Global Employer Services IDA Conference Doris Erlandsen · Global Employer Services IDA Conference Doris Erlandsen ... 2-5 years Lives in Denmark and work in ... Norwegian Scheme

Global Employer Services

IDA Conference

Doris Erlandsen

[email protected]

Phone.: 22202493

Copenhagen, 12. March 2013

mailto:[email protected]

© 2010 Deloitte

Agenda

• Danish tax issues

• Norwegian tax issues

• Double taxation

• Social security

• Comparison of tax calculations in Denmark and Norway.

• Comparison of Denmark/Norway

2

© 2010 Deloitte © 2010 Deloitte

Danish tax rates

3

© 2010 Deloitte 4

Personal taxation – tax brackets

Taxable income (DKK) Taxable income (EURO) Rate (%)

0 – 42,900 0 – 5,758 0%

42,901 – 389,900 5,759 – 52,335 36.57%

389,900 - 52,336 - 51.7%

Church tax approx.: 1 %

AM-tax 8%

© 2010 Deloitte

Personal taxation – Tax rates

Unlimited Limited

Ordinary tax before social security (2013)

Ordinary tax including social security 2013

51.7%

55,6%

51.7%

55,6%

Special tax regime 2013

Special tax regime including social security

26%

31,92%

26%

31,92%

Hiring out of labour 2013

Hiring out of labor including social security

51.5%

55,6%

30%

35.6%

5


Moving out of Denmark

6

© 2010 Deloitte 7

Main rule:

1) Termination of tax liability

2) Fully tax liable to Denmark and treaty resident in host

3) Fully tax liable to Denmark – internal exemption (LL § 33A)

4) Treaty relief (exemption or credit)

Moving out of Denmark

© 2010 Deloitte 8

Termination of tax liability to Denmark

1. Sale of owner-occupied residence or return of rented residence or

2. Let out of residence for at least three years interminably on the owner/lessor’s part

• Possession of holiday cottage is no obstacle to termination of tax liability.

• NB! No overnight stays in case of work in Denmark

• Holiday stays are allowed

Main rule: Under 3 continuous months and less than 180 days within a period of 12

months

Facts

Sell residence in Denmark or lease it out for more than 3 years

Conclusion

Termination of fully tax liability to Denmark

Moving out of Denmark – Termination of tax liability to DK

© 2010 Deloitte 9

Facts

Keep residence in Denmark or lease it out for less than 3 years

Conclusion

Still full tax liability to Denmark, but tax resident in Norway

(Article 4 of the Double Taxation Treaty)

• Residence available

• Strongest personal relations

• Usual stay

• Citizenship

• Denmark tax source income/Country of tax resident (Norway) tax world wide income

Moving out of Denmark - Fully tax liable to Denmark and treaty

resident in Norway

© 2010 Deloitte 10

Facts

Keeping residency in Denmark or lease it out for less than 3 years and treaty

resident in Denmark

Working in host for more than 6 months

stay in Denmark for less than 42 days each 6 months period (vacation)

(Ligningslovens § 33A)

Conclusion

1) Exemption in Denmark if host taxes the salary income

2) ½ exemption if only Denmark has the right to tax the salary income according to the

tax treaty

Moving out of Denmark – Internal exemption (LL § 33A)

© 2010 Deloitte 11

Facts

Keeping residency in Denmark or lease it out for less than 3 years and treaty

resident in Denmark.

Working in Norway for less than 6 month

Conclusion

1) Exemption in Denmark if Norway taxes the salary income and the employee is

covered by the social security system in Norway

2) Credit in Denmark if Norway taxes the salary income and the employee is covered by

the social security system in Denmark

Moving out of Denmark - Treaty relief (exemption or credit)

© 2010 Deloitte

Determine the most tax efficient structure

1. Termination of tax liability to Denmark

2. Fully tax liable to both countries, but tax resident in Norway

3. Using of the Danish favorable scheme (LL § 33A)

4. Treaty exemption or credit exemption

Social security

1. Continue in Denmark’s social security system

2. Change to the Norwegian social security system

Planning

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Pension

13

© 2010 Deloitte

Pension during assignment

• Evaluate present pension plan

1. Keep present plan

2. Change to non-approved Danish pension scheme during assignment to Norway.

(PBL § 53 A)

