Denmark The Pay Limit Scheme

In Denmark, the Pay Limit Scheme offers valuable opportunities for individuals pursuing employment, structured around specific eligibility criteria. It's important to fully understand the requirements and key information before starting the application. Understanding how adjustments in your employment status and tax responsibilities may affect your participation in the scheme is also essential.

Attracting talent through the Pay Limit Scheme

Examining the Pay Limit Scheme in Denmark reveals its purpose of attracting highly skilled professionals with competitive salaries. This initiative offers a work permit option accessible to a wider range of applicants. To be eligible for both a residence and work permit, foreign workers need a job offer that meets or surpasses a specified minimum salary. At present, candidates need to obtain a job with a salary that exceeds the current limit to be eligible for this permit. Annually, this salary threshold undergoes evaluation and is modified according to economic conditions, which ensures that only lucrative positions qualify for the program. This limit guarantees that the scheme continues to target professionals in well-paid roles.

In contrast to many other work visa programs, the Pay Limit Scheme does not necessitate that applicants fulfill specific educational or professional qualifications, allowing a wide range of high-earning individuals to participate. This initiative encompasses not only standard foreign workers but also asylum seekers residing in Denmark. If a job offer meets the salary criteria, applicants can apply for a residence and work permit through the Pay Limit Scheme. It’s important for applicants to recognize that the application process can be time-consuming, so submitting documents early is advisable to prevent any unnecessary delays. This route is essential for skilled professionals who wish to live and work in Denmark, allowing them to contribute significantly to the nation's economy.

Important details for residents and workers

Requirements for self-sufficiency

During your time in Denmark, maintaining self-sufficiency for yourself and your family is crucial. It is prohibited to accept benefits under the Active Social Policy Act, including social security payments. If you or a family member receives these benefits while residing in Denmark, it could lead to the cancellation of your permit and the loss of residency rights. In cases where any authority, like a municipality, provides benefits to non-Danish citizens, SIRI will be informed.

Residency regulations
Individuals holding residence and work permits under the Pay Limit Scheme are allowed to reside in Denmark for the period specified on their permits. It is essential to maintain a Danish address, as being outside of Denmark for more than six consecutive months will lead to the expiration of your permit and the forfeiture of your residency rights. If your job requires you to be away from the country for an extended period, you can request an exemption to prevent your permit from becoming invalid. This permit allows access to the Schengen area for up to 90 days within any 180-day period; however, it does not permit you to work in other countries within the Schengen zone.

Work and employment permits
The link between your employment and work permit in Denmark is crucial. It's vital to maintain a salary that meets or exceeds the minimum pay threshold. Be aware that your work permit may expire before your residence permit, particularly if you hold a permit that allows you to remain in Denmark while looking for new employment. It's essential to avoid working during the job-seeking phase, as this period is specifically meant for finding new job opportunities in Denmark. Additionally, make sure to inform SIRI about any changes in your employment status or if you become unemployed.

Receiving a job offer from a different employer necessitates the submission of a new work permit application. Additionally, if you intend to pursue a side job, a distinct permit is required. The Pay Limit Scheme allows for adjustments in job responsibilities within the same university or company without the need for a new work permit application, provided your salary and employment conditions meet Danish standards. This flexibility is relevant in cases such as transfers or promotions. Participating in unpaid volunteer work is permitted. However, having a Danish residence and work permit does not authorize you to work in other Schengen countries.

Danish language classes
Free Danish language courses are available to individuals holding a residence permit in Denmark. Eligibility for these courses requires that you are at least 18 years old and have your address registered in the Danish National Register. The responsibility for providing these lessons lies with your local municipality, which will guide you to a designated language center. Generally, classes are conducted with other newcomers to Denmark. If you haven't received an offer for Danish classes within a month of registering your address, it’s recommended to reach out to your municipality for assistance.

For individuals with a residence permit in Denmark for work, study, or related reasons, a deposit is required prior to beginning language lessons. It's important to note that failing to complete the necessary modules within the designated period may result in the forfeiture of your deposit.

Adapting to life in Denmark
To thrive in Denmark, it is vital to grasp several key elements. A valuable resource for newcomers is the website lifeindenmark.dk, which offers extensive information, links, and frequently available choices regarding important topics like vacation rights, health cards, tax matters, MitID, education and childcare, housing options, driving licenses, and vehicle registration. Your specific circumstances may necessitate additional crucial information and options.

