Denmark is a popular choice for foreign investors due to many factors, including its high GDP, stable and open economy, low inflation, negligible bureaucracy, and transparent legal, political, and tax issues. Denmark is a member of several organizations, including the EU, making it attractive for foreign investment. Additionally, the country's top-quality education system ensures that the labor market is abundant with highly-qualified specialists. The widespread use of English in Denmark also makes it easy for foreign investors to communicate in both everyday life and official matters.
Denmark also has many advantages related to running a business, such as a simple and inexpensive process for establishing a company, with foreign companies receiving the same privileges as Danish companies. The country's policy actively supports entrepreneurs, including small and medium-sized businesses, by offering many grant, loan, or credit opportunities. Denmark also offers a range of legal forms to choose from, depending on the type of business, with low income tax rates for companies, as well as low costs related to social and health insurance premiums. Double taxation is avoided in most cases due to Denmark's agreements with numerous countries in Europe, America, and Asia.
When deciding to set up a company in Denmark, a range of legal forms are available, including sole proprietorship, limited liability company (ApS), limited partnership (K/S), public limited company (A/S), general partnership (Interesselskab), limited liability company (Ivaerksaetterselskaber - IVS), representative office of a foreign company (Salgskontor), foreign branch office (Filial af udenlandsk selskab), and co-operative association (Andelsforening/Brugsforening).
Sole proprietorship is a popular legal form in Denmark, offering a simple and convenient registration process online with Erhvervsstyrelsen. The registration process involves submitting a business plan to the relevant municipality and providing a certificate of qualification. There is no share capital requirement, but registration costs around DKK 10,000 or approximately PLN 5,000 on average. Once registered, state institutions and authorities will typically contact the company via digital post (Digital Postkasse).
Naming a sole proprietorship is arbitrary and can operate under the owner's name or an assumed name. This legal form does not have a separate legal personality, meaning that all liabilities and assets belong to the owner. In the case of debt, the owner is personally liable with all their assets. A sole proprietorship can employ staff and grant power of attorney to others to act on behalf of the business. If the company's income is less than DKK 50,000 per year, VAT registration is not required.
A limited liability company is the most common form of business in Denmark, ideal for entrepreneurs who want strict control over company activities. To set up a Danish limited liability company, at least one partner is needed, and a minimum of DKK 125,000 in start-up capital must be raised. The process of registering a limited liability company is cheaper and simpler than for other Danish companies, requiring the drafting of the company's articles and memorandum of association and registering with the Agency for Enterprise and Trade within two months of signing the memorandum. The average cost of establishing a limited liability company varies between DKK 3,000 and DKK 5,000.
A Danish limited liability company has its own legal personality, meaning the company's capital is separate from that of the owners. This legal form requires separate management of the company and allows for the appointment of a supervisory board consisting of three members, though it is not legally required. If created, the board's existence must be included in the articles of association. A limited liability company may have only one shareholder. The regulation of this type of legal form is under the Danish Private Limited Liability Company Act.
To establish a limited partnership in Denmark, a minimum of two partners is required, including at least one general partner and at least one limited partner. The general partner can be an individual or a legal entity, such as a limited liability company, and is fully liable for all debts of the partnership. The limited partner's liability is limited to the start-up capital they have contributed.
In addition to having at least two partners, a memorandum of incorporation must be drafted that outlines how the partnership will conduct its business. The limited partnership must be registered with the Trade and Companies Agency within 8 weeks of signing the agreement. The partnership name should include at least one of the general partners' names.
The joint-stock company is a legal form suited for medium to large companies that want to be listed on the Danish stock exchange and sell their shares. The registration process is more complicated and requires several conditions to be met, including having a minimum of one partner and gathering share capital of DKK 500,000. The cost of registering a limited company ranges from DKK 4,500 upwards. The registration should take place within six months of signing the memorandum of incorporation and depositing the initial capital. A joint-stock company is required to have internal bodies, and the shareholders are not obliged to be responsible for any debts of the company with their private assets. The process of converting an existing joint-stock company for a specific business is often more time-consuming and costly than starting a new company from scratch.
