Publiceret: 21.12.2017Af Karen Witt Olsen mail
“A great Christmas gift for Danish businesses,” says CEO at COWI Lars-Peter Søbye about the recent extension of the researcher tax scheme from five to seven years.
The extension of the scheme, which is officially known as the Tax Scheme for Foreign Researchers and Highly-Paid Employees, is part of the business and entrepreneurship proposal put forth last November by the government, the Danish People’s Party and the Danish Social Liberal party - and passed on 19 December, 2017.
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The researcher tax scheme has been in effect in various forms since 1992.
Figures from the Ministry of Taxation show that in 2016, 6,251 foreign researchers and key employees, primarily from the UK, Germany, Sweden and the US were employed at Danish companies and educational institutions under the special tax scheme, which currently consists of a gross tax rate of 32 per cent.
“The researcher tax scheme helps enable us to carry out world-class research in Denmark, but also allows companies to continue growing and bringing in revenue to Denmark and thereby to contribute to our welfare.” Kent Damsgaard, Director.
The scheme helps makes Denmark attractive to the international specialists that the whole world competes for, explains Director at the Confederation of Danish Industry (DI) Kent Damsgaard.
“Denmark is in a position where we compete with countries with much lower income tax rates. The extension of the researcher tax scheme improves Denmark’s odds in the tough international competition for the most talented employees,” says Kent Damsgaard.
See also: The Ministry of Taxation’s facts and figures on the researcher tax scheme
At COWI, CEO Lars-Peter Søbye notes that it is expensive when companies lose one of their highly qualified foreign employees and are forced to find someone new.
The extension of the researcher tax scheme will make it easier to retain the foreign employees who, as it currently stands, will often stay at COWI and in Denmark for just three years.
“Our employees under the scheme often look for a new job already before the scheme expires because the tax rate increases significantly after the five years. We know that the longer we can retain them, the greater the chance of them establishing a connection to the company and to Denmark that means they might settle here,” says Lars-Peter Søbye.
Figures from the Ministry of Taxation also show that the majority of employees under the researcher tax scheme work at educational institutions.
But the second highest portion are employed in manufacturing, while wholesale and retail companies constitute the third-largest employer of foreign specialists.
“The researcher tax scheme helps enable us to carry out world-class research in Denmark, but also allows companies to continue growing and bringing in revenue to Denmark and thereby to contribute to our welfare,” says Kent Damsgaard.
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The extension of the researcher tax scheme has long been on the wish list of both companies and DI.
“At DI Global Talent, we have worked hard together with DI’s departments for taxation and accounting throughout the past year to gain political support for the extension,” says CEO at COWI Lars-Peter
Before the country shuts down entirely for the Christmas holiday, Director Kent Damsgaard, DI does, however, have a few more wishes to add to the list, which would make the scheme easier to administer and to understand, both for companies and the foreign employees who take advantage of it.
“We would like to see that employees do not fall out of the scheme and are subsequently unable to use it for 10 years, for example if they take parental leave,” he says.
DI has sent the Ministry of Taxation a catalogue with proposals for further improvements and recommends that they be implemented as soon as possible. This also applies to the proposal to allow foreign entrepreneurs and other owner-managers to take advantage of the scheme.
Researcher tax scheme
- Formal name: Tax scheme for foreign researchers and highly-paid employees
- Covers researchers and key employees who have not been liable to taxation in Denmark within the last 10 years and who are employed in a Danish company or at a research institution.
- Researchers are persons who carry out research and have scientific qualifications equivalent to those required at PhD level as a minimum.
- Key employees are employees who receive a salary that fulfils the minimum salary requirement of DKK 63,700 in 2017 and DKK 65,100 in 2018 after labour market supplementary pension fund (ATP) deductions.
- The tax rate amounts to 26 per cent, corresponding to a gross tax rate of 31.92 per cent including labour market contributions when employees work in Denmark.
- As of 1 January, 2018, the tax rate will be increased to 27 per cent (32.84 incl. labour market contributions), and the extension of the scheme is therefore revenue neutral.
- Implemented in 1992 - has been adjusted several times.
- The scheme was previously valid for five years and is now valid for seven.
Denmark is in a position where we compete with countries with much lower income tax rates.