only be made after the end of the tax year. This is done by the employee claiming Double Taxation relief in his or her self assessment return.
Ask the UK employer for details of
- The names of employees who paid Danish tax
- The amount of onshore earnings (labour element only) of each
- The name and location of the Danish concern for whom work was done
- The amounts of Danish tax paid and the exact dates on which it was paid
In cases of doubt or difficulty refer to PTCPP, PAYE Technical, Shipley for advice.
As an alternative to deducting both UK and foreign tax from an employee’s wages, the employer may propose paying
- Overseas tax
- Gross wages
- The overseas tax payment repaid to the employer as Double Taxation relief
If this happens, take the following action
Tell the employer that
- The overseas tax would be additional earnings chargeable as employment income
- Overseas tax is a personal liability and unless met from earnings liable to UK tax, there is no claim to Double Taxation relief
- Double Taxation relief is due to the employee not the employer
If the point is pressed, send
- All the relevant papers, a summary of the facts and action already taken to PTCPP, PAYE Technical, Shipley before you reply to the employer