Reintroducing more favourable rules for taxation of share-based remuneration
The Danish parliament has enacted the Bill that essentially reintroduces the former favourable rules governing taxation of share-based remuneration. The Act comes into force on 1 July 2016.
The new tax rules – which in essence correspond to the former rules set out in section 7 H of the Danish Tax Assessment Act (repealed in November 2011) – will, within this framework, provide an opportunity for allocating shares as well as purchase and subscription rights where the employee will only be taxed at the time of selling the acquired shares and where the tax will be levied on the capital gain on the shares and not on the employee's earned income.
To apply the new rules, certain conditions have to be met, including the condition that the employer and employee have agreed to apply the new rules.The rules may be applied only to agreements on payment of share-based remuneration entered into on or after 1 July 2016.
New rules on posting come into force on 18 June 2016
The EU directive on the enforcement of the rules concerning the posting of workers has now been implemented in Denmark.
The rules will be of importance to all businesses regardless of whether they employ workers posted to Denmark (inpatriates) or have posted workers abroad (expatriates).
The new rules aim at ensuring that posted workers enjoy the rights to which they are entitled.
Denmark’s implementation of the EU directive falls into two parts:
1) Stricter requirements for information from foreign businesses
The new rules come into force on 18 June 2016 and will result in amendments to the current Danish Posting of Workers Act. Moreover, the disclosure requirements in the Danish Register of Foreign Service Providers (RUT) will be enhanced.
The idea is closer cross-border collaboration between the authorities and to give the Danish Working Environment Authority more powers when it comes to checking businesses employing posted workers, whether inpatriates or expatriates.
2) Everyone must contribute to a guarantee scheme for posted workers
The new rules also imply the setting-up of the Danish Labour Market Fund for Posted Workers. The Danish Act on the Labour Market Fund comes into force on 18 June 2016, but payment of contributions will not commence until 1 July 2016.
The Labour Market Fund for Posted Workers is a guarantee scheme for inpatriates/expatriates, and the Fund serves two fundamental purposes, i.e. to collect amounts due and owing and to cover receivables.
All employers, foreign as well as Danish, are required to contribute to the Fund from 1 July 2016. The contribution per employer is expected to amount to DKK 5-10 per year per employee.
The ordinary contribution to the Fund will be collected together with the other contributions to the Labour Market Supplementary Pension Scheme (ATP). Contributions will therefore be collected automatically from Danish businesses.
Foreign businesses temporarily providing a service in Denmark and not paying ATP for their employees will receive a separate demand for payment on the basis of their notifications to RUT (Danish Register of Foreign Service Providers).The first contribution will be collected for the third quarter of 2016, due for payment on 1 January 2017.
Who is RUT, and why should you know RUT?
The current rules and requirements for registration of foreign businesses and foreign labour in Denmark (known as the RUT register) will be tightened on 18 June 2016.
Foreign businesses or self-employed earners are under a duty to notify the Danish authorities of their work. The notification must be submitted to RUT, which is the Kingdom of Denmark’s official Register for Foreign Service Providers.
Danish private individuals and Danish businesses hiring foreign labour are required to request documentation to verify that the foreign business is duly registered with RUT. The assignor is obliged to report any non-registration to the Danish Working Environment Authority if the assignor has not been presented with such statutory documentation within three days of the commencement of employment.
Particularly stricter rules apply to foreign service providers in construction, agriculture, forestry, horticulture, gardening and cleaning.
Non-registration as well as non-fulfilment of the duty to request the submission of documentation is punishable with a fine, and Danish assignors (businesses and private individuals alike) risk incurring fines of up to DKK 10,000.
However, various exceptions apply where notification to RUT is not mandatory, for instance in case of participation in conferences in Denmark, including as a teacher/lecturer, short business trips, athletics or special fitting assignments.Azets' HR Legal Department has broad experience in this area and offers to provide assistance with inpatriation and expatriation of employees and to assume responsibility for notifications to RUT for foreign businesses and individuals operating in Denmark.
Company law compliance in connection with annual closing of financial statements
The deadline for filing the companies’ annual reports for the year ended 31 December 2015 was 31 May 2016. In connection with the closing of a financial year, the management of the company should note that not only the annual report is required to be kept duly signed in the company's files.
According to Danish company legislation, a company is obliged to prepare a general meeting memorandum where the agenda of the meeting must follow the chosen agenda set out in the company's articles of association.
Moreover, the company's executive board / board of directors need to approve the annual report at a meeting prior to the general meeting.
In connection with an audit of the company next year, if applicable, the auditor must check whether company legislation has been complied with and, in case of non-compliance, the auditor is obliged to include this in his statement.
All businesses have been assigned a tax account with SKAT
The tax account was introduced from 2 September 2013 in E-tax for Businesses (TastSelv Erhverv), and businesses could subsequently see their total outstanding balances with the Danish Customs and Tax Administration (SKAT). The tax account gives a comprehensive overview of the business’ returns, reports and payments and of its debit and credit balances of VAT, payroll tax, A tax (tax deducted from income at source) and labour market contribution, corporation tax, advance corporation tax, dividend tax, excise duties and environmental taxes and charges, other taxes and duties as well as fees, charges and interest.
It should be noted that the self-employed earner cannot see his or her B tax (tax not deducted from income at source) in the system as the tax account exclusively comprises transactions made via the individual business registration (CVR) number. B tax instalments can therefore only be seen in the business owner’s personal preliminary income assessment in E-tax for Individuals.
How does the tax account work?
If the business pays earlier than five days before the final due date for payment without filing a return or having other due items in the account, the money will automatically be returned.
All amounts from the tax account will be paid into the account registered as the business’ NemKonto.
A FIFO (first-in, first-out) principle has been introduced for the business’ outstanding balances with SKAT, meaning that the oldest balances will be covered first. If a debt is owing to SKAT, a setoff will therefore be made.
Interest is calculated on the daily balance in the account. In practice, this means that day-to-day interest will be applied to the account once a month at a common rate and with compound interest. According to SKAT's website, the rate effective from 1 January 2014 is 0.8% per month, which will be adjusted next time from the end of 2016. If the business does not pay on time, interest will consequently accrue on the overdue amount. The calculated interest is not eligible for tax deduction. In case of overdue amounts in excess of DKK 5,000, a reminder will be issued to the Message File in E-tax for Businesses together with a late charge of DKK 65.
Advisers can access the business’ tax account
Business owners may authorise their auditors or advisers to access the tax account. If an adviser has previously been authorised to access E-tax for Businesses, no new authorisation is needed to give the adviser access to the tax account.Based on our experience, we recommend businesses to reconcile the tax account regularly to avoid unpleasant surprises.