Hydrocarbon activity
According to the Danish Hydrocarbon Tax Act, non-Danish employers and employees may be liable to pay Danish hydrocarbon tax if they are engaged in:
- preliminary surveys
- exploration, and
- extraction of hydrocarbons in Denmark.
The forms below must be completed when reporting hydrocarbon activity and liability:
49.102 - Danish income tax return for foreign companies
49.103 - Information on contractor/contracts
49.055 - Information on foreign employees without residence in Denmark
49.109 - Specification of wages and hydrocarbon tax withheld
Foreign enterprises are liable to Danish tax according to the Hydrocarbon Tax Act if the enterprise:
- earns income in connection with preliminary surveys, exploration, and extraction of hydrocarbons in Denmark, and
- is not liable to tax under the regular Danish tax rules.
Activities covered by the Danish Hydrocarbon Tax Act
The tax liability covers income in connection with preliminary surveys, exploration, and extraction of hydrocarbons, including construction, operation, and maintenance of production facilities and pipelines. The tax liability also covers service functions related to the operation of the installations. Furthermore, income from supply services and transport by ship is covered by the tax liability as well. The tax liability merely concerns income derived from work performed in Denmark or on the Danish continental shelf.
Income from refining and the further transportation of hydrocarbons, and from construction and maintenance of facilities and pipelines in this connection, is not covered by the tax liability according to the Hydrocarbon Tax Act.
Tax year
The taxable income must be determined according to the regular Danish tax rules. However, if enterprises are liable to tax according to the Hydrocarbon Tax Act only, enterprises must use the calendar year as accounting year for the income determination.
Assessment authority
The assessment is made by the Danish Tax Agency and the income tax return must be filed within 1 July of the year following the income year. If the activity discontinues during the income year the income tax return must be filed within 1 month after the discontinuance. Companies must pay the ordinary corporation tax of 22% for 2021.
Tax paid on account within 20 March will be raised by an additional percentage (0.1% for 2021). Tax paid on account after 20 March but within 20 November will be reduced by the equivalent percentages.
Tax paid on account during the period 21 November to 1 February the following year will be reduced by another percentage (0.8% for 2021).
If the company chooses not to pay tax on account, the corporation tax, surcharge included, will amount to 22.946% for 2021.
In cases of termination of the tax liability, the deadline for payment of tax on account is 1 month after the date of termination, which corresponds to the deadline for filing a tax return. In these cases no additional percentage will be calculated.
Transfer Pricing
For income years beginning on or after 1 January 2021, parties liable to pay tax that are subject to the transfer pricing documentation obligation must submit their written documentation to the Tax Agency within 60 days of the filing deadline for the tax return. Documentation must be filed to: hydrocarbon-tax@sktst.dk
To get more information on the topic, we refer to: www.skat.dk/transferpricing
The rules as to submitting written documentation and the disclosure obligation for controlled transactions can be found in Part 4 of the Danish Tax Control Act (Skattekontrolloven).
Double taxation conventions
If a foreign enterprise is domiciled in a country with which Denmark has concluded a double taxation convention, the contents of this convention decides whether Denmark has the right of taxation.
In several new conventions, Denmark has the right to tax income earned in connection with preliminary surveys, exploration, and extraction of hydrocarbons in Denmark if the activity performed offshore - in some cases both onshore and offshore - has a duration of more than a certain number of days within a period of 12 months.
| Country of domicile | Place | Duration within a 12 month period |
|---|---|---|
| The Netherlands | Offshore | More than 30 days |
| Nordic Countries | Offshore | More than 30 days |
| Germany | Onshore and offshore | More than 30 days (does not apply to drilling rig activities offshore) |
As to enterprises domiciled in the United Kingdom, Denmark has the right to tax offshore work from day 1, whereas Denmark has the right to tax both on- and offshore work from day 1 for enterprises domiciled in Ireland.
Furthermore, Denmark has the right to tax enterprises from many other countries on different conditions.