3. Change to local plan in Norway

Pension exit taxation

• Extraordinary large pension contributions to employer-administered pension schemes

within 5/10 years and > 20% of salary income

Pension – leaving Denmark

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© 2010 Deloitte © 2010 Deloitte 15

Norway

© 2010 Deloitte

Agenda - Norway

• Tax rates

• Moving to Norway

• Moving from Denmark to Norway

• Pension

•

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© 2010 Deloitte

Tax rates – Norway (2013)

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Suretax – computed based on gross employment income (personinntekt)

Basis (NOK) Basis (EURO) Rate (%)

0 – 509,600 0 – 68,447 0 %

509,601 – 828,300 68,448 – 111,254 9 %

828,301 - 111,255 – 12 %

Other taxes / social security Rate (%)

Municipal tax – computed on the basis of net taxable

income

28 %

Social Security – employees portion – computed on the

basis of gross employment income

7.8%

Wealth tax – computed on the basis of net taxable wealth

– zero tax below NOK 870K – 1,1 % above NOK 870K

1.1%

Comments:

• Marginal personal income tax is 40 %

• Social security contribution (employee) is 7,8 %

• Total marginal tax and soc.sec. (employee) is 47,8 %

• No expat regime available in Norway (10 % standard deduction - max 40.000)


Moving to / working in Norway

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© 2010 Deloitte

Tax liability in Norway

As non-resident

• Individuals who are considered as non-resident in Norway are liable to pay tax on Norwegian sourced income and wealth (i.e. income from employment activity carried out in Norway and from real estate in Norway – such as rental income from real estate in Norway).

As resident

• Individuals who are considered as ordinary tax resident in Norway are liable to pay tax on world-wide income and wealth

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© 2010 Deloitte

Tax residency – in Norway

Tax resident

Keep below 90 days each 12

months period .. to keep

below 270 days in a 36 months

period

Exceeding 270 days in a 36

months period

Exceeding 183 days in a 12

months period

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© 2010 Deloitte

Tax residency – in Norway

Tax residency established solely on the basis of physical presence

Tax resident from 1st January in the year exceeding

Tax resident from day one when exceeding 183 days in first year of stay in Norway

Entire days and parts of days counts as ”as a day”

183 days during

12 months Tax resident from

1st January in the year exceeding

Known as ”the 90 days rule” by those who strive to avoid Norwegian tax residency

Entire days and parts of days counts as ”as a day”

270 days during

36 months

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© 2010 Deloitte

Non-resident – limited tax liability in Norway

• Liable for Norwegian tax from day one on employment income, when:

‒ Income is sourced in Norway

‒ Earned from employment activity carried out in Norway

‒ Duration is irrelevant

• Liable for Norwegian tax from day one when structured as mere supply of personnel /

hiring out personnel

‒ At disposal for others who are considered liable for tax in Norway

‒ Carry out employment activity in Norway

• Offshore activity – liable for Norwegian tax from day one

‒ Pursuant to the Petroleum Tax Act § 1 jf. § 2

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© 2010 Deloitte

Local Norwegian employment 2-5 years

Lives in Denmark and work in Norway:

Less than 183 days in Norway = Non resident

- Taxed on salary earned for work performed in Norway

- Tax return has to be filed

More than 183 days in Norway = resident

- Treaty exempted? ( center of vital interests)


Moves to Norway with family – More than 183 days in Norway = resident

- Taxed on world wide income and net wealth


Hiring out of labour

- Taxed on income earned for work performed in Norway


NB: Social security in Norway can only be avoid if they have a Certificate of Coverage (A1/E101)

from Denmark

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© 2010 Deloitte

Nordic Tax Treaty - Article 15

Exempt from taxation in Norway if the following conditions are fulfilled:

A. Stay not exceeding in the aggregate 183 days in the twelve-month period; and

B. Remuneration is paid by, or on behalf of, an employer who is not a resident of the

other State; and

C. The remuneration is not borne by a permanent establishment or a fixed base which

the employer has in the other State, and.