The general partnership is a company that can be established without any share capital and does not have legal personality, but it can participate in legal proceedings and enter into different contracts. At least two partners, who can be individuals or legal entities, are required to establish the company. To register the company, it is necessary to prepare a memorandum of incorporation that defines the relationship between the partners. The signed memorandum of incorporation must be sent, along with the registration application, to the DBA within eight weeks. If all the partners in the company have limited liability, it is also necessary to register it with the DBA. The company's name must include the abbreviation I/S, indicating the legal form of the company. Shares in a general partnership are usually divided equally among the shareholders unless specified otherwise.
The representative office of a foreign company is a good option for companies that want to expand their operations to Denmark. It doesn't require share capital and doesn't involve high costs. Companies that have similar legal forms as those in Denmark can apply for a foreign company representative office. The company must have at least one person who manages the company and resides in one of the Member States of the European Union. The name of the foreign company's representative office should include the name of the parent company, the country of its registered office, and the word "filial" which means branch. It's important to note that the parent company is responsible for all obligations of the foreign company's representative office since it doesn't have a separate legal personality.
The process of setting up a branch of a foreign company in Denmark is more complicated than setting up a company or representative office. This option is available to Polish entrepreneurs and those companies that have legal forms similar to those in Denmark. To establish a Danish branch of a foreign company, it is necessary to complete an online registration form and contribute share capital, with a minimum amount of DKK 80,000. The cost of setting up a Danish branch of a foreign company is around DKK 8,000. The name of the Danish branch should include the word 'filial', the name of the parent company, and the country of origin. The director of the Danish company is responsible for the liabilities of the foreign company branch. The company branch is subject to Danish law, and it must submit copies of the monthly accounts of the entire year to the Trade and Companies Agency.
The legal form of a cooperative association in Denmark is not common. It can be established by individuals through an association agreement, which allows the association to engage in transactions for the purchase and sale of goods as well as for the processing of products. The liability of the members of a cooperative association is limited. The abbreviation A.m.b.a. must be included in the name of a cooperative association to indicate its legal form.
When registering a company in Denmark, certain elements of the process are fixed, while others depend on the chosen legal form. As a member state of the European Union, citizens of any EU country can set up a business in Denmark, but they must attach an EU citizen’s residence certificate when submitting the necessary documents to the Trade and Companies Agency. A company also needs its own bank account registered in the NemKonto system, with the required documents being passport, residence permit, identification code, driver’s license, Articles of Association, personal documents of the founders, documents proving ownership of Danish and foreign real estate, profit and loss account, statement of cooperation with other banks and possible licenses if required for the business in question. An electronic signature, or NemID/MitID, is also useful, as it provides easier access to Danish online banks and official government websites. Depending on the type of business, additional licenses or approvals may be required, which can slow down the registration process. The relevant Danish authorities must be applied to for these licenses.
The cost of registering a company in Denmark varies depending on the legal form chosen. There are some fixed costs that apply to all companies, including a fee of DDK 670 for registering the form of business ownership and a fee of DDK 4420 for registering the first logo or trademark and DDK 1435 for additional ones. Digital signature processing is free for the first three signatures, but there is a fee of 80 DDK for subsequent signatures. The services of translators, notaries, and consultancy firms can cost anywhere from DDK 10,000 to DDK 25,000, while company registration done by a specialist organization can cost up to DDK 65,000.
Certain types of businesses require additional licenses or permits, which can slow down the registration process. These licenses are issued by various authorities such as the police, the Food Base or the municipality, and are required for businesses involved in activities such as the sale of alcohol, passenger and goods transport services, food market activities, and medical or pharmaceutical activities.
If the company registration is successful, a certificate of incorporation, an extract from the DCCA register with the company's name, registered address, director's requirements, the size of the authorized capital, the original certificate of participation, the company seal, the original articles of association under apostille, and a power of attorney will be issued.
The option of buying an existing company is an alternative to starting a new one. In Denmark, offers for the sale of ready-made companies are easy to find, and the process of purchasing one is quick and simple. Often, all paperwork can be completed remotely and the takeover can be completed within three weeks. Ready-made companies are typically registered for a few months and have a generic name that is suitable for a variety of businesses. They are designed for entrepreneurs who value their time and want to minimize paperwork. Buying an existing company has other benefits, including the fact that it is recognized as stable and reliable by banks, government agencies, and business partners if it has been registered for a long time, has no liabilities, and has experience with accounting. The only task for the buyer is to open a bank account for the company.