For further information, please contact us at hydrocarbon-tax@sktst.dk
Foreign employees who work in Denmark for a foreign enterprise without a venue carrying out work in connection with preliminary surveys, exploration, and extraction of hydrocarbons in Denmark, and who are not liable to tax according to section 1 of the Danish Withholding Tax Act, are liable to tax under the Danish Hydrocarbon Tax Act.
8% labour market contribution and 30% hydrocarbon tax
Employees must also pay 8% labour market contribution on the gross income according to Act on Labour Market Contribution. Subsequently the 30 % hydrocarbon tax must be calculated on the gross income less the 8% labour market contribution calculated. The value of free food and accommodation is not taxable. No deductions are allowed when calculating the above taxes.
The total employee tax is payable by the employer, who must withhold the tax calculated in connection with the payment of wages and salaries. The employees need not file an income tax return but will receive a tax assessment notice issued by us in the beginning of the subsequent calendar year.
The tax assessment notices will be forwarded to the foreign employers who then must pass them on to the employees.
Double taxation conventions
Denmark has the right to tax employees being residents of the United Kingdom from day 1 for work performed offshore Denmark.
As to employees being residents of one of the Nordic countries, Denmark has the right of taxation regarding work performed offshore Denmark for a period or periods exceeding in the aggregate 30 days in any 12 months period.
Furthermore, residents of other countries will be liable to tax in Denmark if their employer is deemed having a permanent establishment in Denmark in accordance with the conditions stated in the convention concluded between Denmark and the country in which the individual employee is domiciled. Internal Danish tax rules apply in case of a lacking double taxation convention.
Residents of several countries may also be liable to tax, if they work in Denmark for a foreign employer who is not a resident of the employees' home countries.
For further information, please contact hydrocarbon-tax@sktst.dk.
When contracts are concluded with foreign enterprises regarding work in relation to preliminary surveys, exploration, and extraction of hydrocarbons in Denmark, information must be given on the contractors and the contracts. Information must also be given on the employees working in Denmark or on the Danish continental shelf.
The provisions for this obligation are found in the Act on Assessment and Collection of Hydrocarbon Tax.
Any assignor - Danish or foreign - is obliged to give information on the contractor and the contract without prior request, if the contractor is a foreign company which is not registered in Denmark as a subsidiary or a branch. If the contractor engages foreign subcontractors the contractor in this context becomes an assignor and is therefore obliged to give information on the subcontractors and the subcontracts.
When giving information on contractors and contracts the form no. 49.103 - Information on Contractor/Contracts must be completed.
You can download the form from www.skat.dk/offshore.
The completed form must be e-mailed no later than 14 days after the commencement of the work to hydrocarbon-tax@sktst.dk.
All changes to the initial information should be forwarded to our e-mail address above without delay. However, changes to the information concerning the contract amount and the expected date of termination should be submitted immediately after the discontinuance of the contract work.
According to the general rules foreign contractors must give information to the Danish Tax Agency on their employees, see the previous section: Reporting requirements.
According to the Hydrocarbon Tax Act, the assignor is also obliged to give information on persons who are employed by the contractor. However, we will only demand this information from the assignor if the contractor omits to submit the information.
If the above information is not given in due time, we may impose daily penalties until the information has been given.
Employees, who are liable to tax according to the Hydrocarbon Tax Act, must pay a final tax of 8% labour market contribution and 30% hydrocarbon tax on their wages/ salaries. The taxes must be paid by the employer, who must calculate and withhold the taxes in connection with the payment of wages/salaries.
Employers liable to withhold the above taxes are foreign enterprises which are not established in Denmark (enterprises without a venue, e.g. companies which are not registered in the Danish register of companies) and whose employees are liable to tax according to the Hydrocarbon Tax Act.
Employers who must withhold 8% labour market contribution and 30% hydrocarbon tax according to the Hydrocarbon Tax Act must be registered as enterprises with an obligation to withhold tax.
In order to be registered the employer must contact us as soon as possible and at the latest eight days after the commencement of the work related to preliminary surveys, exploration, and extraction of hydrocarbons.
In the application the employer must give the following information:
• name
• address in Denmark
• address abroad
• date of commencement of work
• expected date of termination of work
• name of assignor
• address of assignor
Send the application to hydrocarbon-tax@sktst.dk.
