COUNTRY

Denmark is located in Northern Europe, and occupies a peninsula extending north from Germany (known as Jutland) with which it shares its southern border. Denmark also includes several major islands, including Fyn, Bornholm and Sjaelland; the capital, Copenhagen, is situated on the latter of these. The economy is based mainly on intensive agriculture, high-value manufacturing and services. The country is affluent, with income per capita if USD38,300. Denmark is a member state of the EU, but is not part of the Eurozone. The currency is the Danish Krone (DKK) and in mid-2013 USD1 = DKK5.68. Denmark has high rates of personal income tax and is in the mid-range in terms of corporate tax, and has never been considered a financial centre. However changes to its holding company law in 1999 transformed the country into one of the premier holding company jurisdictions in Europe. Denmark is highly rated in terms of the amount of GDP accounted for by research and development, and its telecommunications and transport infrastructure are of a high standard; Copenhagen is well connected to the rest of Europe by air, road and rail.

Denmark has a population of nearly 5.8 million and an area of approximately 43,000km². Politically, Denmark is a constitutional monarchy with Queen Margrethe II as head of state, though she holds only ceremonial powers. The current Danish prime minister is Mette Frederiksen, who was sworn in on 27 February 2019.

In 2018, according to the International Monetary Fund, Denmark had the 10th highest GDP per capita in the world. It is ranked as 11th on the 2019 UN Human Development Index (a comparative measure of life expectancy, literacy, education, standards of living, and quality of life).

The World Bank ranks Denmark as the easiest place in Europe (and the third easiest in the world) to do business. Company formation can take less than 24 hours and can be completed over the internet. Denmark has some of the world’s most flexible labour market rules and is unencumbered by red tape. Denmark is not a part of the Eurozone although its currency, the krone (‘crown’), is fixed at 7.46 kroner to the euro.

TAXATION

  • Headline tax rates: CIT 25%, PIT 14.86%, VAT 25%
  • Treaty Jurisdictions: Argentina, Armenia, Australia, Austria, Bangladesh, Belarus, Belgium, Brazil, Bulgaria, Canada, Chile, China, Croatia, Cyprus, Czech Republic, Egypt, Estonia, Georgia, Germany, Greece, Greenland, Hungary, Iceland, India, Indonesia, Ireland, Israel, Italy, Jamaica, Japan, Kenya, Korea, Republic of, Kuwait, Kyrgyzstan, Latvia, Lithuania, Luxembourg, Macedonia, Malaysia, Malta, Mexico, Montenegro, Morocco, Netherlands, New Zealand, Norway, Pakistan, Philippines, Poland, Portugal, Romania, Russia, Serbia, Singapore, Slovakia, Slovenia, South Africa, Sri Lanka, Sweden, Switzerland, Taiwan, Tanzania, Thailand, Trinidad and Tobago, Tunisia, Turkey, Uganda, Ukraine, United Kingdom, United States, Venezuela, Vietnam, Zambia
  • TIEA Jurisdictions: Andorra, Anguilla, Antigua and Barbuda, Aruba, Azerbaijan, Bahamas, Bahrain, Barbados, Belize, Bermuda, Botswana, British Virgin Islands, Brunei, Cayman Islands, Cook Islands, Costa Rica, Curacao, Dominica, Faroe Islands, Finland, Gibraltar, Greenland, Grenada, Guatemala, Guernsey, Hong Kong, Iceland, Isle of Man, Jamaica, Jersey, Liberia, Liechtenstein, Macao, Marshall Islands, Mauritius, Monaco, Montserrat, Niue, Norway, Panama, Qatar, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Samoa, San Marino, Seychelles, Sint Maarten, Spain, Sweden, Turks and Caicos Islands, Uruguay, Vanuatu

Holding companies solely owning foreign stocks (shares) do not pay corporate taxes.

Capital gains from the sale of shares are tax exempt as long as the resident company holds a minimum of 10% of the share capital. Dividends are tax exempt. There are no Danish withholding taxes on interest paid to foreign companies. And, no income tax on the profits of foreign owners of holding companies.

The 2009 Danish Tax Reform Act divided shareholders into three groups based on their ownership percentage regarding capital gains taxes:

  • Owners of shares less than 10% of the share capital are called “portfolio investors” and subject to capital gains taxes;
  • Owners of shares of 10% or more up to 50% of the share capital are called “subsidiary investors” who are exempt from capital gains tax; and
  • Owners of shares of 50% or more of the share capital are called “related company investors” are also exempt from the capital gains tax.

