Reclaiming VAT from non-EU member states

Businesses claiming a refund of VAT from non-EU member states must note that the deadline for applications is 30 June in most countries. Consequently, applications for a refund of VAT for 2016 must be submitted on or before 30 June 2017.

A condition for claiming the refund is that a business does not undertake any registrable activity in the country in question. The right of refund follows the national rules applicable to tax relief in the relevant country.

As opposed to refunds from EU member states, the application cannot be submitted via the website of SKAT (the Danish tax authorities), but must be submitted on a form from the individual country (may be in the original language), which must be forwarded directly to the local tax authorities of the country in question, most often accompanied by original documents.

 Driving on holiday abroad may reduce the tax base of a company car

When an employee has a company car, the employer normally pays all the costs of the car, including the costs of fuel. However, some employers have a car policy according to which fuel costs etc. are payable by the employee if the employee uses the car for driving on holiday abroad.

If the employee is to pay the fuel costs of driving on holiday abroad, these costs may in certain cases reduce the tax base of the company car. However, it is a condition that the employee submits the original receipts to the employer, who will then book the amount as operating expenses and charge a corresponding amount to income in the form of user charges in the accounts of the company car.

 Personal data – privacy policy and contract of employment

The new Personal Data Regulation will apply from 25 May 2018. The regulation defines requirements for businesses’ processing of personal data and is a tightening of the existing rules of the Danish Act on Processing of Personal Data.

The term “privacy” is often used in relation to processing of personal data, and the new regulation will increase focus on businesses’ protection of their employees’ data and rights, e.g. by means of a privacy policy (or personal data policy).

When businesses process data on their employees, a number of matters need to be addressed. They can be addressed in a privacy policy and should generally include the following information and data:

  • Identity of the business
  • Contact details of a data protection officer (DPO) or representative, if applicable
  • The purpose of collecting and processing personal data in the business
  • Authority for the collection of personal data
  • Legitimate interests pursued by the business whose processing of personal data is based on a balancing of interests
  • How are personal data stored?
  • What personal data are processed?
  • Recipients of personal data when such data are disclosed to third parties
  • Transfer of personal data to third countries
  • Security measures
  • Is the information a statutory requirement or a requirement under the contract and what are the consequences if the information is not provided?
  • Ensuring that correct information is provided
  • Employee rights
  • Storage period
  • Existence of profiling, if any

We recommend that the contract of employment should include a provision on the processing of personal data and a reference to the privacy policy of the business to the effect that the business meets its duty of disclosure. By his or her signature, the employee agrees and accepts that the business collects, processes, discloses and uses the employee's personal data in compliance with its privacy policy.

At Azets HR Legal, we can help you gain an overview so that you are ready to comply with the new requirements. In the course of 2017, we will be holding seminars on the subject, and we will offer you to-do lists, plans and draft agreements, including privacy policies, and update contracts of employment, review already existing documents and provide advisory services in relation to personal data.

 Residing in Denmark and working in Sweden

If you are residing in Denmark and commuting to work in Sweden, you need to decide whether you want to pay tax under the Swedish SINK regime (income tax of only 20% but no tax relief) or pay ordinary income tax to Sweden.

Application for payment of SINK tax to Sweden:

SINK tax is a state gross tax on earned income, meaning that you may have other income at the same time, such as interest income, which remains taxable in Denmark.

The SINK tax rate is 20%, but there are no tax relief options. If you want to pay SINK tax, you must submit an application to Skatteverket (the Swedish Tax Agency). The application must be renewed every year.

Advantages of the SINK tax regime:

The advantage is not so much the low tax rate (20%) as the general level of wages and salaries is lower in Sweden, because businesses pay a payroll tax to the Swedish state of 31.42% (2017) of the payroll total.

This being the case, the total tax burden will be largely the same in Sweden and Denmark. So the highest paid people (earning in excess of DKK 750,000) may stand to gain a small advantage by opting for the SINK tax regime.

The advantage of the SINK tax regime exists particularly in the cases where a spouse may deduct interest expenses from his or her Danish income.

Exemption from vehicle registration tax on a car registered in Sweden:

An application may be submitted to SKAT (the Danish tax authorities) for permission to use a Swedish registered car in Denmark.

If the foreign (Swedish) employer has the power to exercise control over the employee, it is possible to be granted exemption from vehicle registration tax when the car is used in Denmark. To be eligible for exemption, a principle of substance must apply according to which it is essential that genuine and effective economic activity is pursued for the Swedish business. 

A car registered in Sweden may not be driven in Denmark until permission has been granted by SKAT.