Hiring employees from outside Denmark
If a Danish business hires an employee who doesn’t live in Denmark and whose employer is non-Danish, the employee is taxed according to the rules on international hiring-out of labour. As a result, the business/you are responsible for paying the relevant tax.
The tax is 8% labour market contribution (AM-bidrag) and 30% hiring-out of labour tax.
The rules on hiring-out of labour apply even though the non-Danish employer is registered for VAT in Denmark.
Guide: Is it international hiring-out of labour or contract-based employment?
International hiring-out of labour is the term used if the employees of a non-Danish enterprise are made available to a Danish enterprise, and the employees perform work which forms an integral part of the Danish enterprise.
The work may form part of the core services of the enterprise, or it may be a natural part of the enterprise’s operations, for example bookkeeping, cleaning or canteen management.
The decisive factor is whether the employee is, in effect, at the disposal of the Danish enterprise in the way considered normal for an employee.
The international hiring-out of labour always involves three parties
- A Danish enterprise hiring the labour.
- An employer from a country other than Denmark hiring out the labour, such as for example a temp agency or another enterprise.
- A non-Danish employee who is employed by the non-Danish employer.
It does not matter whether the contract concerning the supply of labour is referred to as a contract for the international hiring-out of labour, or a project contract. What matters is whether the non-Danish employee is, in effect, working for the Danish enterprise on terms which basically correspond to the employee being in the service of the Danish enterprise.
When is a situation not considered international hiring-out of labour?
non-Danish employees are not covered by the rules governing the international hiring-out of labour when the work performed
- is not an integral part of the enterprise’s core services or operations, or
- has been separated into an independent non-Danish enterprise.
When there is doubt as to whether the services are sufficiently separated
The decision as to whether the work is clearly defined and separated into an independent non-Danish enterprise is based on a specific assessment. In such a situation, it is important to determine which of the parties is mainly responsible and bears most of the financial risk associated with the work performed.
If the criteria concerning responsibility and financial risk indicate that no separate non-Danish enterprise exists and that the Danish enterprise is therefore the real employer, it may be relevant to look at the following supplementary criteria:
- Who instructs the employee on how to perform the work?
- Who checks and is responsible for the workplace?
- Is the Danish enterprise invoiced for the wages/salaries?
- Who supplies tools and equipment?
- Who decides how many employees are required to perform the work and what their qualifications should be?
- Who picks the employee who will perform the work, and who has the right to remove the employee from the job?
- Who has the right to impose work-related sanctions on the employee?
- Who decides working hours and holidays?
If you want to be sure if it's international hiring-out of labour, you can aks us for a binding ruling. Read more about binding rulings here.
When do the rules on the international hiring-out of labour not apply?
The rules do not apply when:
- The employee is fully tax liable in Denmark.
- The employee is subject to limited tax liability as regards the wages/salaries received for work performed in Denmark due to the employee’s residential status, or because the employee is directly employed by a Danish employer.
- The agreement on the hiring-out of labour is concluded by two Danish enterprises, and it is not a case of the international hiring-out of Labour.
- The non-Danish employer hiring out the labour has a permanent establishment in Denmark.
- The employee is a performing artist, musician, circus performer or athlete.
Example 1: Hiring-out of labour
A Danish IT company (A) is responsible for the support and maintenance of an IT system for one of its Danish customers.
For a period of five months, A does not have enough employees to perform the work and is therefore hiring in five employees from a non-Danish IT company (B) to help carry out the work. A is responsible for training the five employees, who work in teams together with A’s own employees.
It is thus a situation of A being in need of resources to carry out work which A’s own employees are also performing. It is also possible for A to instruct, guide and control B’s employees, which speaks in favour of this being an instance of the international hiring-out of labour.
Example 2: Hiring-out of labour
A Danish customer enters into a contract with a Danish construction company on the construction of a large building. The construction work is on such a scale that the Danish construction company enters into an agreement with a non-Danish construction company under which the non-Danish company will perform some of the work.
As the work progresses, it is agreed what jobs should be performed by the non-Danish construction company’s employees, and the number of hours worked by the non-Danish workers on the construction project are invoiced. The services to be provided by the non-Danish company are not clearly defined and individualised in advance. The Danish construction company is responsible for procuring materials for the project.
Based on an overall assessment, this is a case of the international hiring-out of labour.