However, capital gains realized on the transfer of shares in Danish companies (regardless of the ownership percentage) held by foreign investors are not subject to Danish taxation.

Inbound Dividends received from subsidiary investments and related company investments, as of the 2010 tax year, are tax exempt regardless of the ownership period. Dividends received from portfolio investments are subject to Danish tax. Since 2010, there are no required minimum holding periods for these exemptions to occur.

However, U.S. taxpayers must report all global income to the IRS along with others living in countries taxing global income reporting all income to their tax authorities.

BUSINESS

  • Suitable for: Wealth Management, Shipping, Aviation, Yachting, Trading Goods, Intellectual Property/Licensing, Holding companies, E-commerce
  • Company Types: Limited liability companies, branches, joint ventures, sole proprietorships, general partnerships and limited partnerships
  • Formation Cost: 4000 – 6000 USD
  • Formation Time: 7 – 14 days
  • Maintenance cost: 2500 – 3500 USD

INCORPORATION

Generally, Denmark does not impose any specific requirements on foreigners wishing to establish a business presence in the country. There are no residency requirements for management, including members of the Executive Board (CEO), Board of Directors or Supervisory Board.

There are three types of business forms available to foreign companies in Denmark. Each of these business forms has distinct advantages and disadvantages, as well as differing scope of business activities, registration requirements and minimum capital requirements. In most cases it will depend on the degree of commitment a company has to Denmark and the planned business activity.

Limited Liability Company

Incorporation of a company in Denmark is a quick, informal and cost-efficient process.

In Denmark, there are two types of corporations that can be set up:

  • Aktieselskab (A/S) (Public limited liability company)
  • Anpartsselskab (ApS) (Private limited liability company)

The most commonly selected option is the ApS, however the choice largely depends on the expected activity level in Denmark.

A defining characteristic of setting up in Denmark is the simplicity, ease and cost-efficiency of the entire process.

Several key points are listed below:-

  • Incorporation of companies can be done online and are often ready for business within a few hours
  • No residency requirements for management, including members of the Executive Board (CEO), Board of Directors or Supervisory Board
  • Shareholder’s and board meetings can be held electronically
  • No notarial deeds
  • Flexible language requirements – registration of corporate documents of limited liability companies (A/S and ApS) in Swedish, Norwegian or Danish. Note that some documents may be registered in English
  • Dividends can be distributed on an interim basis
  • Danish company law is in conformity with current EU legislation
  • With one of the most favourable tax climates in the EU, it is much more tax efficient to establish headquarters in Denmark as opposed to other Nordic countries

Aktieselskab (A/S)

A/S are usually chosen for middle-sized and large companies. Only A/S companies may be listed on the Copenhagen Stock Exchange.

A/S Investment Capital Requirements: Minimum of DKK 500,000.

It is optional if the investor chooses not to fully pay up the registered share capital. However, the paid-up capital must be at least 25% of the registered share capital.

The investors’ liability will then be restricted to the value of the shares subscribed.

Management 

A/S companies are required to have a two-tier supervisory system: a Board of Directors (minimum 3 persons) and an Executive Board (minimum 1 person, the CEO). The BoD may be substituted with a Supervisory Board.

No residency requirements are imposed on any of the directors.

Anpartsselskab (ApS)

A/S are usually chosen for small and middle-sized companies. Typically used as subsidiaries for multinational enterprises due to lower compliance requirements.

ApS Investment Capital Requirements: Minimum of DKK 50,000.

It is optional if the investor chooses not to fully pay up the registered share capital. However, the paid-up capital must be at least 25% of the registered share capital.

The investors’ liability will then be restricted to the value of the shares subscribed.

Only a single shareholder is required and no restrictions apply on the nationality of the shareholder.

Management 

ApS companies can choose to have a one or two-tier supervisory system. An Executive Board (minimum 1 person, the CEO) must be in place, however a Board of Directors or Supervisory Board may also be appointed.

No residency requirements are imposed on any of the directors.

Accounting requirements: Both A/S and ApS are required to submit annual financial statements.

