The Pay Limit Scheme in Denmark

Navigating the complexities of obtaining a work permit in Denmark can be a daunting task for many professionals. The Pay Limit Scheme provides a structured pathway for high-earning individuals to live and work in Denmark, offering significant benefits and flexibility. Understanding the requirements and processes associated with this scheme is essential for making informed decisions and ensuring compliance.

An overview of the Pay Limit Scheme

Denmark’s Pay Limit Scheme serves as a targeted work permit program designed to draw in top-earning professionals.

A primary benefit of the Pay Limit Scheme is its flexibility; it does not require specific educational backgrounds or career fields, allowing a broad spectrum of high-income individuals to qualify.

The scheme not only applies to standard foreign workers but also includes individuals seeking asylum in Denmark. They may also apply for a residence and work permit under the Pay Limit Scheme if they have received a job offer that satisfies the salary requirement.

To keep the program aligned with economic trends, the salary threshold is reviewed and adjusted annually, maintaining its focus on high-level professionals. This threshold functions as a safeguard to ensure that only positions with substantial salaries qualify. According to the latest guidelines, applicants must have a job offer with a salary exceeding the designated limit to be eligible.

Applicants should be aware that the process can be time-consuming, so submitting paperwork early is recommended to prevent delays. By offering a vital pathway, the program enables skilled professionals to live and work in Denmark, where they can significantly contribute to the nation’s economy.

Through the Pay Limit Scheme, foreign nationals with job offers meeting or exceeding the designated salary threshold can apply for a combined residence and work permit.

Comparing the Pay Limit Scheme with the Supplementary Pay Limit Scheme

Distinguishing the Pay Limit Scheme from the Supplementary Pay Limit Scheme

Under the Pay Limit Scheme, individuals may apply for a residence and work permit if they have obtained a job with a minimum annual salary of DKK 459,000. This program is designed for skilled workers and guarantees that their wages align with Danish standards, creating an opportunity for them to live and work in Denmark.

Conversely, the Supplementary Pay Limit Scheme provides a comparable opportunity but comes with slightly different criteria. Applicants must have a job offer with a minimum annual salary of DKK 393,000 to be eligible for this scheme. Importantly, it does not require a specific educational background or mandate that applicants work in a certain professional field, which broadens accessibility for a wider array of individuals. Moreover, those who have applied for asylum in Denmark can also seek to participate in the Supplementary Pay Limit Scheme if they receive a job offer with a high salary.

Both the Pay Limit Scheme and the Supplementary Pay Limit Scheme are intended to promote the employment of skilled professionals in Denmark, but they address different circumstances and possess unique criteria. Although both programs seek to attract skilled labor, the primary distinction lies in the salary requirements and the flexibility regarding educational and professional qualifications found in the Supplementary Pay Limit Scheme. This flexibility makes the Supplementary Pay Limit Scheme a suitable option for individuals who might not fulfill the strict requirements of the standard Pay Limit Scheme but still possess valuable skills for the Danish labor market.

Applying for the Pay Limit Scheme

1. Create a case order ID
The initial step in submitting an application or appeal that involves a fee is to generate a case order ID.

This process incurs a fee of DKK 6,290. However, there are specific circumstances where this fee may be waived, known as fee exemptions. Notable examples of such exemptions include situations related to the Association Agreement between the EU and Turkey and Denmark’s international obligations.

It's essential to remember that generating a case order ID is required, even if you are exempt from paying a fee. If you pay a fee that is subsequently deemed unjustified, you will receive a full refund.

Required applicant information:
- passport number,
- email address,
- first name,
- last name.

Additionally, you must consent to allow the immigration authorities to send the case order ID to the provided email address. Finally, click on “Create case order ID” to move forward.

2. Fee payment
All fees are adjusted annually on January 1. Consequently, if you pay the fee before January 1 and submit your application after that date, your application might be at risk of denial.

To avoid any issues, make sure to generate your Case Order ID, complete the fee payment, and submit your application within the same calendar year.

If your Case Order ID fails to appear, manually input it and choose the option to verify your payment status.

3. Provide documentation
It’s advisable to collect all the required documents before you begin filling out the application form. If you provide any documents in languages other than English, Norwegian, Swedish, or Danish, certified translations into Danish or English will be required.

You must submit the following items:
- An employment contract or job offer detailing your salary, employment terms, and a description of the job.
- A complete copy of your passport, including all pages (even blank ones) and both the front and back covers.
- Relevant educational credentials associated with the offered job.
- Proof of payment for the application fee, which should include a receipt of your transaction.
- Authorization documents, if necessary, especially if the position requires Danish authorization.