D. The situation is not one in which employees are hired out.

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© 2010 Deloitte

Self employed (Consultant business)

Less than 183 days in Norway = Non resident

- Taxed on income earned for work performed in Norway

- tax treaty protection?


More than 183 days in Norway = resident

- Taxed on world wide income

- tax treaty protection?


NB: Social security in Norway can only be avoid if they have a Certificate of Coverage

(A1/E101) from Denmark

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© 2010 Deloitte

Nordic Tax Treaty - Article 5 jfr. Article 7

Exempt from taxation in Norway if the following conditions are fulfilled:

For practitioners of independent personal services, typically engineers

- Less than 183 days in Norway during a 12 months period

- Not a permanent establishment in Norway, typical office/permanent

workplace

Permanent establishment (if not independent personal services or fixed base (office))

- Less than 12 months from the first to the last day

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© 2010 Deloitte

Tax Office

• Foreign employer

‒ The Central Office Foreign Tax Affairs (COFTA / SFU)

• Time limited … in practice less than 4 years

‒ Transferred to Local Tax Office if;

• exceed 4 years

• move to local contract

• settles down in Norway by;

• buying a house or an apartment rather than living in rented accommodation

• marries a Norwegian

• no clear rules or guidelines available

• Norwegian employer

• Local Tax Office

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© 2010 Deloitte

Assessed by COFTA – what does that mean ?

• Simple approach:

‒ Individuals are assumed to be non-resident and only taxed on Norwegian sourced income;

• Difficult to obtain certificate of tax residency

• Difficult to claim avoidance of double taxation in Norway

• Not taxed on world wide income and wealth

‒ COFTA may seem to be slowly moving towards the same practice as the local tax office, i.e. unlimited taxation on individuals who are determined as ordinary tax resident in Norway

• News: Taxation of housing benefit

‒ No beneficial sjablons available to determine taxable benefit

‒ Taxable benefit to equal market value

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© 2010 Deloitte

Employee – Norwegian Personal Tax Return

• Temporary stay and on foreign payroll:

‒ Tax Return to be submitted via COFTA

‒ Form RF-1030

‒ Additional form (RF-1030S)

• Tax resident and/or on Norwegian payroll

‒ Tax Return to be submitted via Local Tax Office

‒ Form (RF-1030)

‒ Other forms that may be relevant must be attached to form RF-1030 (the Tax

Return).

• Tax Return – filing deadline

‒ 30th April in they year following the tax year.

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Social Security

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© 2010 Deloitte

Norwegian social security

• Mandatory member in the Norwegian Scheme form first day of work

‒ Both health insurance (benefits in kind) and pension and benefits in cash as sick

pay, maternity leave etc.

• Automatically exempted if an A1 is provided

• The A1 issued by Danish Authorities will always be accepted and not overruled

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© 2010 Deloitte

Norwegian social security

• Social security contributions

‒ Employee’s part is

‒ 7,8% of gross remuneration

‒ collected together with Norwegian taxes if tax resident in Norway

‒ Invoiced by the Norwegian National Insurance Administration to the Home

Country Employer if not tax resident in Norway

‒ Employer’s part is

‒ 14,1% of gross remuneration

‒ Paid to the Norwegian tax authorities together with the bi-monthly reporting if on

Norwegian payroll

‒ Invoiced by the Norwegian National Insurance Administration to the Home

Country Employer

‒ Both the employer and employee is exempted from the contribution liability if an E101 is

obtained from the Danish Authorities

‒ The E 101 must be submitted to the Norwegian National Insurance Authorities in order to be

approved as exemption from the employee’s part

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© 2010 Deloitte © 2010 Deloitte 33

Employer-based pension plans

© 2010 Deloitte

Pension plans in Norway – general

• It is mandatory to offer employees an additional pension plan at a minimum level

‒ Must be a plan in accordance with requirements for Norwegian pension plans

‒ Exemption can be approved if covered under a Danish pension plan that is

“comparable”

• All employees on a Norwegian payroll shall as a main rule be enrolled in the

Norwegian plan

‒ If exempted from the Norwegian National Insurance Scheme (with an A1) the

employee is not allowed to be included in the Norwegian plan

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© 2010 Deloitte

Danish pension plans in Norway – tax

• Contributions made by an employer to a Danish qualifying collective (group) pension

scheme are as a starting point not approved as tax favorable pension plans in

Norway

• Contributions will be taxed as employment income

• If the Danish plan fulfills requirements that need to be fulfilled by the Norwegian plans

the contributions will not be liable to Norwegian taxes

• Must apply for exemption

• Not a practical solution

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Nordic tax treaty and social security

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© 2010 Deloitte

Dual resident – article 4

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Home/DK

World wide income.

