My company has recently employed a full-time staff member who works for us from home in Denmark, and will be capturing clients for us there. That employee is American, but has been living and has been self-employed in Denmark for a few years. We were originally advised that we should pay the employee gross and he would pay his taxes etc. to the Danish authorities (we would pay pension contributions to his private pension).
However, we have just been advised as follows
“In order to pay and report ATP (contribution to the Labour Market Supplementary Pension Scheme) the company must be registered as a non-Danish Company on a non-permanent business location in Denmark.
It’s mandatory to pay and report to ATP and for that you need at company registration number.
”ATP Livslang Pension
All companies with employees in Denmark must pay a contribution to their employees’ ATP Livslang Pension.
This is the case for both Danish and International companies.””
Could anybody please help with directing me to published guidance (preferably in English!) on how a UK company can employ someone in Denmark? Many thanks!
There are no specific rules for UK companies in Denmark. The rules apply equally to all non-Danish companies.
As your employee is making sales in Denmark, to be fully compliant you need to register your business there. It sounds as though you have a "permanent establishment" in Denmark, which basically means you also have a liability for corporate taxes. These corp taxes could be kept small, while you can then get your company registration number and make your contribution to the ATP.
I strongly suggest you get good tax advice in Denmark so you understand your position and know how to minimise any questions from the tax authorities before you register. We are able to help if needed as we have local accountants in Denmark who are fluent in English and deal with UK clients.
I suggest that you don’t employ them directly but engage them as a Consultant. Then all the local tax issues fall to your Consultant to fix themselves. Also easier to change your local partners using a Consultant if required.
Employing a full-time sales person as a consultant may not prevent you from having corp tax obligations. The sales person may also be deemed to be an employee by the tax authorities depending on the exact working arrangements. To avoid any tax risks down the line, I recommend you get a local accountant to give you advice based on your specific business.