The change means that a researcher with approved research qualifications may choose to be taxed in accordance with section 48E without having to meeting the special remuneration requirement of this provision, see below.
However, the other terms in section 48e must be satisfied. The approved researcher will be able to obtain permanent residency in Denmark without supplementary taxation for the period in which the 25 percent scheme was applied.
The change that took effect in 2000 also applies to certain other types of research and development workers.
R&D workers who meet the conditions in section 48E and subsequently have the right to be taxed according to that provision may apply for certification that their work corresponds to research and development work.
If certification is granted, the R&D worker will be able to obtain permanent residency in Denmark without supplementary taxation for the period in which the 25% scheme was applied.
Approval of research qualifications
Requirements for approval
In order to be granted approval of research qualifications, the researcher must be able to document qualifications corresponding to the level of a position as assistant professor or above or as researcher/project researcher. Such positions require qualifications at the level of PhD or similar.
Where to apply
The universities, government research laboratories and Danish Research Councils have the competency to approve research qualifications.
If the position is at an institution covered by the Danish Act on Universities, etc. or the Danish Act on Government Research Institutions, the application is to be processed by the institution in question.
If the position is at an institution that is not covered by one of the acts listed above or if the position is at a private-sector company, the application is to be processed by one of the Danish Research Councils. If the application is to be processed by a Research Council, it is to be submitted to the Danish Research Agency using Form 6a.
When to apply
The Danish Ministry of Taxation requires that approval of research qualifications has been granted by the beginning of the employment period. This requirement is considered met if the approval is granted within the period after the start of the employment period that is usually spent by the research institutions or Research Councils on the approval procedure.
Certification of research and development work
Requirements for certification
The Danish Research Councils may refuse to process any application for certification that the work performed corresponds to research and development work if it has not been documented that the remuneration requirement of section 48E of the Danish Withholding Tax Act has been fulfilled. The remuneration requirement for 2003 was DKK 54,300 per month.
It must be stated in the employment contract that the work to be performed corresponds to research and development work. Certification is given on the basis of the OECD's guidelines as stated in the Frascati Manual 1993.
The Frascati Manual's basic definitions of research and development work are translated into Danish in Appendix 1 of the Danish Ministry of Science, Technology and Innovation Executive Order on the Approval of Researchers, etc. in accordance with section 48e of the Danish Withholding Tax Act.
Where to apply
Applications for approval that the work performed corresponds to research and development work are always to be submitted to the Danish Research Councils. The application is to be submitted to the Danish Research Agency using Form 6b.
When to apply
The Danish Ministry of Taxation requires that certification of the work as corresponding to research and development work has been granted by the beginning of the employment period. This requirement is considered met if the certification is granted within the period after the start of the employment period that usually forms part of the research institutions' or Research Councils' certification procedure.
Temporary provisions for persons who have obtained 25 percent taxation in accordance with the rules that applied prior to 13 May 2000
Persons who were subject to 25 percent taxation on 13 May 2000 are considered covered by the provisions in their current wording.
However, any transactions made after this date must meet the current rules if the person wishes to continue to be covered by the 25 percent taxation scheme. This means that a researcher whose employment contract has been extended or who has commenced a new employment situation must apply for approval of research qualifications.
Special temporary provisions have been laid down for persons who were covered by section 48E of the Danish Withholding Tax Act on or after 13 November 1998 in its wording at the time. These temporary provisions do not apply to persons who have already paid supplementary tax. The decision as to whether a person is covered by the temporary provisions is made by the Danish taxation authorities.
Researchers with project approval from a Danish Research Council
Researchers who were exempt from the remuneration requirement in section 48E may apply for approval of research qualifications according to the new rules. If approval is granted, the researcher will be able to obtain permanent residency in Denmark without supplementary taxation for the period in which the 25 percent scheme was applied.
Persons who met the remuneration requirement of section 48E of the Danish Withholding Tax Act
Persons who were not exempt from meeting the remuneration requirement may apply for certification that their work corresponded to research and development work.
If certification is granted, the worker will be able to obtain permanent residency in Denmark without supplementary taxation for the period in which the 25 percent scheme was applied.
If the 25 percent taxation scheme has be chosen on the basis of more than one employment situation, certification must be applied for separately for each employment situation.
Applications for certification that the work performed corresponds to research and development work are always to be submitted to the Danish Research Councils. The application is to be submitted to the Danish Research Agency using Form 6b.
Where the rules are found
The rules regarding 25 percent taxation can be found in legislation on withholding tax and on municipal property value tax for persons, etc. (tax deducted at source), cf. Consolidated Act no. 80 of 2 February 2001, and in the Danish Ministry of Taxation’s circular no. 130 of 28 June 2000.
The rules for approval of researchers, etc. in accordance with section 48E of the Danish Withholding Tax Act can be found in Danish Ministry of Science, Technology and Innovation Executive Order no. 568 of 22 June 2000.
