Expatriate service

Important decisions to make when being stationed outside Denmark

When you are stationed abroad, you will generally not have to pay Danish tax on your salary, and, for that reason, you will no longer get tax relief on your pension payments in Denmark. Therefore, you will, as a starting point, get a pension plan where the payouts are tax-free in Denmark as the payments to the plan will not qualify for tax deduction in Denmark. It is important that you do the following.

  1. Please forward the declaration on your foreign tax relations as soon as possible as this is a prerequisite for establishing a pension plan without tax deduction
  2. Consider whether your insurance cover suits your new life abroad
  3. Consider whether you need advice on adjusting your pension plan.
What characterises a pension plan without tax deduction?

When PFA receives the declaration about your foreign tax relations, you will automatically get a new pension plan without Danish tax deduction, and your existing pension plan will be changed to a pension plan without payments.

A pension plan without tax deduction is characterised by:

  • No Danish tax deductibility for the payments
  • The return being exempt from pension yield tax
  • The return being taxed as capital income in case of full tax liability in Denmark
  • All payouts from the plan being tax-free in Denmark if you can document that neither any Danish nor any foreign tax deductibility has applied to the payments
  • The payout being tax-free in Denmark if you choose to cash your savings before time.*

*You can choose to cash your savings before retirement if you either permanently settle abroad without any affiliation with a Danish company or are a foreign national and settle in your native country.

Please forward the declaration on your foreign tax relations as soon as possible

According to the international rules on exchange of information about financial accounts (the Common Reporting Standard and Foreign Account Tax Compliance Act), you need to provide information about your foreign tax relations before we can establish a pension plan without tax deduction in Denmark. If you want a pension plan without Danish tax deduction, we therefore kindly ask that you forward the signed declaration as soon as possible through pfa.dk or by ordinary post to PFA Pension, Sundkrogsgade 4, 2100 Copenhagen, Denmark.

Complete the declaration on foreign tax relations

If PFA does not receive the information about your foreign tax relations within six months, you will get a deductible plan.

Does your insurance cover suit your new life abroad?

Your savings will be invested in accordance with your current investment selection, but it is important that you consider whether your insurance coverage is still adequate. Often times, you will be the main provider for your family during the expatriate service, and therefore, it may be a good idea to check whether you are sufficiently insured. As a starting point, your level of coverage will be maintained and the payouts will be tax-free in Denmark as your insurance plans will automatically be established without Danish tax deductibility for the payments if you opt for a pension plan without tax deduction.

In connection with your expatiate service, you will get a new occupational capacity insurance, PFA Occupational Capacity with fixed payouts. With the new insurance plan, you will receive a fixed amount if your occupational capacity becomes reduced by minimum 50 per cent for more than 6 months. Your current coverage will be converted to an amount in DKK. The payouts are tax-free and can, as a maximum, amount to 60 per cent of your previous salary.

Generally, your Health Insurance will lapse as you, in connection with your expatriate service, will be covered by extended travel insurance, which will be stated in your expatriate service contract. If your spouse or cohabiting partner has taken out PFA Health Insurance and your partner is going abroad with you during your expatriate service, your spouse or cohabiting partner will not be covered by PFA Health Insurance during the expatriate service.

Get advice

PFA will contact you to remind you to decide on whether you want a pension plan without Danish tax deduction and to forward the information on foreign tax relations as soon as possible. In addition, PFA recommends that you book a pension consultation to ensure that your pension plan matches your needs in connection with the expatriate service. You can also get advice on the possibility of applying for exemption from paying pension yield tax on the return on your current pension plan, which will be a plan without payments during the expatriate service. You can also get tax advice on your overall finances through Novo Nordisk’s agreement with EY.

Remember to register PFA for your e-Boks

If you have not already done so, it is a good idea to register PFA for your e-boks to ensure that you receive information about your pension plan during your expatriate service.
  

Book a consultation

 

Returning to Denmark

When Payroll notifies PFA that you are returning to Denmark, the payments to your pension plan without Danish tax deduction will cease. Instead, the payments to your regular, deductible PFA pension plan will be resumed. Your pension plan without Danish tax deduction will be changed to a plan without payments.

You will get a new and more simple occupational capacity insurance when your deductible plan is resumed. The new insurance plan, PFA Occupational Capacity with income protection, will provide you with a total income of 80 per cent of your previous salary if your occupational capacity is reduced by minimum 50 per cent for more than 6 months and your salary falls below your insurance cover. The insurance tops up your income, so that your total income amounts to 80 per cent of your previous salary regardless of whether you are receiving sickness benefits, public early retirement pension, job rehabilitation benefits or similar. The objective of this insurance plan is to ensure you a financial safety net if your occupational capacity becomes reduced, and, therefore, you cannot reduce your coverage below 80 per cent of your previous salary. Your previous salary refers to your salary at the time when you become entitled to insurance payouts.

Your Health Insurance will automatically be resumed. If your spouse or cohabiting partner wants to resume his or her Health Insurance, please notify PFA no later than three months after you have returned to Denmark. If you have, in connection with your expatriate service, reduced your insurance coverage because of the tax-free payout in Denmark, you can choose to increase your coverage to the same level as before your expatriate service without submitting health information.

What about your pension savings without tax deduction?

When you return to Denmark, you have two options:

  1. transferring the savings from your plan without Danish tax deduction to your regular tax-deductible PFA plan
  2. keeping your plan without Danish tax-deduction and have your savings paid out tax-free when you retire.

Any current return on your plan without Danish tax deduction will be subject to capital gains tax if you are fully liable to pay tax in Denmark. Pension yield tax is still not payable.

Please note that if, during expatriate service, your payments were tax-deductible in your country of residence, the payouts will be subject to Danish tax if you are liable to pay tax in Denmark at the time of payout.

Book a consultation

PFA recommends that you book a pension consultation to ensure that your pension plan matches your needs upon returning to Denmark. It may also be a good idea to make use of Novo Nordisk’s agreement with EY to get advice on tax matters and your overall financial situation.
    

Book a consultation