Business in Denmark


Among the places attractive to those who dream of starting and running their own business, Denmark occupies a significant place. It is a country that is highly regarded among entrepreneurs for its favorable business conditions and regularly tops business-related rankings. Extremely appealing to foreign investors, Denmark provides a favorable business climate. An important aspect is to familiarize yourself with local regulations, applicable taxes, deadlines and the necessary fees and documents that must necessarily be submitted. The goal is to avoid pitfalls that may be encountered on the business road. Taking a closer look at the information contained on this site will help you gain a complete knowledge of running a business in Denmark.



Key information on registering and operating a business in Denmark


In the economic area, Denmark adheres to the principles of a free market, open competition and no restrictions on running your own business. When establishing a company in Denmark, the same guidelines apply to all citizens of the European Union:


Options available for running a business in Denmark


Running your own business in Denmark has its benefits and challenges, so it's worth thinking about whether you are ready for the challenge and the decision to start your own business. It is also important to choose the right legal and tax form that will best suit our skills and abilities.

The laws governing the establishment and operation of a business in Denmark include The Carrying on Business for Profit Act of June 1996; The Public Limited Companies Act of June 1973, as amended; The Private Companies Act of May 1996, as amended; and The Company Accounts Act of June 1996.

All forms of business are available to both domestic and foreign entities under the same conditions.

Different types of companies in Denmark:

  1. ​Individual venture: sole proprietorship (Enkeltmandsvirksmhed),
  2. Joint stock company (Anktieselskab - A/S),
  3. Partnership (Interesselskab - I/S),
  4. Limited liability company (Apartsselskab - ApS),
  5. Limited partnership (Kommanditselskab - K/S),
  6. Branch of a foreign company (Filial af udenlandsk selskab),
  7. Representative office of an international company (Salgskontor),
  8. Cooperative association (Andelsforening/Brugsforening).

In Denmark, one of the frequently chosen ways of doing business is self-employment, which allows you to work on your own account under your own name or company name. Such a company can also hire employees.



Self-employment - sole proprietorship (Enkeltmandszirksmhed)


A sole proprietorship is the simplest form of business in Denmark. The owner is personally liable with his/her assets for the debts and obligations of the business. Sole proprietors use a personal CPR registration number. For self-employment, registration is done through Erhvervsstyrelsen (www.erhvervsstyrelsen.dk).

Below are the positive and negative sides of self-employment.

Advantages:

Disadvantages:

The owner must choose one of three options for taxing the company:


  1. The option to be taxed according to the Kapitalafkastordning law, which allows part of the profits to be shifted to personal income and part to capital income.
  2. The option to tax income as personal income, on a par with employee salaries.
  3. The option to be taxed according to the Enterprise Act (Virksomhedsordning), which allows for the deduction of loan interest expenses, but also allows the company's profits to be retained as bank savings.



Joint stock company (Aktieselskab - A/S)


Another option is to create a joint-stock company, consisting of a board of directors, management or supervisory board elected at a general meeting and consisting of at least three people (in order to maintain the majority rule for decisions on important company matters).

The partners and owners of the company are not personally liable for the company's debts, although the bank may demand collateral from them in the case of loans.

What to know about setting up a joint stock company in Denmark:

After signing the articles of incorporation and depositing the initial capital into a bank account, we have 6 months to register the company with the Danish Trade Register. The registration process usually takes 2 to 3 weeks.

The registered company receives a CVR identification number (equivalent to the Polish REGON number). The next step, after the company is registered, is to report to the tax authority (Told-og Skatteregion).



General partnership (Interesselskab - I/S)

Another option available to those wishing to work on their own in Denmark is to form a general partnership. Such a company requires a minimum of two natural or legal persons to form a partnership, who undertake joint obligations and their mutual relations are regulated in a founding agreement.


The most important information regarding a general partnership:

  1. A general partnership has no legal personality, but it has the ability to enter into contracts, has the right to be a party to court cases and can assert its own rights.