When launching a business in Denmark, the following elements can be incorporated:
- A detailed plan outlining the company's setup, complete with an estimated timeline for becoming operational.
- A documented summary of key expenses associated with establishing the company in Denmark.

For newly established companies that have yet to compile their first annual accounts, it is recommended to include:
- A business plan or concept that defines the company's objectives and strategies.
- Supporting documentation for the business's financial foundation, such as a budget or general ledger balance.

When submitting an application on behalf of a company, it's important to note that specific documentation may be necessary to evaluate the economic viability for paying employee salaries.

4. Necessary documentation for hotels and restaurants workers
It’s recommended to gather all required documentation before starting the application form. This checklist is customized for roles in the hospitality and food service industries, where extra information might be needed.

In cases where any submitted documents are in languages other than English, Norwegian, Swedish, or Danish, including professional translations into Danish or English is crucial.

You or your employer must provide the following documentation:
- The company’s most recent annual accounts, unless this information is already available on Virk.dk.
- An overview of the staff that details the number of employees at the same location as the applicant, including their positions and salaries (a sample can be downloaded below).
- A budget and business plan for the company, which is only required if the business was established less than a year prior to the application.
- The general ledger balance of the company, needed only if the first annual accounts are not yet prepared. This balance should be as up-to-date as possible and must include information on turnover, employee remuneration costs (specifying whether the applicant’s salary is included), and the financial outcome.

Your submission must include the following items:
- An employment contract, as a simple job offer is insufficient.
- Evidence of relevant work experience, which can be a declaration or statement from a previous employer.
- Documentation of educational qualifications and courses relevant to the position, such as a diploma from the educational institution.
- Your curriculum vitae (CV).
- A complete copy of your passport, covering all pages, including any blank ones, along with both the front and back covers.
- Proof of fee payment, including the receipt for your transaction.

If you have authorized your employer to manage the application on your behalf, a valid power of attorney must be included. In situations where a third party is representing both you and your employer, that party needs to provide SIRI with a separate power of attorney for each individual involved.

Ensure the following details are included:
- The name of the individual granting the power of attorney.
- The name of the person receiving the power of attorney.
- The date and signature.

5. Completing and submitting the application
You can choose between two online application forms:
- AR1 requires both you and your employer to complete different sections.
- AR6 allows you to authorize your employer to submit the application on your behalf.

Each form includes comprehensive instructions on how to fill it out and which documents need to be submitted alongside. Ensure that all necessary documents are prepared in digital format for attachment during the application process. If you do not have a MitID, be sure to sign, scan, and include the 'Sworn declarations and information' document with your application.

When using the AR1 form, the initial section must be completed by your employer. Once they finish their section, a reference number and password will be generated, which your employer should share with you. This allows you to access the online application and complete your portion. In contrast, only your employer needs to fill out the AR6 form.

6. Collecting biometric data
Collecting biometric data is mandatory when applying for a residence permit. You must have your biometric features recorded within 14 days of submitting your application, which includes capturing a facial photograph and your fingerprints. If you are a commuter applying solely for a work permit and do not live in Denmark, there is no requirement for you to record your biometric features.

If you are legally residing in Denmark, you can usually record your biometric features within the country if you:
- hold a valid visa,
- qualify for an exemption from the visa requirement, or
- already possess a valid residence permit.

Scheduling an appointment in advance is necessary to record your biometrics at a SIRI branch office. For those currently outside Denmark, biometric data can be recorded at a Danish diplomatic mission or an application center in your country of residence.

In the absence of a Danish diplomatic mission or application center in certain countries, a provided list will direct you to a Norwegian mission that has an agreement with Denmark or to the closest Danish diplomatic facility in the vicinity.

It’s wise to visit the webpage of the local diplomatic mission before submitting your application to gather more information. Additional requirements, such as extra passport photos, additional copies of the application, or extra fees, may be specified by each diplomatic mission.

When submitting your application at a Norwegian diplomatic mission, including one passport photo is necessary. If your application is approved and you receive a residence permit, you must record your biometric features within a designated period after arriving in Denmark.

Failure to record your biometric data will lead to the rejection of your application, preventing it from being processed. If you encounter challenges in scheduling an appointment at a Danish diplomatic mission and cannot complete your biometric recording within the 14-day limit, it’s advisable to inform the relevant authorities about the scheduled appointment time. This can help ensure your application remains valid.