The Pay Limit Scheme and job status changes

The connection between employment status changes and the Pay Limit Scheme is significant. When you receive a permit through the Pay Limit Scheme, your residency permit becomes directly associated with your job in Denmark. Your work permit is tied to the specific position that validates your residency, which restricts you from taking on any other role, even within the same organization. Informing SIRI is essential if you change jobs or become unemployed. In the event of unemployment, it is vital to notify SIRI, as your residence and work permit depend on that particular job. Additionally, ensure you apply for a job-seeking permit within two days after your employment concludes.

In situations where you face unemployment due to factors beyond your control, like layoffs, you can apply for an extra six-month residence permit to look for new job opportunities in Denmark. If you possess a permit under the Pay Limit Scheme, you can change your job responsibilities within the same organization or university without having to apply for a new work permit. Situations such as promotions or relocations are covered by this flexibility, as long as your salary and employment conditions meet Danish standards.

Obtaining a new job while currently employed in Denmark requires submitting a fresh application for both a residence and work permit. This application should outline your new employment details and can be submitted under one of the available work schemes. It is important to ensure that your salary is at least at the established pay limit. After submitting your application, you are permitted to start working, even if your permit's approval is still in progress.

Length of stay in the Pay Limit Scheme

 
During the application process, it is essential to declare your financial ability to support yourself and any family members accompanying you. Failing to include this declaration will result in a residence permit that is only valid for 14 days before your employment starts. Applicants from outside Denmark may receive a residence permit valid for one month prior to the beginning of their job, allowing time to adjust to life in Denmark. If you submit your application while in Denmark, the residence permit will take effect on your first day of work.

Jobs that last under four years usually result in your residence and work permit matching the length of your employment. When employment extends to four years or more, a residence and work permit is generally granted for that entire duration. It is important to seek an extension of your residence and work permit when your employment contract is renewed.

Applying for an extension of both your residence and work permit is essential for maintaining your employment in Denmark once your current permit expires. It's crucial to submit your extension application before your existing permit runs out. Timely submission ensures that you can remain in Denmark and continue working, even if SIRI has not yet made a decision on your extension request when your current permit expires. By applying on time, you secure your ability to stay in Denmark and continue your employment without interruption.

To keep working after the initial four-year period, you must apply for an extension based on your current job. An extension application is required to maintain your employment beyond these four years.

The validity of a residence permit is limited to a maximum of three months prior to the expiration of your passport. In cases where your passport is valid for a shorter period than your intended stay, the residence permit will be modified to reflect this reduced validity. Once you have renewed your passport, you can apply for an extension of your residence permit; however, this application must be submitted no earlier than three months before your current permit expires.

When you secure a new position, you must submit a new application based on that job. You can apply under the Positive List or any applicable work scheme. Significantly, after submitting your application for the new job, you are permitted to begin working immediately, even before your new permit is issued.

Tax duties in the Pay Limit Scheme

 
Participants in the Pay Limit Scheme need to be aware of their tax obligations to effectively manage their finances while living and working in Denmark. Generally, anyone residing in Denmark is subject to full tax liability, meaning they are taxed on their worldwide income. Understanding this distinction is crucial for those in the Pay Limit Scheme, as it affects how their income is taxed.

For individuals who are fully tax residents, tax rates in 2024 can be as high as 52.07%. This total includes various components: a base tax of 12.01% on personal income, a top tax of 15% on income exceeding DKK 588,900 after applying an 8% labor market tax deduction, and municipal tax, which averages around 25.067%. Additionally, an 8% labor market tax is levied on personal income. Despite these high tax rates, Denmark offers several deductions that can significantly lower the overall tax burden for individuals.

Those who do not meet the requirements for full tax liability may qualify for limited tax liability, depending on certain conditions. This scenario pertains to individuals who earn income from Danish sources but reside in Denmark for less than 183 days within a 12-month period. In such cases, income is taxed at rates comparable to those of full liability (up to 52.07%), but only earnings from employment in Denmark are considered.