  2. The assets of a general partnership consist of contributions made and property acquired by the company during its existence.

  3. It is important that the name of the Danish company contains the abbreviation I/S, which indicates its legal form.

  4. In order to create a general partnership, no share capital is required.

  5. All documents, along with the registration application, must be sent to the Danish Commerce and Companies Agency - DCCA Erhvervsstyrelsen (erhvervsstyrelsen.dk) within 8 weeks of signing the company's agreement to obtain a Central Company Register number - CVR (www.cvr.dk).

  6. If all partners of a general partnership want to have limited liability, it is necessary to register it with the DBA.


Limited liability company (Anpartsselskab - ApS)


One choice that is very popular in Denmark is the limited liability company (the Polish equivalent of z o.o.). This form is often chosen by people who plan to run a family business and retain personal control over it.

The Danish company Anpartsselskab - ApS has a legal personality and is regulated by the Private Limited Liability Company Act. Establishing such a company through a law firm involves a cost of 3,000 to 5,000 Danish kroner.

Different types of limited liability companies in Denmark:

  1. ​Private limited liability company Anpartsselskab - ApS.

  2. The private limited liability company Ivaerksaetterselskaber - IVS, which has been available in Denmark since January 1, 2014. This company, like Anpartsselskab - ApS, is governed by the Danish Private Limited Liability Company Act. The minimum initial capital of Ivaerksaetterselskaber is 1 Danish kroner or the equivalent in euros. At least 25% of the company's profit from the last 12 months must be allocated to reserves, which are mandatory, and dividends can only be paid if the sum of share capital and reserves reaches 50,000 Danish kroner.


Anpartsselskab - ApS vs Aktieselskab - A/S



Limited partnership (Kommanditselskab - K/S)


There is also another company option in Denmark, namely a limited partnership, which can be established. This form requires a minimum of one general partner (e.g., a limited liability company), who will be fully liable for the company's obligations. In addition, a limited partnership must have several limited partners, who are liable for the company's obligations only to the extent of the capital they contribute to the partnership.

Basic information about the K/S partnership:

Another variant of the limited partnership is a partnership with limited liability up to the amount of shares - Partnerselskaber - P/S. The partners of such a company are public limited liability companies, which are liable for the company's obligations only up to the limit of shares specified by the amounts in question or the entire share capital.


 

Branch of a foreign company (Filial af udenlandsk selskab)


There is an additional option for Polish entrepreneurs in the Danish labor market, which is to establish a branch of a foreign company. This does not require share capital, although the incorporation procedure is more time-consuming than for company formation.


Polish entrepreneurs can establish a branch of their company in Denmark if the company registered in Poland has an analogous legal structure that is adopted in Denmark (for example, ApS limited liability company or A/S joint stock company).

Relevant information regarding a foreign branch of a company:

  1. ​The name of the branch should include the term "filial," meaning "branch," and the name of the company and the country in which it is located.

  2. Registration of a branch is possible through the erhvervsstyrelsen.dk platform in Denmark.

  3. In order to register a branch, relevant documents are required.

  4. The registration form, once completed, must be submitted to the Trade and Enterprise Agency, containing:
    • the name of the Polish company,
    • legal form of the company,
    • amount of share capital,
    • financial report of the previous year,
    • KRS number,
    • scope of activity,
    • address and name of the branch in Denmark,
    • the scope of the branch's activities,
    • personnel data,
    • addresses of those authorized to make decisions on behalf of the subsidiary in Denmark.

  5. The minimum share capital should be DKK 80,000.

  6. In order to regulate VAT taxation for a branch of a foreign company, it is necessary to report to SKAT (Tax Authority).

  7. The cost of establishing a company branch in Denmark through the assistance of a lawyer is approximately DKK 8 thousand.