We make the registration and inform the employer about the employer number assigned. The employer number must be stated at the reporting and payment of the taxes withheld.
If the employer discontinues business in Denmark related to preliminary surveys, exploration, and extraction of hydrocarbons, we should be informed eight days after the discontinuance at the latest.
Foreign employers who are obliged to withhold hydrocarbon tax must give information on all their employees engaged in work related to preliminary surveys, exploration, and extraction of hydrocarbons. This information must be submitted to us via hydrocarbon-tax@sktst.dk.
For every new contract involving work in Denmark related to preliminary surveys, exploration, and extraction of hydrocarbons the employer must submit information on the employees who are engaged in the work under each contract.
The employer must submit the information on the employees as soon as possible or at the latest 14 days after the commencement of the work.
We must be informed about all changes to the initial information given.
Reporting forms regarding information on employees
When giving information about employees the employer must use the form/spreadsheet 49.055 - Information on foreign employees without residence in Denmark.
The completed spreadsheets must be e-mailed to hydrocarbon-tax@sktst.dk.
The employer is not to withhold any tax from the wages and salaries of Danish employees unless the Danish Tax Agency has expressly informed him to do so.
The employer must withhold 8% labour market contribution and 30% hydrocarbon tax from the wages and salaries of the foreign employees. The tax payable amounts to a total of 35.6% of the gross income.
Exemption from withholding tax will be given to foreign employees who expect to live in Denmark for at least six months or to employees where Denmark has ceded the right of taxation according to a double taxation convention.
The employer must withhold taxes from the wages/salaries of all foreign employees unless we have given an exemption.
NB! An exemption requires an application about this from the employer.
The time at which tax must be withheld
The employer must withhold the tax at the time where the wages/salaries are paid or any time before this when payment can be claimed according to the contract of employment.
The taxation basis
The 8% labour market contribution must be calculated on the basis of the employee's gross income earned during work in Denmark (except the value of free food and accomodation). The 30% hydrocarbon tax must be calculated on the gross income less the 8% labour market contribution calculated. The total tax payable thus amounts to 35.6% of the gross income. No deductions are allowed when calculating the tax.
The following must be included in the basis of calculation:
• wages earned during time off in lieu relating to work performed in Denmark
• bonuses
• holiday pay
• contributions to a pension scheme
• contributions to group life insurance and the employees' payment of national health insurance to their home country.
The above list is by no means exhaustive.
lf the employer has agreed with the employee that the first mentioned is to pay the taxes assessed on the employee, the basis of taxation is found by dividing the net wages and salaries by 0.644.
Every month on the 1st the employer must pay the 8% labour market contribution and 30% hydrocarbon tax withheld during the previous month. Declaration and payment must reach us no later than the 10th. In case of late payment interest will be charged.
The total amount of tax payable must be converted into DKK (Danish kroner) by using the exchange rate of Denmark’s central bank, Danmarks Nationalbank, current on the first bank day of the month (www.nationalbanken.dk)
The taxes withheld must be paid in DKK to the following bank account:
Account No. (IBAN): DK6202164069071597
BIC/Swift code: DABADKKK
Danske Bank A/S
Statens Koncernbetalinger
Girostrøget 1
DK-0800 Høje-Tåstrup
Denmark
The employer must report on the taxes withheld in the following way:
Monthly specification of wages and taxes withheld
Every month on the 1st and no later than the 10th the employer must specify the wages and the taxes withheld during the previous month on the individual employee.
The applicable spreadsheet 49.109 - Specification of wages and hydrocarbon tax withheld must be e-mailed to kulbrinte-bogforing@sktst.dk.
If the 8% labour market contribution and the 30% hydrocarbon tax withheld are not paid on time, a monthly default interest will be charged until payment has been received.
For 2022 the monthly default interest amounts to 0.7%.
The interest is not deductible when making up the taxable income.
If the employer fails to fulfil his obligation to withhold the tax or withholds too small an amount of tax, the employer is liable to pay the deficit.
For further legal information in Danish see our legal guide .