Host/Norway

Source income

Host/Norway

World wide income.

Home /DK

Source income.

Dual resident?

E.g. DK and N

Article 15 taxation of

compensation package

No

Home/DK

Host/

Norway

Yes Treaty resident

article 4

Determination treaty resident

Permanent home

Center of vital interests/

personal and financial interests

Stay (habitial abode)

Citizenship

Tax liable in host/Norway from day one if:

1.Working in Norway more than 183 days for a

foreign employer or

2.Working in Norway for a Norwegian employer or

3. Working for a permanent establishment of

the Danish employer or

4. If the employment is hiring out of labour

© 2010 Deloitte

Definition

•Social security contribution = payments for employer/employee

•Social security coverage = rights following the social security coverage

EU regulation 883/2004

• Assignments started 1 June 2012 or later

‒ (Denmark as from 1 May 2010)

General rule, article 11:

- Covered in the working country

Social security

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© 2010 Deloitte

Assigned from home employer

Regulation 883/2004

•Social security coverage in home up to 2 years (article 12).

•Application must be submitted.

Social security – 883/2004 – working in one country

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1 year 2 years


General info

40

© 2010 Deloitte

Simplified gross to net calculation - Comparison

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Assumption: Single, no children, gross salary € 60,000, full year

Norway Denmark

EURO EURO

Gross salary 60,000 60,000

Total personal

income tax

13,074 17,386

Social security –

employee

4,680 4,800

Net in pocket 42,246 37,814

Social security –

employer

8,460

(14,10%)

671

(1.12%)

Employer total cost 68,460 60,671

© 2010 Deloitte

Simplified net to gross calculation - comparison

42

Assumption: Single, no children, net salary € 40.000, full year

Norway Denmark

EURO EURO

Gross salary 56,059 64,801

Total personal income

tax

11,686 19,614

Social security –

employee

4,373 5,184

Net in pocket 40,000 40,000

Social security –

employer (% of gross)

7,904

(14.10%)

(1.03%)

671

Employer total cost 63,963 65,469

© 2010 Deloitte

Social security – Denmark - Norway

43

2013/DKK/year Norwegian

social security

Danish social

security

Net salary 300,000 300,000

Danish tax 187,129 187,129

Norwegian social security – employee 32,858 0

Norwegian social security – employer 59,396 0

Danish social security - employee 0 1,080

Danish social security - employer 0 5,000 (approx)

Total costs (approx) 580,000 493,000

Difference per year + 87,000

© 2010 Deloitte

Favurable tax rates for expats ?

44

No

• 10% standard deduction

Yes

• Expert-taxation (26% in 60 months)

• Hiring out of labour(30% flat tax rate)

© 2010 Deloitte

Social security - contributions

45

• Employee: 7.8 % of gross income (personal income)

• Employer: 14.1 % of gross income (soner)

• Employee: DKK 1,080 per year (2013)

• Employer: Approx. DKK 5,000 per year (2013).

© 2010 Deloitte

Social Security Coverage

46

• Maximum 5 years

• Maximum 5 years

• Maximum 3 years

© 2010 Deloitte

Kontaktinformasjon

Doris Erlandsen - Deloitte Danmark Stig A Sperre – Deloitte Norge

Partner

Phone: +45 22202493

E-mail: [email protected]

Partner

Phone: +47 99 29 01 87

E-mail: [email protected]

47

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Documents

Global Employer Services IDA Conference Doris Erlandsen · Global Employer Services IDA Conference Doris Erlandsen ... 2-5 years Lives in Denmark and work in ... Norwegian Scheme