  8. The company branch is subject to Danish law.

  9. The branch manager is fully responsible for liabilities.

  10. A copy of the company's annual financial report must be submitted annually to the Agency for Trade and Enterprise.

  11. The company's branch in Denmark is subject to a 25% corporate tax.



Representative office of a foreign company (Salgskontor)


Entrepreneurs who wish to operate in the Danish market have another formal option to choose from. This is the creation of a representative office of a foreign company to promote products and services (although it does not have the authority to sell them directly).

A representative office of a foreign company, although it has no legal capacity, functions as an entity acting on behalf of the parent company, and the latter is fully responsible for all its obligations. It is worth noting that Salgskontor regulations are not explicitly regulated in Danish law.


Cooperative associations (Andelsforening/Brugsforening)


The legal form known as a cooperative association is formed on the basis of an association contract between individuals. Based on this agreement, it is possible both to sell and process products owned by members and to purchase and resell goods to the same individuals. Members of this cooperative association are liable for the obligations of the business to a limited extent. An important aspect is the addition of an abbreviation to the name of the cooperative association to indicate its legal form, namely "A.m.b.a." (cooperative association with limited liability).


Entrepreneurs and their obligations to employees in the matter of employment


Entrepreneurs in Denmark who decide to hire employees should carefully familiarize themselves in advance with the country's labor laws and the laws that apply to various professional groups. One example of such regulations is the Employment Documentation Act (Ansættelsesbevis loven), which stipulates that those who work for at least a month, in excess of eight hours per week, are entitled to receive a document containing key information about the terms and conditions of their employment.

In Denmark, labor rights are often supported by so-called collective bargaining agreements, which are agreements on working conditions that are negotiated between employers (employer organizations or companies) and employees represented by trade unions or employee associations.

The scope of a collective agreement includes:

All employers in Denmark are required to provide their employees with insurance against occupational diseases and accidents, and to provide health and safety training. Also important is the provision of a fair wage and the prohibition of discrimination. If these rules are not followed, unions in Denmark have the right to organize strikes, lockouts or industrial action on behalf of workers to negotiate better wage conditions. Unions can also initiate labor conflicts in order to reach a collective agreement.

Denmark also has a law that regulates the posting of workers to work abroad.


Health and safety rules applicable in Denmark


Individuals who are self-employed or who are employees in a Danish company are required to comply with the labor regulations and occupational health and safety rules in Denmark. The sanction for failure to comply with these regulations is exposure to fines or even suspension of the work performed. The relevant guidelines can be found on the website of the Danish Labor Inspection Authority (UIP).

Key responsibilities of employers in Denmark include:

Among the main tasks of workers in Denmark are:


If a Danish company has a minimum of 10 employees, it is obliged to establish a structure responsible for health and safety issues and appoint inspectors to oversee the implementation of safety regulations. The same applies to companies that engage employees in variable or temporary positions, where working hours exceed two weeks.



Practical tips for registering a company with the Registry of Foreign Service Providers (RUT)


Individuals who decide to launch and operate their own business in Denmark are required to register the company with the Registry of Foreign Service Providers - RUT, even before starting work. It is also necessary to report any changes to the company, no later than 1 business day before they are made.

Worth knowing about the RUT:


Any natural or legal person for whom services are provided in Denmark qualifies as a Danish service provider.



Overview of important tax issues in Denmark: VAT and settlements within certain deadlines


If you do business in Denmark or are employed there, you are subject to the country's tax system. The tax system there is characterized by a gradual increase in tax rates depending on the income you earn. The amount of the income limit, from which taxable income begins, depends on the amount of income earned. In Denmark, it is possible to deduct certain expenses from tax, such as insurance premiums, child support, pension contributions, commuting expenses and food. However, the Danish tax authority has the right to verify the accuracy of these expenses within seven years.

Highlights of taxation in Denmark:

  1. ​For 2019, the following income tax percentages apply:
    • 8% for income below DKK 50,217,
    • 39.2% for income between DKK 50,217 and DKK 558,043,
    • 56.5% for income in excess of DKK 558,043.