For individuals involved in the Pay Limit Scheme, consulting tax professionals is recommended, as they can identify applicable deductions and improve tax management. Working with tax experts is essential for comprehending local regulations, ensuring compliance, and maximizing potential deductions or exemptions. Furthermore, it's important to consider the special tax regime for expatriates. Eligible expatriates can take advantage of this regime, which allows them to benefit from a flat tax rate of 27% on their gross income for up to 84 months, as long as they fulfill specific requirements.

Participants in the Pay Limit Scheme, especially those in well-paying roles, can find this arrangement particularly advantageous, as it simplifies tax obligations and may lead to a lower overall tax rate. Understanding the complexities of the Danish tax system, especially in relation to the Pay Limit Scheme, emphasizes the need for professional advice.

Comparing Pay Limit and Supplementary Schemes

 
Individuals can seek a residence and work permit through the Pay Limit Scheme, provided they have a job offer with an annual salary of at least DKK 459,000. This initiative aims to draw skilled professionals whose earnings meet Danish salary expectations, allowing them the chance to live and work in Denmark.

Although the Pay Limit Scheme and the Supplementary Pay Limit Scheme both facilitate the employment of skilled workers in Denmark, they cater to different situations and have separate eligibility requirements.

The Supplementary Pay Limit Scheme offers a comparable option but with slightly reduced criteria. To be eligible, candidates must secure a job offer with a minimum annual salary of DKK 393,000. A notable feature of this scheme is that it does not necessitate a specific educational background or employment in a particular field, thus enabling a wider array of individuals to qualify. Additionally, asylum seekers in Denmark holding a high-paying job offer are also permitted to apply under this scheme.

While both schemes aim to attract skilled workers to Denmark, the primary difference is in the salary requirements and the more lenient educational and professional criteria of the Supplementary Pay Limit Scheme. This leniency makes the scheme appealing to individuals who may not satisfy the stricter requirements of the standard Pay Limit Scheme but can nonetheless contribute valuable expertise to Denmark’s workforce.

Who qualifies for the Pay Limit Scheme?

 
To secure a residence and work permit through Denmark's Pay Limit Scheme, certain criteria must be met. Employment terms must comply with Danish regulations, and the salary offered must be at least at the minimum threshold set. Additionally, the salary must align with Danish standards. Moreover, salary payments should be deposited into a Danish bank account under your name.

To qualify, your offered salary must meet or exceed the specified minimum threshold. For 2024, this threshold is set at DKK 487,000, with annual adjustments on January 1st. When determining if the minimum salary is met, only specific components of your compensation are considered. This includes your base salary in liquid assets, guaranteed fixed supplements, contributions to labor market pension schemes (from both employer and employee), and paid holiday allowances.

Understanding the assessment criteria is essential, as non-monetary benefits offered by your employer—like free meals, access to a company car, paid phone or internet services, and housing allowances—are excluded when determining if your salary meets the minimum requirement. Regardless of taking unpaid leave, your total salary for the year must still comply with the minimum requirement. Moreover, holiday allowances that are earned in one year but paid out the next cannot be included in the annual salary calculation for the year they were accrued. Only holiday allowances received from your current employer will be considered as part of your salary.

Compensation must align with the standards set in the relevant professional sector for your employment. In assessing whether the offered salary meets Danish norms, specific components are considered. These include the base salary in liquid assets, guaranteed fixed supplements, contributions to labor market pension schemes (covering both employer and employee), and the paid holiday allowance. It's crucial to remember that these benefits cannot be included when determining if your salary complies with Danish standards.

Additionally, your compensation package may encompass extra perks from your employer, such as a paid canteen, access to a car, and coverage for phone, internet, and living expenses. A holiday allowance that is payable in the subsequent year will not be factored into the annual salary calculation for the year it was accrued. Additionally, only the holiday allowance provided by your current employer is recognized as part of your overall salary.

To meet Danish norms, employment terms must adhere to specific standards. It is essential to ensure fair treatment of employees while offering benefits that align with industry norms. Key aspects such as holiday entitlements, notice periods, and other relevant conditions should meet or exceed the benchmarks established in your field. If there are any concerns regarding whether your employment terms comply with Danish standards, regional labor market councils can provide assistance. Equipped with the expertise to evaluate your employment conditions, these councils can confirm whether they align with local regulations and expectations. Their assessments provide clarity and reassurance, ensuring that your rights and benefits are protected within the Danish labor market. This collaborative approach emphasizes a commitment to maintaining high standards in employment practices across various sectors.