Upon receiving your permit, your facial photograph and fingerprints will be stored on a microchip embedded in your residence card.

7. Get an answer
A response to your application indicates that you have successfully completed several essential steps: generating a case order ID, paying the applicable fee, submitting your application, and recording your biometric data.

You will receive a notification once a decision has been made about your application. In cases where more information is needed to process your case, SIRI will contact either you or your employer directly.

Essential considerations for applying to The Pay Limit Scheme

An employment contract with a company that is registered in Denmark is generally required for eligibility. However, there are exceptions, including situations where you are employed by a foreign company that provides services in Denmark. When applying from within Denmark, it’s crucial to ensure that your stay is lawful.

Applications for residence permits based on employment are processed by the Danish Agency for International Recruitment and Integration (SIRI). Be aware that SIRI usually denies applications if they are submitted too early in relation to your intended start date in Denmark. If you apply more than six months before your expected arrival, the likelihood of refusal increases. Moreover, it is important to note that the case processing fee you have already paid to SIRI will not be reimbursed if your application is turned down.

To submit your application, creating a case order ID is essential, along with paying a fee that covers the costs associated with SIRI’s case processing. Your employer must complete one of the two sections of the application form before you can proceed. After your employer finishes their part, a reference number and password will be generated, which they need to provide to you. This information will enable you to access the online application and finalize your section. If you've granted your employer power of attorney to handle the application for you, they are required to use the AR6 online form, which is solely filled out by the employer.

Qualifications for the Pay Limit Scheme

To qualify for a residence and work permit under the Pay Limit Scheme in Denmark, specific criteria must be met. Employment conditions should adhere to Danish standards, and salaries offered must be in line with these benchmarks. Additionally, you must meet at least the minimum salary requirement, and your salary payments should be made to a Danish bank account registered in your name.

Employment terms must align with Danish norms. This includes aspects like holiday entitlements, notice periods, and other pertinent conditions, which should either meet or exceed the established standards in your profession. Such measures ensure fair treatment of employees and guarantee that they receive benefits consistent with industry practices.

If SIRI raises concerns or has doubts about whether your employment terms comply with Danish standards, you can turn to regional labor market councils for assistance. The expertise to evaluate your employment conditions and determine compliance with local regulations and expectations lies within these councils. The evaluation they provide can offer clarity and peace of mind, ensuring that your rights and benefits are safeguarded within the Danish labor market. This cooperative strategy emphasizes the dedication to upholding high standards in employment practices across different sectors.

Salaries offered must be in accordance with Danish standards. Compensation cannot fall below the benchmarks established in your specific professional sector. When evaluating whether the salary meets Danish norms, only specific elements are considered, including:
- contributions to labor market pension schemes, encompassing both employer and employee contributions,
- base salary in liquid assets, which includes guaranteed fixed supplements,
- paid holiday allowance.

Salaries provided must conform to Danish standards. The compensation you receive should meet or exceed the benchmarks established within your specific professional sector. Only specific components are considered when assessing whether the salary complies with Danish norms:
- contributions to labor market pension schemes, encompassing both employer and employee contributions,
- base salary in liquid assets, which includes guaranteed fixed supplements,
- paid holiday allowance.

Your employer may offer additional benefits as part of your compensation package, which can include perks like a paid canteen, free access to a car, and coverage for phone, internet, and living expenses. It is crucial to keep in mind that these benefits are not taken into account when determining if your salary complies with Danish standards.

If a holiday allowance is paid only in the following year, it will not be counted in the annual salary calculation for the year it was earned. Moreover, only the holiday allowance from your current employer can be included in your total salary assessment.

Meeting the minimum salary threshold is essential. The offered salary must at least meet the designated minimum, which is set at DKK 487,000 for 2024 and is adjusted each year on January 1st.

When assessing whether the minimum salary threshold is met, only certain components of your salary are taken into account. The elements that are included are:
- your base salary in liquid assets, which encompasses guaranteed fixed supplements,
- contributions to labor market pension schemes, including both employer and employee contributions,
- paid holiday allowance.

It’s essential to remember that non-monetary benefits provided by your employer, such as complimentary meals, access to a company car, covered phone or internet costs, and housing expenses, cannot be factored in when determining if your salary meets the required minimum amount.

Even if you take unpaid leave, your total salary for the year must still meet the minimum requirement. Moreover, holiday allowances earned in one year but paid in the following year cannot be included in the annual salary calculation for the year they were accrued. Only the holiday allowances from your current employer will be considered as part of your salary.

