The close proximity of Denmark and Sweden have resulted in a number of people crossing the Øresund to work in the neighbouring country. This trend has increased with the opening of the Øresund Bridge and is expected to increase further. The number of people commuting by train has increased by 30% in 2002 and today 4,000 persons cross the bridge daily to go to work.
Persons and companies, however, must be aware of the differences of the two systems. The differences are aligned through special rules that apply when working across the border. The special circumstances are illustrated in the table below. The information is only for clarification of a more complicated reality and should not be the only source of information on the subject.
Aspects for consideration
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Aspect
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Procedure
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Documentation
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Employee registration
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To be moved from local Swedish tax authority to local Danish tax authority and national register
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ID, employment contract, latest tax return, bank information. In case of relocation: Inter Nordic relocation certificate
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Which tax rules applies to the employment
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Depending on the terms of the employment
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Employment contract
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Social benefits
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Primarily provided in the country of employment
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Moving membership of unemployment fund: Certificate E301
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Below, the rules regarding employee registration, taxation, and social security are outlined. These are the general rules and should not be applied directly. Every employment situation needs special attention in order to follow the rules correctly.
Registration
Persons must be registered in the country of employment for tax purposes. A Swedish person employed in Denmark must be registered in the National Register in order to get a social security number (CPR-number). The social security number makes it possible for the employee to get an ’Estimate of future income’ and a ’Tax card’. On the Tax card the rate of taxation is indicated which is calculated on the basis of the Estimate of future income. The Tax card must be handed over to the employer in order to secure the correct taxation.
Taxation
According to the Nordic Tax Agreement the general rule is that tax is paid in the country where the work is carried out.
Additionally, Denmark and Sweden has agreed upon a double taxation convention, which ensures that the employee is only taxed in one country. The tax convention applies in two frequent arising circumstances for the employment of a Swede in Denmark. The first is when the employee lives in Sweden but works in Denmark. The second is when the Swede temporarily lives and works in Denmark.
In the first case the employee commutes every day and is taxed in the country of the employer. The Swede is limited tax liable in Denmark and fully tax liable in Sweden. Limited tax liability is when the employee pays tax in Denmark of the remuneration earned in Denmark, but has full tax liability in Sweden. The consequence of this is that the employee can only deduct what is directly related to the taxable income in Denmark. Deductions are for example transport and travel expenses as well as union fees.
Another possibility is if an employee earns at least 75 % of the global income in Denmark. This gives the employee the right to deduct both work related but also private expenses, i.e. interest payable on real estate in Sweden. As a principal rule in Denmark it is not possible to deduct payment on retirement insurance in foreign insurance companies, but it is to some extend possible to deduct payments to Swedish retirement arrangements.
In the second case the Swede is employed and residing in Denmark and has the same rights and duties as the Danes. Equally, the Swede has access to the same social benefits. The Swede also pays regular Danish tax, special pension contribution, and gross income tax. There is an exception in this case in relation to the first; it is possible under certain circumstances to be employed in Denmark and taxed in Sweden.
Social security
Regardless of the different rules, the dominant rule of social security contribution payments is that these are to be paid in the country of employment. This means that special pension contribution and gross income tax is to be paid in Denmark when a Swede is employed in Denmark.
This also means that the employee has the right to the social benefits in Denmark. Rights are earned to social benefits such as health insurance, sickness benefit, pension, child support, industrial injury insurance, etc.
Unemployment insurance
In order to get unemployment insurance the employee must be a member of an unemployment fund in the country of employment. The Danish and Swedish systems are very much alike. It is easy to shift the membership from a Swedish to a Danish unemployment fund. The only necessity is a certificate (E301) from one unemployment fund to the other stating the level of seniority. In this way the seniority is maintained no matter the location of the employment.
If the situation of unemployment occurs, the Swede with residence in Sweden has to transfer the membership of the unemployment fund back to Sweden using the same certificate (E301) because this is where the unemployment insurance will be paid.