To set up your bank account in Denmark, it is essential to contact a bank directly. You have 180 days from the date your residence and work permit is issued to open this account. If you arrive in Denmark after receiving your permit, the same 180-day rule applies from your entry date. For salary payments in Denmark, it is mandatory for your wages to be deposited into a bank account registered in your name and operating legally within the country. You can select any type of account, as there are no limitations on this. Should you face difficulties due to a lack of a Danish address or CPR number, consider checking for a basic payment account at www.basalbetalingskonto.dk. If you have maintained a valid Danish residence permit for at least 180 days, your salary should be directed to your Danish account starting with your first payment. Transferring your salary from another Danish bank account is not required.

To be eligible for a residence permit through the Pay Limit Scheme, it is crucial that your spouse, partner, children, or, in some instances, other family members with accompanying residence permits have not had their permits revoked more than once due to not possessing a necessary work permit.

A minimum of 30 hours of work per week is required. Additionally, your salary must be at least equal to the designated minimum amount, regardless of how many hours you work each week.

In some cases, it may be necessary to acquire Danish authorization or a temporary adaptation and training permit before you can obtain a residence and work permit. When participating in adaptation and training for Danish authorization, a temporary authorization (evalueringsautorisation) from the Danish Patient Safety Authority is required.

Moreover, individuals who receive job offers as medical doctors must secure authorization from the Danish Patient Safety Authority. Positions involved in a legal labor dispute cannot have permits issued. Nonetheless, other roles within a company or institution participating in the conflict may still be eligible for permits, provided those positions are not included in the dispute as outlined in the relevant agreements among labor market parties.

What to consider before applying?

 
The Danish Agency for International Recruitment and Integration, known as SIRI, is responsible for processing residence permit applications related to employment. To begin your application, you must create a case order ID and pay a processing fee that covers SIRI's costs. Initially, your employer needs to fill out one of the two sections of the application form. After they complete it, they will obtain a reference number and password, which they must give you to access and finish your portion of the online application. If you have given your employer power of attorney to manage the application for you, they must utilize the AR6 online form, which is specifically intended for employer use.

Grasping the application process is vital, as SIRI frequently rejects residence permit applications submitted too far in advance of your planned start date in Denmark. Applying more than six months before your intended arrival greatly raises the chances of refusal. Additionally, keep in mind that if your application is rejected, any processing fee paid to SIRI will not be refunded. Typically, you need an employment contract with a company registered in Denmark to apply, although exceptions apply, such as when you work for a foreign company offering services in Denmark. When submitting your application from within Denmark, it is important to make sure that your stay is legal.

How to apply for the Pay Limit Scheme?

 
1. Generate a case order ID
Initiating an application or appeal that involves a fee requires the creation of a case order ID. This step is necessary even if you qualify for a fee exemption. The standard application fee is DKK 6,290, but you may be exempt from this charge in certain situations, such as those related to Denmark's international obligations or the Association Agreement with Turkey. Should you pay a fee that turns out to be unnecessary, a full refund will be issued.

To create your case order ID, you will need to provide your passport number, first and last name, and email address. You also need to give permission for immigration authorities to send the case order ID to your email. To move forward, click on “Create case order ID.”

2. Fee payment  
Fees are updated every year on January 1, making it crucial to plan your application timing wisely. If you submit your application after January 1 but have paid the fee beforehand, there’s a risk it could be rejected due to the new fee structure. To prevent this issue, make sure to generate your Case Order ID, pay the fee, and submit your application all within the same calendar year.

In case your Case Order ID doesn’t appear automatically, you can input it manually and choose the option to check your payment status.

3. Collecting required documentation
To ensure a seamless application process, it’s important to gather all necessary documents before filling out the application form. Key items to prepare include:

• Proof of payment for the application fee, like a transaction receipt.
• Educational qualifications pertinent to the position you are applying for.
• An employment contract or job offer detailing your salary, employment terms, and job responsibilities.
• A complete copy of your passport, including all pages (even those that are blank) and the front and back covers.
• Any authorization documents required, especially if your job necessitates Danish authorization.
  
  

Certified translations into Danish or English are required for any documents that are not in English, Norwegian, Swedish, or Danish.