  2. Denmark also has an optional church tax of 0.92%.
     
  3. The Danish manipulation tax, paid to local government units, is variable. The amount free of this tax is set annually (in 2019 it was 10.10% on gross wages; those whose income did not exceed DKK 37,200 were exempt from the tax fee).

  4. To register with the regional customs and tax authority, use the services of the Danish Commerce and Companies Agency.

In a self-employment situation in Denmark, the tax authority (SKAT; www.skat.dk) treats income from providing services on a self-employed basis as income for the business owner. Therefore, the taxation of the business is declared in a single tax filing. Self-employed individuals who pay taxes and contributions are also entitled to pension and health benefits similar to those enjoyed by employed individuals. Periodically, on a quarterly or semiannual basis, it is necessary to file a tax return (which includes income tax and VAT) through the Danish Tax Authority's online platform (SKAT), using the LetLøn system, which facilitates employee payroll records. Advance income tax payments can be paid on March 20 and November 20. On these dates, it is possible to pay a higher advance payment in order to receive a tax refund with interest, above the interest rate offered by banks. On the other hand, on November 20, a reduced interest rate of 0.4 is stipulated, resulting in lower interest compared to bank interest rates.

As for companies operated in Denmark, there is a corporate income tax (CIT) of 22%. Danish companies with an annual turnover of more than DKK 20,000 also become VAT payers, at a rate of 25%.

A flat income tax of 32% is applied to individuals in Denmark. This tax is remitted to the local government. In addition, there is also a progressive tax, the rate of which is 5.64% (for income up to DKK 42,000) or 15% (for income above this amount). This tax is paid to the state treasury. Liability for this tax covers income from labor and income from capital. The value of this burden cannot exceed 59%.

In the context of VAT, there are certain rules in Denmark. Businesses with an annual turnover of more than DKK 50,000 are subject to this tax. The VAT rate is 25%. However, there is a VAT exemption for certain services, such as the sale or rental of real estate (including the supply of energy, water and gas), medical care, education, banking, insurance transactions and cultural activities. In these cases, the VAT rate is 0%.

Foreign workers residing in Denmark for a period of 3 months to 3 years and earning a minimum salary of DKK 47,500 are subject to a 25% flat tax, which is increased by a 9% contribution to the Danish labor market.

All companies, both domestic and foreign, selling services or goods in Denmark are required to pay a flat 25% VAT. This is a value-added tax added to the price of services and goods sold by companies.

Business owners in Denmark must register their companies as VAT payers before providing services and goods. Registration can be done on the RUT website (Register of Foreign Suppliers - virk.dk). There is a reverse charge procedure under which foreign companies, when supplying goods and services to Danish companies, are not required to collect Danish VAT. In such a situation, the invoice contains only the net value of the goods or services, using the reverse charge formula, which means that the buyer is responsible for charging and paying the VAT on the service or goods in question. In the case of such services, we have, for example:

The SE number (assigned by SKAT) is provided by Polish companies operating in Denmark as a VAT payer ID (if there is no VAT registration, only the TIN is provided). In a situation where the owner of a Danish company acts as an employer at the same time, he is required to register as an employer in Denmark. Persons working abroad, whether permanently or seasonally, are subject to different tax regulations related to their origin and duration of stay in Denmark.

Polish companies, even if they are not registered as VAT payers in Denmark, can claim VAT refunds on taxable expenses incurred in Denmark.

Recipients of services in Denmark are required to register as VAT payers and pay this tax, even when providing services to companies that are not registered as VAT payers.

What you should know about CIT:The SE number (assigned by SKAT) is provided by Polish companies operating in Denmark as a VAT payer ID (if there is no VAT registration, only the TIN is provided). In a situation where the owner of a Danish company acts as an employer at the same time, he is required to register as an employer in Denmark. Persons working abroad, whether permanently or seasonally, are subject to different tax regulations related to their origin and duration of stay in Denmark.

Polish companies, even if they are not registered as VAT payers in Denmark, can claim VAT refunds on taxable expenses incurred in Denmark.