The Start-up Denmark program is an initiative offered by the Danish Ministry of Business and Growth in partnership with the Ministry of Immigration, Integration, and Housing. It is designed to encourage foreign investors to start a business in Denmark and includes obtaining a residence permit for up to two people for a period of two years. The program focuses on innovative business ideas that bring added value to the Danish economy. The applicant's business idea is assessed by Danish experts, and the program is not aimed at entrepreneurs planning to open a restaurant or a grocery shop in Denmark.
The entrepreneur must meet certain criteria to be eligible for the program. For example, they must be a shareholder in their country of nationality and not receive dividends, and they must have sufficient savings to cover themselves and their family for one year. The savings amount required is approximately EUR 18,000 for one person, EUR 36,000 for two people, and an additional EUR 6,000 per child.
The program has several stages, including submitting a business plan, awaiting a decision, submitting applications for the program and a residence permit, and waiting for final approval. If the entrepreneur successfully completes the process, they are granted access to the privileges provided to Danish citizens doing business, including state subsidies and support programs. The entrepreneur and their family also gain social guarantees such as health care and education.
Residence without parking documents
The Danish law allows Polish citizens to stay in Denmark for up to 3 months without a residence permit. If they plan to extend their stay, they must apply for an EU citizen’s registration certificate before the 3 months period ends. This certificate serves as an official confirmation of the person's legal stay in Denmark. The reason for the stay must be specified in the certificate, and a new certificate must be applied for if the reason changes. Scandinavian citizens are exempt from holding a residence permit, but citizens of other countries such as Switzerland, Norway, Iceland, and Liechtenstein must follow the same rules as EU citizens.
The EU-opholdsbekendtgørelsen regulates the rules on residence of EU citizens in Denmark. After legally residing in Denmark for a minimum of 5 years, individuals may apply for permanent residence. To do this, they need to go to the citizens’ service office (Borgerservice) with a current certificate of residence of an EU citizen. This office is usually located in the municipality. After visiting the Borgerservice, they will receive a registration number (CPR), a health insurance card and address registration.
The process of obtaining a business visa for Denmark is similar to applying for a Schengen visa. To apply for a business visa, an invitation from a Danish company or business partner is necessary, along with a completed application form, a passport, biometric data, and a digital photo. The decision for the visa application is typically made within 10 days of the application. Additional documents may be required depending on the circumstances. The cost of a business visa is €27, but it is possible to pay an additional fee for a fast-track procedure, which takes three days. Once obtained, a business visa is valid for up to 90 days, and it is possible to extend its validity for an additional 90 days for legitimate reasons.
The tax system in Denmark is progressive, meaning the amount of tax an individual pays is based on their income. Danish taxpayers can claim deductions for expenses like transport to work, insurance premiums, pensions, food costs, and child support, but must provide documentation. The Danish Tax Administration may audit taxes paid in the past seven years. Danish tax liability is determined by factors such as residency status, type and amount of salary received, place of employment, and place of establishment of the employer or business. Individuals with full tax liability must pay tax on all income, while those with limited tax liability do not pay tax on income earned in Denmark. Companies in Denmark must be registered with the Enterprise and Trade Agency at least eight days before starting operations. Denmark does not offer tax breaks or holidays for entrepreneurs.
The Danish law requires individuals to pay taxes on their income, which includes both income tax and progressive tax. Income tax is a fixed rate of 32%, while the rate of progressive tax varies based on the amount of income earned. If the income is less than DKK 42,000 per year, the progressive tax rate is 5.64%, but if it's higher than this threshold, it's 15%. When calculating the progressive tax, both work and capital income are considered. Income tax is paid to local authorities, and progressive tax is paid to the treasury.