When establishing a company in Denmark, you must include a documented overview of key setup expenses, along with a plan that outlines a timeline for becoming operational. For new companies that do not yet have their first annual accounts, it’s important to provide documents that showcase financial stability, such as a budget or a general ledger balance, in addition to a business plan that outlines your objectives and strategies.

When submitting an application on behalf of a company, keep in mind that you may need to provide extra documentation to assess the business's ability to support employee salaries.

4. Collecting required documentation for employment in hotels and restaurants
To make the application process smoother, it’s advisable to gather all necessary documentation before beginning the form. Designed for positions in the hospitality and food service industries, this checklist addresses the need for additional information. For any documents not in English, Norwegian, Swedish, or Danish, certified translations into Danish or English must be provided.

Your application should consist of the following items:

• Evidence of pertinent work experience, like a declaration or statement from a former employer.
• An employment contract, since a job offer by itself is not adequate.
• Your CV.
• Proof of payment, such as a transaction receipt.
• A complete copy of your passport, including all pages (even the blank ones) and both front and back covers.
• Documentation of your educational qualifications and courses related to the position, such as a diploma from your educational institution.
  
  

You or your employer may need to provide additional documents, especially if the company was founded less than a year ago. These may include:

• The latest annual accounts, unless this information is already accessible on Virk.dk. 
• A current general ledger balance if the initial annual accounts are unavailable; this should contain details on turnover, employee costs (noting whether the applicant’s salary is included), and overall financial results.
• A budget and business plan for the organization.
• An employee overview, outlining the number of staff at the applicant’s location along with their roles and salaries (a sample is available for download below).
  

If you have authorized your employer to manage your application through a power of attorney, make sure to include a valid document. In situations where a third party is representing both you and your employer, separate powers of attorney for each must be submitted to SIRI.

Ensure that the power of attorney contains:

• The name of the individual granting the authority.
• The name of the recipient of the authority.
• The date and signature.
  
  

5. Submitting and finalizing the application form
You can choose between two online application forms, each with specific requirements:

• AR1 Form: This form requires both you and your employer to fill out separate sections. Your employer starts by completing the first part, after which they will receive a reference number and password to share with you. This information will allow you to access and finish your section of the form.
• AR6 Form: With this form, you can authorize your employer to submit the application on your behalf.
  
  

Each form includes thorough instructions outlining the steps for completion and the necessary documents. Ensure that you have all required documents in digital format ready for upload during the application process. If you lack a MitID, remember to sign, scan, and attach the ‘Sworn declarations and information’ document along with your application.

6. Record your biometric information
Collecting your biometric data, which includes a facial photograph and fingerprints, is a crucial step when applying for a residence permit. This must be done within 14 days of submitting your application. It’s important to schedule an appointment in advance; you can have your biometrics recorded at SIRI branch offices while in Denmark. If you are located outside Denmark, you can visit a Danish diplomatic mission or an application center in your country to record your biometric information. In regions without a Danish mission, a list will direct you to the nearest Norwegian mission that has an agreement with Denmark.

Individuals who are legally in Denmark on a visa, are visa-exempt, or hold a valid residence permit generally have the option to record their biometric features locally. However, this biometric requirement is waived for those commuting to Denmark solely for work without a residence.

In the event that you face difficulties booking a biometric appointment within 14 days, it's important to notify the authorities about your scheduled appointment to avoid rejection of your application. It’s important to be mindful of the requirements of local diplomatic missions, as some may require additional fees, passport photos, or extra copies of the application. A passport photo is mandatory for applications submitted at a Norwegian diplomatic mission.

Once your residence permit is approved, you must record your biometric data shortly after arriving in Denmark to complete the processing. If this step is not carried out, your application will be denied. When issued, your residence card will include a microchip that securely stores your facial photograph and fingerprints.

7. Get a response
Typical processing times for cases can be found on the right side of the page. If SIRI needs more information to move forward, they will contact you or your employer directly. A response to your application indicates that you have successfully completed all necessary steps, which include creating a case order ID, paying the fee, submitting your application, and recording your biometric data.

You can rely on our team of experienced professionals to assist you in understanding the intricacies of the Pay Limit Scheme. Feel free to reach out to us at any time for more information or assistance.