Expatriate service

Important decisions to make when being stationed outside Denmark

When you are stationed abroad, you are generally not liable to pay tax in Denmark on your salary. This means that your pension payments will no longer qualify for tax deduction in Denmark. Therefore, PFA recommends that you 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 consider the following:

  • You will receive a digital declaration through My PFA
  • If you want a pension plan without tax deduction in Denmark, then please forward a declaration informing PFA of your foreign tax relations as soon as possible
  • Does your insurance cover suit your new life abroad?
  • Do 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 FATCA), you need to provide information about your foreign tax relations before we can establish a pension plan without tax deduction in Denmark. You should therefore complete the digital declaration as soon as possible. You must be logged on with MitID to sign the declaration.

If PFA does not receive the information about your foreign tax relations within 3 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.

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 domestic partner has taken out PFA Health Insurance and your partner is going abroad with you during your expatriate service, your spouse or domestic 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.

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. 

Your Health Insurance will automatically be resumed. If your spouse or domestic 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:

  • transferring the savings from your plan without Danish tax deduction to your regular tax-deductible PFA plan
  • 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. 

Book a consultation
 

Inpatriate employees

If you are stationed in Denmark on inpatriate service, you can get a pension plan without tax deduction. Read more about your options here:

If you are covered by the special tax scheme for researchers and highly paid employees

If you are a researcher or a highly paid employee and are covered by the special tax scheme for researchers and highly paid employees (Section 48E of the Danish Tax at Source Act), your salary will be subject to Danish gross tax with limited tax deduction and a low tax rate instead of the regular Danish taxation. Therefore, your pension plan will be established as a plan without deduction, which is an advantage as you pay reduced tax on your salary and tax deduction for your payments in Denmark will thus be of limited value to you. 

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 FATCA), you need to provide information about your foreign tax relations before we can establish a pension plan without Danish tax deduction. You should therefore complete the digital declaration as soon as possible. You must be logged on with MitID to sign the declaration.

Your pension plan without Danish tax deduction will be established when PFA receives the declaration on your foreign tax relations, and, subsequently, you have the possibility of getting advice on your entire pension plan. If PFA does not receive the declaration on your tax relations within 3 months, you will get a deductible plan with retroactive effect from the time of your employment.

What happens when your gross taxation ceases?
When your gross taxation ceases and you become subject to the regular Danish regulations, PFA will be notified by your employer after which your pension payments will be made to a tax deductible pension plan.

If you are covered by the regular Danish tax regulations

Inpatriate employees will, as a rule, get a tax deductible plan with Danish tax deduction for the pension payments. You can choose to change your pension plan to a pension plan without Danish tax deduction. 

If you want to have as much of your salary as possible paid out while working in Denmark, we recommend that you choose a pension plan with tax deduction. However, please be aware that if you want to have your pension plan paid out when you leave Denmark, your savings plan will be subject to a flat-rate tax of 60 per cent. 

If you want to have your pension plan paid out when you leave Denmark, we recommend that you choose a pension plan without tax deduction. Your net salary will be lower as your pension payment will not be tax deductible, which means that your pension payment will be subject to tax.

Please forward the agreement on pension plan without tax deduction as soon as possible
If you want a pension plan without tax deduction in Denmark, PFA must receive a signed agreement on establishment of the pension plan no later than on the last weekday of the month your employment began. Forwarding the agreement in time ensures that the first pension payment will be made to your pension plan without Danish tax deduction. This way, you avoid getting a deductible plan that cannot subsequently be merged with your pension plan without tax deduction. 

Submit a declaration of your tax relations abroad
According to the international rules on exchange of information about financial accounts (the Common Reporting Standard and FATCA), you need to provide information about your foreign tax relations before we can establish a pension plan without Danish tax deduction. You should therefore complete the digital declaration as soon as possible. You must be logged on with MitID to sign the declaration.

Your pension plan without Danish tax deduction will be established when PFA receives the declaration on your foreign tax relations. Subsequently, you will have the possibility of getting advice on your entire pension plan. If PFA does not receive the declaration on your tax relations within 3 months, you will get a deductible plan.

If you are a frontier worker

If you are a frontier worker and, for example, live in Sweden, you will, as a rule, get a tax-deductible pension plan with Danish tax deduction for the pension payments. You can choose to change your plan to a pension plan without tax deduction, where the payouts are tax-free in Denmark as the payments do not qualify for tax deduction in Denmark. 

PFA recommends that you get a deductible plan if you live in Sweden and are liable to pay Danish tax on your Danish work income, so that you can use the tax deduction for your pension payments. 

If, down the road, you wish to cancel your pension plan and have the money paid out because your employment in Denmark ends, PFA recommends that you instead get a pension plan without Danish tax deduction. 

Please forward the agreement on pension plan without tax deduction as soon as possible
If you want a pension plan without tax deduction, PFA must receive a signed agreement on establishment of the pension plan no later than on the last weekday of the month your employment began. Forwarding the agreement in time ensures that the first pension payment will be made to your pension plan without Danish tax deduction. This way, you avoid getting a deductible plan that cannot subsequently be merged with your pension plan without tax deduction. 

Submit the declaration if you wish to have a pension plan without tax deductions
If you want a pension plan without Danish tax deduction, you must, according to the international rules on exchange of financial accounts (the Common Reporting Standard and FATCA), provide information about your foreign tax relations. You should therefore complete the digital declaration as soon as possible. You must be logged on with MitID to sign the declaration, if you want a pension plan without Danish tax deduction.

We recommend that you forward the declaration on your foreign tax relations as soon as possible to ensure that you avoid getting a tax-deductible plan that subsequently cannot be merged with your pension plan without Danish tax deduction.

Pension plan without tax deduction

  • Your payments are not tax-deductible in Denmark
  • The return is exempt from Danish pension yield tax
  • The return will be taxed as capital income on an ongoing basis in case of full tax liability in Denmark
  • The payouts from the plan are tax-free in Denmark if you can document that neither any Danish nor any foreign tax deductibility has applied to the payments
  • If you choose to withdraw the savings before retirement, the payout will be tax-free in Denmark. If you reside in Denmark at the time of withdrawal, the conditions mentioned above regarding payouts must be met.

Pension plan with tax deduction

  • Your payments to the plan are tax-deductible in Denmark and the payouts will be subject to tax in Denmark
  • PFA settles pension yield tax on the investment return from your pension plan
  • The return will not be taxed regularly as capital income in Denmark 
  • On retirement, you are liable to pay Danish income tax on the regular payouts as well as tax on any lump sum payouts. If you live outside Denmark, other tax rules may apply
  • If you choose to cancel the savings plan before retirement, you are liable to pay a flat-rate tax of 60 per cent of the savings to the Danish state.*

Does your insurance cover match you and your family?

If you opt for a pension plan without tax deduction in Denmark, the insurance plans will automatically be established without Danish tax deductibility for the payments, and your level of coverage will be maintained. Any insurance payouts will be tax-free in Denmark if you can document that neither any Danish nor any foreign tax deductibility has applied to the payments. Therefore, it is a good idea to consider whether your insurance coverage suits you and your family. 

 

Book a consultation before leaving Denmark

We recommend that you book a consultation when you are planning to leave Denmark again in order to get advice on the possibilities of having your pension plan paid out without Danish tax deduction or transferring your pension plan. 

Book a consultation