It is also essential that your salary payments are made to a Danish bank account registered in your name. To comply with the requirements for receiving your salary in Denmark, payments must be deposited into a legally operating Danish bank account that you own.

It is important that you personally contact a bank to open your Danish bank account. You can open any type of account without specific restrictions. Your Danish bank account should be set up within 180 days of receiving your residence and work permit. In cases where you arrive in Denmark after obtaining your permit, it is necessary to establish the bank account within 180 days of your arrival. For individuals who have had a valid Danish residence permit for at least 180 days, the salary must be deposited into your Danish account beginning with the first payment.

If you haven't secured a Danish address or CPR number and are encountering challenges in opening a Danish bank account, you can check out www.basalbetalingskonto.dk for options to set up a basic payment account. It's important to note that transferring your salary from another Danish bank account is not necessary.

Changes in employment status related to the Pay Limit Scheme

Obtaining a permit through the Pay Limit Scheme creates a direct connection between your residence permit and your job in Denmark. The work permit is restricted to the specific job that underpins your residency.

If you secure a new job while working in Denmark, you will need to submit a new application for a residence and work permit, including information about your new position. Upon submitting the new application, you are allowed to start working immediately, regardless of whether SIRI has approved it yet. Additionally, it is essential that your salary continues to meet or surpass the required pay limit.

As a result, you are not allowed to work in any role other than the one specified in your permit, even if you receive another job offer within the same company. It is crucial to notify SIRI if you change jobs or become unemployed, as your residence and work permit are tied to that specific employment. You must submit an application for a job-seeking permit within two days of your employment ending.

If you experience unemployment due to circumstances beyond your control, such as layoffs, you can apply for an additional six-month residence permit that enables you to seek new job opportunities in Denmark.

Additionally, if you hold a permit under the Pay Limit Scheme, you can modify your job responsibilities within the same organization or university without having to file a new work permit application. This includes situations like receiving a promotion or relocating, as long as your salary and employment conditions comply with Danish standards.

When you secure a new job, you must apply for a new residence and work permit, choosing from the available work schemes. Once your application has been submitted, you are permitted to begin working, even if your permit is still awaiting approval.

Tax liabilities associated with the Pay Limit Scheme

Individuals participating in the Pay Limit Scheme need to understand their tax responsibilities to effectively handle their finances while living and working in Denmark.

Primarily, anyone living in Denmark is generally subject to full tax liability, meaning they are taxed on their global income. This is unless a double taxation treaty (DTT) specifies otherwise, which may allow them to be classified as tax residents in a different country. For participants in the Pay Limit Scheme, grasping this distinction is vital, as it affects how their income is taxed.

For the year 2024, tax rates for individuals classified as fully tax-resident may soar to 52.07%. This overall figure encompasses a variety of taxes, including a base tax of 12.01% on personal income, a top tax of 15% on earnings exceeding DKK 588,900 after deducting an 8% labor market tax, as well as an average municipal tax of approximately 25.067%. Furthermore, personal income also incurs an 8% labor market tax.

While these rates are notably high, Denmark offers several deductions that can effectively reduce individuals' effective tax rates. Therefore, it is prudent for those in the Pay Limit Scheme to consult with tax professionals to identify available deductions and optimize their tax responsibilities.

Limited tax liability may apply to individuals who do not qualify for full tax liability under certain conditions. This situation typically affects those who earn income from Danish sources but spend less than 183 days residing in Denmark within a 12-month timeframe. In this case, income is taxed similarly (up to 52.07%), but only earnings from Danish employment are taken into account.

Another noteworthy element is the special expatriate tax regime, which enables eligible expatriates to enjoy a flat tax rate of 27% on their gross salary for a period of up to 84 months, provided they meet certain criteria. This arrangement can be particularly beneficial for participants in the Pay Limit Scheme, especially those in well-paid positions, as it simplifies their tax responsibilities and may lead to a lower overall tax rate.

Considering the intricacies of the Danish tax system and the specific stipulations of the Pay Limit Scheme, it is crucial to seek professional guidance. Tax specialists can assist in navigating the tax environment, ensuring adherence to local regulations, and maximizing available deductions or exemptions.

How long can you stay under The Pay Limit Scheme?

Stating your financial capability to support yourself and any accompanying family members during the application process is crucial. If this declaration is not made, your residence permit will only be valid for 14 days prior to the start of your employment. When submitting an application from within Denmark, your residence permit will become effective starting on your first day of work.

If you apply from outside Denmark, you might receive a residence permit that is valid for one month before your employment begins, providing time to adjust to life in the country.