Things to do upon Incorporation

Preliminary procedure: Before proceeding with incorporation, it is required that foreigners first verify the uniqueness of their name at the Danish Registrar by providing three unique names. The founders also have to provide the articles of association.  The articles of association must contain certain information such as the company’s name, the location of the registered office, the objective of the company, the share capital and also the names and addresses of the managing members.

Note that documents for incorporation must be notarised before use.

Obtaining a NemID signature

A particularity of the company registration in Denmark is that each business must receive a digital signature known as NemID. A NemID signature allows business employees to register themselves electronically. A company may request up to 3 NemID signatures free of charge for its employees, and but any additional NemID signatures will be subject to a charge of DKK 79 per additional employee.

While a comprehensive list of documents is not available online, typical documents that are required for registration include copies of the shareholders and directors’ passports, utility bills to prove the address as well as a bank reference letter.

Agency: Danish Agency for Digitisation National IT and Telecom Agency

Time: Less than one day

Cost: Free

Registration of the company 

Agency: Danish Business Authority (DBA) (formerly the Danish Commerce and Companies Agency)

There are three ways in which registration may be done:

a. Online registration through the DBA’s WebReg system – only certain service providers such as law firms with a NemID may undertake the online registration

b. Paper registration

c. Acquisition of a shelf company

However, given the speed and efficiency of the online registration process, this option remains as the most popular choice.

Time: Online registration usually completed within a day, however paper registration usually takes 2-3 weeks.

Cost: DKK 670 (online registration) or DKK 2,150 (paper registration)

Deposit start-up capital in a bank

After the minimum start-up capital is deposited, the bank will issue a certificate of deposit.

Registration of employees for workmen’s insurance with

Agency: Private insurance company

Time: 1 day

Cost: No charge

Advantages

  • Efficient and speedy incorporation process
  • If the Danish company is chosen to be the Nordic headquarters and it opens branches in other Nordic countries, double taxation may be prevented as Danish law exempts income from foreign branches from Danish taxation

Branch

Foreign corporations operating in Denmark can operate as a branch office without the need to incorporate. However, it is generally advisable to incorporate rather than set up a branch office in Denmark, given the numerous drawbacks associated with having a branch office. Having said that, foreign enterprises wanting to set up a branch in Denmark for lower levels of activity are allowed to do so.

A branch office is not considered to be a separate legal entity, rather it is part of the foreign parent and as such all basic corporate documents of the parent company must be translated and registered with the Danish Business Authority.

Branch Investment Capital Requirements: No minimum capital requirements.

The parent company is fully liable for the liabilities of the branch.

Management 

At least one branch manager must be registered.

Accounting requirements: While a branch is not required to prepare financial statements, a copy of the head office’s financial statements must be filed annually with the Companies Registry.

Things to do upon Incorporation 

To register a branch, evidence has to be provided of the existence of the parent company, certified copies of the Articles or Statues, the names of the directors, the share capital, the registered office, and the names of the representatives who will act for you. Various documents will also need to be translated, including the:

  • Parent company’s registration certificate
  • Parent company’s articles of association
  • Names of the parent company’s directors and secretary

Agency: Danish Business Authority

Time: Several weeks

Advantages

Less obligations with regards to accounting

Disadvantages

  • Long and possibly costly incorporation process
  • Parent company is responsible for any debts and liabilities of the branch, possibly exposing the parent company to lawsuits and tax debts of the branch office
  • Potentially lengthy and complicated tax dealings with the tax authorities with regards to branch tax obligations
  • As a branch is considered a permanent establishment of the foreign parent, it is generally subject to double taxation.

Representative Office

This is the easiest and least expensive type of foreign investment structure to set up and has no registered capital requirements. The defining characteristic of an RO is its limited business scope. An RO is generally forbidden from engaging in any profit-seeking activities, and can only legally engage in preparatory activities such as market research etc.

An RO is typically used at the preliminary stages of establishing a business presence in Denmark.

Branch Investment Capital Requirements: No minimum capital requirements.

Management: No management requirements

Accounting requirements: An RO is not required to prepare annual financial statements

Registration: No corporate registration required with the Danish authorities

Taxation: Not subject to tax

Other Types

Some other entities that are available to foreign investors wanting to set up in Denmark include:

  • European public limited company (SE company)
  • European economic interest groupings (EEIG)
  • Start-up companies (Iværksætterselskab)