Example 3: Hiring-out of labour
A Danish horticultural enterprise (A) enters into an agreement with a non-Danish enterprise (B) on the picking of 2 tonnes of cucumbers for A.
Under the agreement, B makes a works manager, vegetable crates and employees available.
The work is carried out at the premises of A’s horticultural business, and A is responsible for growing the cucumbers.
The work is basically planned and performed to fit in with the operations of the horticultural business, including the timing of the selling of the cucumbers. It would therefore be an instance of the international hiring-out of labour.
Example 1: not hiring-out of labour
A Danish construction company builds single-family homes.
The company carries out the bricklaying and carpentry work using its own employees.
As regards the flooring, the Danish company enters into a subcontract with a non-Danish enterprise, which carries out the work at a fixed price agreed in advance.
The work is performed exclusively by the flooring company’s own employees under the management and responsibility of the flooring company. Under the agreement, the flooring company supplies most of the flooring and construction materials. Any defects or nonconformities are remedied by the flooring company at its own expense.
The work must be regarded as an independent service supplied by a non-Danish enterprise, and the service supplied by the flooring company is clearly defined and separate from the work performed by the Danish company.
Example 2: not hiring-out of labour
A Danish consultancy firm hires a consultant to supply a specific and clearly defined service for a specific project. The consultant is employed by a non-Danish enterprise. The non-Danish enterprise supplies the service to the project at a price agreed in advance.
One of the Danish company’s own employees is a specialist within this particular niche, but this employee is busy with other things.
The task is performed independently by the non-Danish consultant, i.e. without guidance, instruction or control by a project manager. The Danish company’s project manager is responsible solely for coordinating the performance of the consultant’s task with the rest of the project activities.
If, based on an overall assessment of the other relevant supplementary criteria, the non-Danish consultant is deemed to have supplied an independent service, this is not a case of the international hiring-out of labour.
Example 3: not hiring-out of labour
A manufacturer stops making deliveries of its own products to customers. Instead, the deliveries are handled by a self-employed haulage contractor.
In other words, the task is outsourced to an independent haulage contractor and is no longer an integral part of the company’s activities.
You must withhold and pay 8% labour market contributions and 30% hiring-out of labour tax on behalf of the employee to the Danish Tax Agency. This applies both when you hire non-Danish labour directly from the non-Danish employer, and when the hire contract has been arranged and invoiced through another business or temp agency.
Your business must pay the tax if you forget to withhold it when you pay the non-Danish business providing the employee.
Calculating international hiring-out of labour tax
You must make a list of hired employees and their taxes every month.
The gross income and the tax must be in Danish kroner, and you must use the exchange rate applicable on the day when you withhold the tax.
The employee’s gross income is the basis for calculating the hiring-out of labour tax and it consists of salary, bonus, commission, allowance etc. including:
- time off in lieu earned in connection with work performed in Denmark
- holiday pay earned in connection with work performed in Denmark
- travel and transport allowances
- value of free food and accommodation if the employee is not considered to be travelling
- other kinds of taxable employee benefits
The non-Danish employer must provide you with documentation showing the gross income of the employee.
Example: This is how you calculate Oliver's hiring-out of labour tax
Oliver lives in Germany, and his German employer hires him out to your business. The price amounts to DKK 30,000, which can be either remuneration for a number of hours of odd jobs or remuneration for performing a certain job. Hans is paid DKK 18,000 and the value of free food amounts to DKK 2,000. In total, the gross income amounts to DKK 20,000.
| Labour market contributions (8% on gross income of DKK 20,000 | DKK 1,600 |
| International hiring-out of labour tax (30% on gross income of DKK 20,000 less labour market contributions of DKK 1,600) | DKK 5,520 |
| [Total tax is 35.6% on gross income | DKK 7,120 |
This is how you settle the tax
- You pay the hire of DKK 30,000 to the German employer less Oliver's tax of DKK 7,120 = DKK 22,880
- You pay the tax withheld the Danish Tax Agency = DKK 7,120
- The German employer pays the salary plus transport allowance of a total of DKK 20,000 to Oliver less the Danish tax of DKK 7,120 = DKK 12,880
- The German employer's profit of DKK 10,000 is not taxable.
Reporting hiring-out of labour tax
Work performed from 1 January 2023 should be reported via E-income. Before you can do so, your business should be registered for reporting of labour market contribution (AM-bidrag) and A-tax (tax withheld from income at source). You may change your business registrations at virk.dk.
