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Denmark: Tax Authorities Clarify Moonlighting Rules

(Dec. 11, 2012) <?Denmark's tax authority, Skat, plans to clarify rules covering working "under the table," with cash payments for odd jobs. The changes, effective as of January 2013, will be especially helpful in clarifying the tax situation for those under 16 and retired workers on pensions who work part time for extra money. Teenagers younger than 16 have no tax liability if they work in someone else's home; pensioners are exempt from taxes on the first 10,000 kroner (about US$1,700) earned each year. In addition, for those receiving state pensions, any income over 30,000 kroner offsets part of the pension. (New Moonlighting Rules Take Effect in 2013, THE COPENHAGEN POST (Dec. 5, 2012).)

In the past, workers have been unsure about what constituted just helping out a friend or family member and what was earning taxable income. Skat notes that in theory work done for friends does not need to be reported, so long as there is no “significant economic benefit,” and no money is exchanged. Bo Sandmann Rasmussen, an economics professor at the University of Aarhus, said that “[e]xactly where the boundary lies is uncertain. … I have heard tax agents say that you can help a neighbour build a carport, even though it could be worth as much as 30,000 kroner.” (Id.)

Thor Möger Pedersen, the Minister of Taxation, last year said that Skat will hold customers who hire workers on the black market and the people providing such services responsible for cheating the tax system. The Skat suggested that cash payments be limited to 10,000 kroner. While higher cash payments are still legal, keeping to the 10,000 kroner amount will ensure that parties to the transaction will not be charged with major tax evasions. (Jennifer Buley, Crackdown on Cash-In-Hand Customers, THE COPENHAGEN POST (Nov. 22, 2011).)