When an employer posts workers in another country, so the country where the work is done has the right to tax workers` wages, the tax authorities in that country are not always able to obtain information about work solely on the basis of their own taxation and registration system. TrekK`s contract provides that a worker`s country of residence informs the country in which he works from the start of work in order to ensure communication between the two countries and advances in due course. During the advance phase, transfer requests must be received by authorities in other Nordic countries through this guide, which examines the Nordic agreement on tax collection and transfer, also known as the TREKK contract. The guide describes the conditions for transferring taxes between two Nordic countries and describes the situations in which tax can be transferred to an individual. The guide also contains instructions for reporting jobs in the Nordic countries. The solution to combat these strategies when it comes to DBA is twofold. First, existing ADAs are modified by a multilateral instrument (MLI) that sets certain minimum requirements based on the BEPS. The provisions of the MLI prevail over certain provisions of the DBA of countries that have agreed to apply the MLI. Iceland signed the MLI in early June 2017. Second, there are several changes derived from BEPS and MLI that have found their place in the OECD model, which will have an impact on future DBAs.
The main purpose of the amendments is to remove any doubt that the DBAs are not intended to allow minimal or zero taxation – or double taxation – but to counter any tax evasion. In early March 2018, the OECD published a new DtA model. Work to revise the Icelandic DBA model has already begun, taking into account changes to the OECD model as well as various changes to national tax legislation, in accordance with the BEPS. The employer can therefore reduce the amount of tax on the worker`s salary either on the basis of the six-month rule or on the worker`s tax card, which eliminates double taxation. In both scenarios, the employer must complete a form NT2 (VEROH 5052a) to inform the Finnish tax authorities that there is no tax to be withheld. The list of countries with which Norway has a DTT can be found in the “Holdings at Source” section in the business summary. After the tax is confirmed, tax refunds under Article 50 of the Finnish Tax Notices Act can be transferred from Finland to another Nordic country, for example if the exemption method or the six-month rule has been applied to a taxpayer`s wages, but the advances have not been transferred. This may be the case when a request for a transfer of taxes from the other country arrives in Finland only after confirmation of the worker`s tax. If a refund has already been paid to the subject, no transfer can be made.
The Nordic Agreement on Tax Collection and Transfer is based on Article 20 of the Nordic Convention on Mutual Tax Assistance (Treaty 37/1991). The agreement is also referred to as “TREKK” in the Danish word “trkke” (“restraint”). The current TREKK Treaty (Treaty 97/1997) came into force on 1 January 1998. It applies to Denmark, the autonomous Faroe Islands as well as Finland, Iceland, Norway and Sweden. Greenland is not a contracting party to the agreement. Social security agreements have been concluded with Australia, Canada, the European Economic Area, India, the United Kingdom, the United States and other countries.