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Danish Tax Administration on permanent establishment due to working from home

The Danish Tax Administration has recently issued another tax ruling on whether working from home in Denmark can give rise to a permanent establishment of a foreign company.

The case involved the CEO of a small Swedish company who, from the beginning of 2024, worked 60% of the time from the company's office in Sweden and 40% of the time from his home in Denmark. The allocation of time was planned and agreed in advance with the Swedish company. The CEO's activities in Denmark were more of an internal nature, i.e. related to the management of the company in Sweden and did not target the Danish market in any way.

The Danish Tax Administration confirmed that the place of management remained in Sweden, in particular because most of the management activities were still carried out by the CEO in Sweden; however, it decided that the Swedish company had established a permanent establishment in Denmark.

The decisive factors for the creation of the permanent establishment were:

• Working from home in Denmark was pre-determined and not random or sporadic.
• The activities of the CEO in Denmark have a significant impact on the day-to-day management of the company.
• The amount of work performed by the CEO from home in Denmark was considered significant given the small size of the company.

This decision is in line with previous Danish Tax Administration decisions in which planned and permanent work from home was considered sufficient to create a permanent establishment. According to our information, the Czech Tax Administration takes a similar view.

If you have any questions, please contact the authors of the article or your EY client team with whom you work.

Authors:

Martina Máleková

Markéta Krocová