Please note that reporting of hiring-out of labour should be done by means of income category 02 Special taxation (Særlig beskatning) and as type of income 132 International hiring-out of labour - hiring employees from outside Denmark (Arbejdsudleje - leje af udenlandsk arbejdskraft). You have to enter amounts in fields 13, 15 and 16 and information about the address etc. of the employee you have hired.
You can find general help to reporting in E-income at Reporting pay in E-income.
Work performed up to and including income year 2022
You have to report work performed in income year 2022 via form 01.10 International hiring-out of labour.
Paying international hiring-out of labour tax
The tax is payable in Danish kroner to your tax account (skattekonto). You can find the payment ID in E-tax (TastSelv):
- Log on to E-tax for businesses (TastSelv Erhverv)
- Select ’Skattekontoen’ (Tax account)
- Select ’Stamoplysninger’ (Master data)
You can now see the payment ID.
Payments from a non-Danish bank account
When you make a tax payment from a non-Danish bank account, you need to use the below information. Remember to state your SE number (VAT number) in the comments field.
IBAN number: DK87 0216 4069 1633 94
BIC/SWIFT code: DABADKKK
Account: 02164069163394
Account holder: Skattestyrelsen
Documentation for the employee
The employee will be given the following documentation of paid international hiring-out of labour tax in Denmark:
-
Every month, the non-Danish employer will give the employee a payslip showing the salary earned in Denmark and the Danish tax withheld from this salary.
-
In March or April following the income year, the employee will get a statement in English from us. Until and including income year 2022, it will be sent via the Danish employer to the non-Danish employer to make sure that it reaches the actual address of the employee. As of income year 2023, it will be sent by regular post to he employee’s private address in the home country. And as a result, it is important that you state the correct address of the employee you have hired.
Documentation for the non-Danish employer
To document the amount (A-tax relating to international hiring-out of labour) which the your business sets off against the invoice from the non-Danish employer,you may use the following documentation:
-
until and including the income year 2022, a completed copy of form 01.010 and from the income year 2023 a copy of the E-income reporting
-
a receipt which the Danish business can print from its Tax account (Skattekonto) showing the amount paid: "A-skat (Arbejdsudleje)".
Documentation for the Nordic tax authorities
The Danish Tax Agency may issue an "NT3 statement" to document that A-tax (tax deducted from income at source) for employees from the Nordic countries will be withdrawn in Denmark.
The employee’s salary must be calculated according to an ordinary tax card when:
- the employee chooses to have his/her tax calculated as ordinary limited tax and not according to the rules for hiring-out of labour tax
- the employee stays in Denmark more than 183 days within a period of 12 months, or
- when the employee is or becomes subject to full tax liability in Denmark. The employee becomes subject to full tax liable in Denmark if he/she has a residence in Denmark or stays in Denmark for 6 consecutive months.
The employee may choose to be taxed according to an ordinary tax card at the end of the year by submitting a tax return before 1 May the year after arrival. The employee must be registered for a tax card in accordance with the rules described at When you employ non-Danish labour.
As a Danish business, you must withhold tax and labour market contributions (am-bidrag) and report these in E-income. If the employee doesn't have a tax card, you have to withhold 8% and 55% of the salary for labour market contributions and tax, respectively.
You will be liable to pay the outstanding tax if you continue to withhold hiring-out of labour tax knowing that the employee has been in Denmark for more than 183 days within a 12-month period.
Example: When not to base the employee's tax on the hiring-out of labour rules
Oliver lives in Germany and his German employer hires him out to you.
The first few months you have withheld hiring-out of labour tax. When you realise that his stay will exceed 183 days within a period of 12 months, Hans will need to apply for a personal tax number and a tax card effective from his first day of work in Denmark. Please state that hiring-out of labour tax has been withheld for the first few months, so that Hans will be credited the hiring-out of labour tax already paid. Then, you report the salary information in E-income.
Just before Oliver was hired out to you, he was hired out for a month to another Danish employer. You need to include this period in the 183 days.
Residence and work permits
If you employ or hire an employee who doesn’t hold a Nordic (EEA) or EU passport, you need ensure that the employee has residence and work permits.
See guidance at newtodenmark.dk.
Get your employee off to a good start
Your employee should be registered according to the rules at 'When you hire non-Danish employees' (currently only in Danish)
For further legal information in Danish see our legal guide .