Recipients of services in Denmark are required to register as VAT payers and pay this tax, even when providing services to companies that are not registered as VAT payers.

What you should know about CIT:

  1. ​The corporate income tax rate is 28%.

  2. Legal entities, such as limited liability companies and joint stock companies, are subject to taxation. However, in the case of partnerships, only the partners of these companies are taxed.

  3. In Denmark, there is a principle of consolidation of corporate taxation, which means that the parent Danish company together with its subsidiaries and branches are subject to it.


Common doubts about running a company in Denmark


  1. ​What is a Denmark Holding Company?
    It is a company from Denmark, operating as a holding company, which must be registered with the Trade and Companies Authority. Below you will find key information about Denmark Holding Company:
    • A private Danish holding company is the so-called Anpartselskab (ApS).
    • The holding company from Denmark holds shares in other foreign subsidiaries.
    • It has the right to control 100% of the shares of foreign companies.
    • The profits of such a company are exempt from taxation.
    • The minimum required share capital is DKK 125,000.
    • No more than one shareholder is required.
    • No restrictions on the activities of subsidiaries.
    • It is possible to register it within one day.
    • Company accounts are publicly registered and audited annually.
    • These companies hold only foreign shares.
    • Dividends are exempt from taxation.
    • According to the 2009 Tax Reform Law, different types of investors are distinguished according to the level of shareholding: affiliated investors - exempt from capital gains tax and holding shares at 50% of the share capital; portfolio investors - obligated to pay capital gains tax and holding shares with less than 10% of the share capital; subsidiary investors - not obligated to pay profit tax and holding shares between 10% and 50% of the share capital.

  2. Definition of Denmark Private Limited Company - PLC
    Denmark Private Limited Company is a limited liability company, also known as Anpartsselskab - ApS. Shareholders of such a company are liable only to the extent of the value of their contributions for the company's obligations. Denmark is a member country of the European Union, which allows this type of company to expand its operations into the markets of EU member states. The share capital of a PLC cannot be less than DKK 50,000, and any company (even with a name in English) must end with the abbreviation Danish ApS. Registration of a Denmark Private Limited Company requires contact with two government agencies: The Articles of Incorporation and Memorandum of Association are registered with the Registrar of Companies, as well as the Danish Trade and Companies Agency. Templates for the Articles of Association are available from the Danish Business Authority, which describes the rules regarding, among other things, the personal information of promoters, the allocation of shares, the cost of setting up the company, the personal information of the auditor of business in Denmark and the managers. A PLC must have at least one Danish director and at least one shareholder.

  3. Restrictions on business activities
    PLCs in Denmark are prohibited from engaging in seven business activities, including:
    • banking,
    • trust fund management,
    • fund management,
    • trust management,
    • insurance,
    • collective investment schemes,
    • reinsurance.

  4. Definition of PMV
    The term PMV (Personligt ejet mindre virksomhed) refers to a small business where the owner does not have to register it with the Central Business Register (CVR). The owner is fully responsible for the company's liabilities with his or her assets. PMV does not require start-up capital, but once an employee is hired or annual turnover exceeds DKK 50,000, the owner is required to convert the business into a full-fledged company.

  5. General concept of NemID (EasyID) in Denmark
    In Denmark, NemID is an identification tool that functions much like a digital signature, available to all Danish companies.

  6. Supervision of companies in Denmark by the Labor Inspectorate
    The Labour Inspectorate in Denmark is concerned about the safety of workers and regularly inspects companies for working conditions and hygiene. Arbejdstilsynet, or the Danish Labor Authority, oversees companies operating in Denmark, including foreign companies offering temporary services, and checks that companies have registered with the RUT, or Register of Foreign Providers. The inspections are unannounced and cover all companies in Denmark. The Labor Inspectorate cooperates with the police, checking the legality of foreigners residing in Denmark with work permits, and with the Tax Office, which checks fees and taxes, including VAT. The Labor Inspectorate can conduct inspections without a court order, including offshore installations, and can also conduct various forms of surveillance.

