Construction and installation work in Denmark: special attention to Permanent Establishment regulations

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It is becoming increasingly common for manufacturers of machinery and technical installations to offer a comprehensive service that includes assembly and commissioning at the buyer’s site. For this purpose, the manufacturer sends a team of qualified technicians to carry out the project.

In case the installation and commissioning has to be carried out at a plant located abroad, the provisions of the domestic regulations and the agreed regulations with regard to this type of service must be reviewed.

In general, and as provided for in Article 5 of the OCDE Convention Model, to avoid double taxation and the various bilateral treaties, work, such as a construction project or installation, only constitutes a permanent establishment if its duration exceeds twelve months (or six months, in some treaties).

Normally, this margin allows planning the work project taking into account that a Permanent Establishment will not be set up in the country where it will be carried out, with all the tax, labor, and legal implications that this would entail.

At this point, we emphasize the importance of carrying out a preliminary analysis of the tax aspects involved in carrying out the work project depending on the country where it is carried out. At that stage, we put the attention on a country like Denmark, which being a member of the EU for 50 years and a country with great economic potential, does not have in force the Agreement to avoid Double Taxation with Spain, after the denunciation by the Danish Embassy that left without effect the referred agreement with effect from January 1, 2009.

This fact refers us to the application of Danish internal tax regulations, so it is essential to make a preliminary analysis beforehand in order to carry out a correct planning of the project.

Contact us to receive advice on this matter and we will provide you with all the support, both in the tax, labor, immigration and legal fields that you may need.

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