What is an employee bond?
An employee bond is a debt assumed by the company on behalf of an employee. The debt is payable on a specified date and interest is usually payable until that date. In practice, the only employee bonds issued in Denmark are those covered by section 7 A of the Danish Tax Assessment Act because of the favourable tax treatment they receive compared with that of cash salary. In order to qualify for the favourable tax treatment, however, a number of conditions must be satisfied (see below). Today, employee bonds are usually issued as part of a flexible remuneration package and in return for the bonds, employees must make a salary sacrifice. The face value of the bonds will reflect the individual salary sacrifices made by the employees. However, employee bonds can also be issued under various incentive schemes, e.g. employee profit-sharing schemes or similar arrangements. What tax benefits do employee bonds provide? Employees are not taxed on employee bonds covered by section 7 A of the Dani