  7. The role of the Danish RUT
    Those planning to do business in Denmark must report their company to the Registry of Foreign Service Providers, or RUT. It is also necessary to report any changes to the RUT on their effective date. Failure to notify or improperly notify the RUT may result in a financial penalty. The registry has a contact number for business owners to obtain information regarding registration with the RUT and labor regulations. The registration requirement applies to employees and employers. The RUT number is necessary for contact with Danish authorities.

  8. Summary of Denmark Holding Company
    This is a holding company from Denmark that must be registered with the Trade and Companies Authority. Below you will find key information about Dania Holding Company:
    • The private company acting as a holding company is Anpartselskab (ApS).The Danish holding company owns shares in other foreign subsidiaries.
    • It has the right to control 100% of the shares of foreign companies.
    • The profits of such a company are exempt from taxation.
    • The minimum required share capital is DKK 125,000.
    • No more than one shareholder is required.
    • No restrictions on the activities of subsidiaries.
    • It is possible to register it within one day.
    • Company accounts are publicly registered and audited annually.
    • The companies hold only foreign shares.

      According to the 2009 Tax Reform Law, different types of investors are
      distinguished according to their level of shareholding: affiliated investors -
      exempt from capital gains tax and holding shares at 50% of the share capital;
      portfolio investors - obliged to pay capital gains tax and holding shares with
      less than 10% of the share capital; subsidiary investors - not obliged to pay
      profit tax and holding shares between 10% and 50% of the share capital.

  9. Responsibility for compliance with regulations
    Companies operating in Denmark are under the supervision of the police, the Tax Office and the Labor Inspectorate. They inspect registration with the RUT, payment of taxes, compliance with health and safety rules and the legality of employment. Violations of these rules can result in warnings, fines or prosecution.

  10. Establishing a branch vs. a new company
    Establishing a branch of a foreign company in Denmark is a good idea for Polish companies. An entrepreneur can establish a branch if the business in Poland is similar in nature to a Danish A/S or ApS. Establishing a branch does not require start-up capital, as with a new company.

  11. Danish krone exchange rate
    Online exchange offices offer more favorable rates than traditional outlets. You can also negotiate margins. Sample site: www.rkantor.com.

    Important sites and phone numbers in Denmark are:
    • erhvervsstyrelsen.dk,
    • skat.dk,
    • virk.dk,
    • statsforvaltning.dk,
    • customstax.dk,
    • Urząd ds. Rejestracji: Danish Commerce and Companies Agency, Kampmannsgade 1, DK-1780 Copenhagen V; Tel.: +45 33 30 77 00; Fax: +45 33 30 77 99; E-mail: ckk@erhvervsstyrelsen.dk.

  12. Company registration procedure
    Registering a company in Denmark is easy and includes no restrictions, freedom of competition and low income tax. You can establish a business through the website of the Danish Commerce and Companies Agency (DCCA): www.erhvervsstyrelsen.dk. The new company is assigned a special Central Company Register number - CVR: www.cvr.dk. Registration with Customs and Taxation can be done at www.toldskat.dk.

  13. Residence certificate
    Polish individuals planning a longer stay in Denmark or starting their own business must obtain an EU/EEA citizen's residence certificate from the Danish Regional Office (www.statsforvaltning.dk).

  14. Invest in Denmark
    Invest in Denmark is an organization in Denmark serving as an investment resource for entrepreneurs.

  15. LetLøn System
    The LetLøn system is a free tool available on the website of the Danish Customs and Taxation Service (SKAT) for keeping payroll records of small business employees. The system calculates taxes and costs automatically.

  16. Afstaelse
    Afstaelse is a fee for renting premises for an activity that tenants must pay.

  17. VAT payer
    Entrepreneurs in Denmark must pay CIT and 25% VAT if their annual turnover exceeds DKK 20,000.

  18. Translation of documents
    Translation of documents from Danish by a certified translator costs about 400 Danish kroner per page.