The duration of a residence permit cannot exceed three months before your passport's expiration date. Should your passport have a shorter validity than the anticipated length of your stay, your residence permit will be adjusted accordingly, resulting in a shorter validity period. After renewing your passport, you can request an extension of your residence permit, but this can only be done no earlier than three months prior to the expiration of the current permit.

For jobs lasting under four years, the validity of your residence and work permit usually corresponds to the length of your employment. Additionally, you will automatically receive a six-month job-seeking permit, allowing you to search for new job opportunities in Denmark. However, it's essential to remember that working during this job-seeking phase is not allowed. To remain employed in Denmark after your current permit expires, you must apply for an extension of your residence and work permit.

If your employment is expected to last for four years or more, you will typically receive a residence and work permit valid for that entire duration. An extension based on your current employment must be applied for if you wish to continue working after the initial four years. By ensuring that you submit your extension application promptly, you can remain in Denmark and continue your job even if your existing permit expires prior to SIRI's decision regarding your extension request.

If you obtain a new job, a new application must be submitted based on this position. You can submit this application through the Positive List or any relevant work scheme. It's important to note that after you have submitted your application for the new job, you are allowed to start working right away; you don’t have to wait for your new permit to be approved.

In cases where your employment contract is renewed, it is essential to apply for an extension of your residence and work permit. To ensure you can continue living and working in Denmark, your extension application should be submitted before your current permit expires. By doing so, you can remain in the country even as your permit nears its expiration.

Important insights for workers and residents in Denmark

If you intend to live and work in Denmark, it’s crucial to get acquainted with different aspects of life there.

The website lifeindenmark.dk provides a wealth of resources, links, and various options covering essential topics, such as:
- MitID,
- the CPR register,
- health card,
- tax matters,
- education and childcare,
- vehicle registration and driver’s license,
- vacation entitlements,
- housing choices.

Depending on your individual situation, you may need additional important information and options.

The Pay Limit Scheme provides a residence and work permit that allows you to live in Denmark for the duration specified on your permit. Additionally, this permit grants access to the Schengen area for up to 90 days within a 180-day period, though it does not authorize you to work in other Schengen countries.

It’s crucial to maintain your Danish address, as staying outside of Denmark for more than six consecutive months will result in the expiration of your permit, leading to a loss of residency rights. Should your job necessitate a prolonged stay outside the country, you have the option to apply for a dispensation to keep your permit from expiring.

The work permit you hold is directly connected to your employment in Denmark, so it is essential that your salary meets or exceeds the minimum pay limit at all times.

Engaging in unpaid voluntary work is permitted. However, during the job-seeking period, you must avoid any paid work, as this time is strictly reserved for looking for new employment opportunities in Denmark. It is also important to inform SIRI of any changes in your employment status or if you lose your job.

It’s important to note that your work permit may expire before your residence permit, especially if you have been granted a permit to stay in Denmark while seeking new employment. If you receive a job offer from a different employer, you will need to apply for a new permit. Moreover, taking on a side job will require a separate permit.

Possessing a Danish residence and work permit does not grant permission to work in other Schengen nations. Nevertheless, under the Pay Limit Scheme, it is possible to modify your job responsibilities within the same university or company without having to submit a new application for a work permit. Situations such as promotions or transfers benefit from this flexibility, provided that the salary and employment conditions are in accordance with Danish standards.

Throughout your stay, it is essential to maintain self-sufficiency for yourself and your family. Receiving benefits under the Active Social Policy Act, including social security payments, is not allowed. Should you or any family member receive these benefits while in Denmark, there is a possibility that your permit may be revoked, leading to the loss of your residency rights. Any authority, including municipalities, will notify SIRI if benefits are granted to non-Danish citizens.

A residence permit in Denmark allows you to attend free Danish language classes. To be eligible, you must be at least 18 years old and have your address officially registered in the Danish National Register. Typically, these classes are conducted with other new arrivals to Denmark.

For individuals with a residence permit in Denmark related to work, study, or similar purposes, a deposit is required before you can start taking lessons. It’s crucial to remember that failing to complete the various modules within the specified timeframe may result in the loss of your deposit.

Danish lessons should be provided by your local municipality, which will also direct you to a language center. If you do not receive an offer for Danish classes within a month of registering your address in Denmark, it is advisable to contact your municipality for help.

Our team of experienced professionals is dedicated to assisting you in understanding the details of the Pay Limit Scheme. Feel free to reach out to us at any time for additional information or support.