Arbejdsudleje: Redegørelse af nuværende lovgivning og analyse af problemstillinger

Thomas Schjølie Grüner

Student thesis: Master thesis


Executive summary: Social dumping represented by Eastern European workers in particular has been the source of major problems and heavy debating in Denmark for the past few decades. Industries hiring unskilled labour have been particularly hard hit because Danish tax residents are not able to compete with foreign workers in terms of tax benefits. Social dumping is also a problem for the Danish welfare state as it is deprived of tax revenue to which it is entitled. As part of reducing social dumping, Danish Act No 195 (L195) amending Section 2 of the Danish Withholding Tax Act was adopted with effect from 19 September 2012. The amendment of the rules on hiring out labour was to be seen as an alignment with international practice in this field as hoped for by the Danish authorities. This issue is addressed internationally, however, to a limited extent among countries when signing a double taxation treaty. Such treaties have increasingly been based on the OECD Model Convention and related commentaries, particularly in recent decades. The Model Convention and its commentaries are also often used in solving issues and clearing up interpretation difficulties related to international treaties. The concept of hiring out labour was first incorporated into the OECD Model Convention in 1992 and remained largely unchanged until 2010 when the OECD’s interpretation of the concept of employer was radically revised. The revision was due to the increasing level of attempted tax evasion under the rules on hire-out. Following the revision, higher priority was given to the very nature of services provided and to whether an employment relationship could be claimed based on a so-called substance-over-form analysis. This revision of the interpretation of the concept of hiring out labour and hence the concept of employer is exactly what the Danish Parliament intended to incorporate into Danish law through Danish Act No 195. Since the adoption of Danish Act No 195, some major stakeholders have been arousing criticism of the fact that the tax authorities were interpreting the new rule too broadly, wrongfully affecting workers employed by foreign enterprises operating as wholly independent entities in Denmark, which is a violation of the double taxation treaties. Due to major difficulties of interpretation, SKAT (the Danish Tax Administration) issued binding instructions containing specific changes in practice concerning the interpretation of the concept of hiring out labour going forward which were to ensure an even higher level of harmonisation of Danish and international law and to reduce interpretation difficulties. Based on an examination of several rulings and binding assessment notices, this thesis demonstrates that practice in this field up until the issuance of SKAT’s binding instructions was not consistent with the original purpose of the amendment. The examination also shows a measurable positive impact on the harmonisation process following the issuance of the binding instructions.

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
Publication date2014
Number of pages72