You must withhold 8% labour market contributions (AM-bidrag) and 30% hiring-out of labour tax when you pay the invoice for the hired-out labour. This applies both when you hire the foreign labour directly from the foreign employer, and when the hire contract has been arranged and invoiced through another enterprise or temp agency.
You are responsible for the payment of the tax. You must pay the tax yourself if you forget to withhold it when paying the employer.
How to calculate international hiring-out of labour tax
The foreign employer must provide you with documentation showing the gross income of the employee.
The employee's gross income consists of:
- Salaries/wages etc., including:
- time off in lieu earned in connection with work performed in Denmark
- Holiday pay earned in Denmark
- Travelling allowance and transport allowances
- Value of free food and accommodation
- Other kinds of taxable fringe benefits
If you do not receive documentation of the employee's gross income, you must calculate the hiring-out of labour tax on the basis of the invoice amount. You must withhold the tax in the payment to the foreign employer.
If the foreign employee chooses to have his tax calculated according to the ordinary rules on limited tax liability, or if he is fully liable to tax in Denmark, you must withhold tax via eIncome.
Example of how you calculate the tax:
Hans lives in Germany, and his German employer hires him out to you.
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.
| Calculation of Hans's Danish tax | Amount |
| Labour market contributions (AM-bidrag) (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 |
| Settlement | Amount |
| You pay the hire of DKK 30,000 to the German employer less Hans's tax of DKK 7,120 | DKK 22,880 |
| You pay the tax withheld to SKAT | DKK 7,120 |
| The German employer pays the salary of DKK 18,000 plus transport allowance of DKK 2000 to Hans less the Danish tax of DKK 7,120 | DKK 12,880 |
| The German employer's profit of DKK 10,000 is not taxable | |
How to report and pay international hiring-out of labour tax
You must make a list of hired labour and their tax 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. You may use form no. 01.010 EN:
Form no. 01.010 EN (Arbejdsudleje/International Hiring-out of Labour)
The form should be submitted via the Danish enterprise's tax account (skattekonto) in E-tax for businesses (TastSelv Erhverv).
You must pay the tax no later than the 10th of the month following the month in which you withhold the tax and pay the invoice to the foreign enterprise. Large enterprises, covered by the rules of advanced payment must pay the tax no later than the last bank day of the withholding month.
The tax is payable in Danish kroner to the tax account of the Danish enterprise.
Payments of tax from a foreign bank account should be transferred to the following account: IBAN number: DK87 0216 4069 1633 94 and BIC/Swift code: DABADKKK.
Interest will be charged for late payment.