A holding company in Denmark, known as a holdingselskab, is a distinctive type of company whose main purpose is to own shares in other companies, called “subsidiaries” or “operating companies.” Such a holding company can take the form of a joint-stock company (Aktieselskab - A/S) or a limited liability company (Anpartsselskab - ApS). It should be noted that a sole proprietorship cannot act as a holding company. In addition, all shares held by the holding company may be invested in foreign subsidiaries.
In Denmark, there are no strict restrictions on the type of activities of subsidiaries, which in practice manifests itself in the fact that a holding company can hold shares in companies operating in different industries and specializing in different fields. It should be borne in mind, however, that the Danish holding company be burdened with responsibility for any financial obligations of the operating companies in which it invests.
Planning to establish a holding company in Denmark? Our services will help you through the entire registration process, optimizing capital and meeting all legal requirements. We offer support at every stage - from registration to analyzing the benefits and tax challenges of running a holdingselskab.
In order to establish holdingselskab, it is necessary to contribute share capital, which is at least DKK 500,000 for a joint-stock company or DKK 125,000 for a limited liability company. Registration of the company as a VAT payer is not mandatory, and the company name does not have to contain the word “holding”. However, it is necessary to have at least one person as a director and one shareholder.
Registration of a Danish holding company by the Trade and Companies Agency requires going through a process that usually takes about 6 days. To pass it successfully, it is necessary to:
- acquiring an electronic signature (MitID or NemID),
- opening a bank account for the company,
- registering the company with the DBA (Danish Business Authority),
- registering employees for employee insurance.
Registering a holding company before establishing operating companies is usually a standard procedure, but it is also possible to carry out the reverse process, which is a bit more complicated in terms of the legal formalities to be carried out. In this case, it is possible to use the same initial capital that was previously allocated for the creation of an operating company to establish a holding company, thus creating “working capital.” Still another option is to buy an existing holding company that already meets all the necessary legal requirements. This option gives you the opportunity to bypass at least a few days of waiting for the registration of the company.
It is worth remembering, however, that before transferring personal shares from an operating company to a holding company, it is important to consider the potential tax consequences that this will entail.
Benefits of owning a holding company:
- There is no need to register for VAT.
- Dividend profits can be transferred between companies, providing the opportunity for capital preservation.
- By transferring the deficit from one operating company to another, under joint taxation, the amount of tax can be reduced.
- No special accounting procedures are required other than an annual audit of the books.
- Low tax rates apply to dividends and gains on the sale of shares.
- There is no need to meet minimum requirements for the number of shares in other companies to be considered a holding company.
- The registration process is quick and easy.
Challenges of owning a holding company:
- The possibility of being liable for the operating company's debts is a significant risk.
- Differences in tax laws may exist depending on the number of shares held and the legal form of the subsidiaries.
- The complexity of the legal relationship between a holding company and its subsidiaries can be difficult to manage without the help of specialists.
- Operating activities are usually limited to the management of owned assets, and the registration of a Danish holding company can be more complicated if operating companies have previously been established.
In Denmark, the tax rate for a holding company depends on the type of income. The legal form of the operating companies, which can be public or private, is also a key factor. Income includes both dividends paid by operating companies and gains from the sale of shares in those companies.
Here are the tax rates for dividends received from operating companies:
- If you own 10% or more shares in a private company, the rate is 0%.
- If you own less than 10% of the shares in a private company (portfolio shares), a rate of 15.4% is applied to 70% of the dividends, with a tax rate of 22%.
- When holding 10% or more shares in a public company, the tax is 22%.
- On the other hand, when holding less than 10% of shares in a public company (public portfolio shares), the rate is 2%.
Income from shares is also subject to taxation according to the following rules:
- If you own 10% or more shares in a private company, you are not subject to tax (0%).
- If you own less than 10% of shares in a private company (portfolio shares), you also do not have to pay tax (0%).
- For holders of 10% or more shares in a public company, the tax rate is 22%.
- However, when holding less than 10% of shares in a public company (public portfolio shares), the 22% rate also applies.
A Danish holding company is exempt from corporate income tax (CIT), provided it holds only foreign shares. When such a holding company owns less than 10% of another company, its shares are classified as “portfolio shares.” Special tax rules apply to portfolio shares in private companies.
When a company owns a 50% stake in another Danish company, it becomes the administrator of the joint tax regime between the holding company and the operating company, according to current Danish regulations. If both companies are registered in Denmark, they must be reported to SKAT Erhverv within one month of the start of joint taxation. Joint taxation is also possible when the companies are located in different countries. Such a situation results in a division of liability between the holding company and the operating companies. Total tax liability is shared when the operating company is 100% owned by the holding company, while partial liability occurs when the operating company is only partially owned by the holding company. Both institutions should have the same tax year, and a change in the holding company's tax year also affects the operating company.
Although the regulations do not require specific accounting procedures for holdingselskab, holding companies are required to have their books audited annually, which must be carried out by professional Danish accountants.
A company's income can be classified into two main types: profits earned from the sale of shares in other companies and dividends paid by operating companies. From a tax perspective, Danish law provides for a 22% income tax rate for the company, which is also applied to other limited liability companies. Note, however, that proceeds from transactions involving the sale of shares in other companies are exempt from taxation.
Shares that represent less than 10% in a particular company are called portfolio shares. Special tax rules apply to ownership of such shares in private companies. Generally, 70% of dividends are taxable, while profits made from the sale of shares are not taxable. Dividends are paid to shareholders at an extraordinary general meeting or annual general meeting.
Registering a Danish holding company in Denmark, which can take the form of Aktieselskab (A/S) or Anpartsselskab (ApS), involves a cost of DKK 670. Additional expenses may occur if you opt for the services of an accounting firm or law firm. Business expenses include accounting and banking fees, while possible losses may result from loss of share value.
- A holding company is a type of limited liability company that is distinguished by the fact that it holds shares in other companies, called operating companies. In Denmark, this structure can take the form of an A/S (Aktieselskab) or ApS (Anpartsselskab), but is not possible as a sole proprietorship.
- The main purpose of holding companies is to manage the shares held in other companies.
- Holding companies in most cases are not VAT payers.
- A holding company can take advantage of a tax system that allows deficits to be transferred between companies and profits to be reported as dividends, which helps protect profits from potential claims or lawsuits.
- Regardless of the number of shares held, a holding company is always classified as such, and the number of these shares only affects the amount of taxes due. These taxes are usually very low, especially for dividends and share sales.