When a sole proprietorship operates in Denmark, the income generated is considered as the personal income of the business owner. As a result, the entrepreneur is required to file a single tax return, which covers both business and personal income. The frequency of tax return filing is either quarterly or semi-annually, depending on the specific company. The Danish Tax Authority's website provides an online platform for filing tax returns. Sole proprietors in Denmark are entitled to health and pension benefits, just like regular employees. The deadlines for advance payments of income tax are March 20th and November 20th. If the advance payment is made earlier, the tax can be refunded with a higher interest rate than what banks offer. However, if the payment is not made until November, the interest rate will be reduced by 0.4, resulting in a lower interest rate.
Companies – CIT
In Denmark, companies are obligated to pay corporation tax at a fixed rate of 28%. The taxation of companies is based on the concept of consolidation, which means that not only the parent company but also its branches and subsidiaries are taken into account. However, in the case of partnerships, taxation only applies to the individual partners of the company.
Companies in Denmark that have an annual turnover exceeding DKK 50,000 must register and pay Value Added Tax (VAT). VAT is a type of tax that is included in the price of goods or services offered, and the current VAT rate in Denmark is 25%. However, some goods or services may be subject to a 0% VAT rate, including medical care, education, real estate sales or rentals, cultural activities, banking, and insurance transactions.
Foreign companies selling goods or offering services to Danish companies can apply the reverse charge procedure, which exempts them from paying Danish VAT. Instead, the purchaser becomes responsible for paying the VAT. The reverse charge procedure is limited to specific types of businesses, such as construction work, sports events, employee leasing, cleaning, entertainment, exhibitions, and conferences.
Excise duties are applicable only to certain categories of goods and are paid by the end purchaser. These goods include mineral water, alcoholic beverages, tea, coffee, chocolate, ice cream, tobacco, motor fuels, video cassettes, phonograph records, and electric light bulbs.
There are two types of labor laws in Denmark, one for manual workers and another for white-collar workers, based on the nature of the employment. However, regardless of the type of work, all employers in Denmark are required to provide their employees with health and safety training, fair wages, and insurance coverage for work-related accidents and illnesses. Failure to comply with these standards may lead to labor conflicts, strikes, lockouts, or other actions taken by trade unions to promote solidarity among the affected workers.
In Denmark, there is no single legislation governing the relationships between employers and employees of different occupational groups. Instead, the primary reference document is the agreement between the Danish Federation of Trade Unions and the Danish Confederation of Employers, which addresses issues such as working hours, notice periods, minimum holiday entitlements, and maximum retirement age.
All agreements between employers and employees must be in writing, and verbal agreements are not recognized. The law in Denmark does not specify the length of time for which a contract must be concluded, allowing some degree of flexibility to be exercised on an individual basis. However, it is generally accepted that salary increases can be negotiated every two years or so, while an employment contract can be renegotiated on average once every four years.
All individuals employed in Denmark are covered by the Danish social security system. This means that employers in Denmark are required to deduct social security contributions from the salaries of their employees. The annual amount of these contributions is around DKK 1,080 per employee. On average, it is estimated that Danish employers pay between DKK 10,000 to DKK 12,000 per year in social security contributions for each of their employees.
Denmark does not have a minimum wage law in place. Instead, working conditions and pay rates are determined through collective agreements that are specific to certain industries or professions. Although there is no general minimum wage in Denmark, collective agreements establish minimum wages for particular industries or professions. Wages may be calculated based on hourly, daily, or monthly rates, depending on the type of work performed. Payment of wages can occur once or twice a month. Furthermore, wages for specific industries are renegotiated on an annual basis.
The standard workweek for employees in Denmark is 37 hours. Overtime is defined as the first 3 hours of work beyond the standard 37 hours per week or the first 3 hours worked during the employee's time off. The overtime bonus is agreed to be 50% of the regular hourly wage. If the employee works more than 3 hours of overtime in a given day or works on Sundays or holidays, the bonus increases to 100%. The employee has the option to choose additional time off instead of the bonus. This policy applies to both full-time and part-time employees in Denmark.
The laws in Denmark regulate the rules concerning employee leave entitlements. Each employee is entitled to five weeks of paid leave, which amounts to 30 days, inclusive of Saturdays. Second and third shift employees are entitled to an additional two hours of leave for every week worked. It is mandatory for employees to take a minimum of 18 continuous days of leave between May 1st and September 30th. If an employee has not worked for the entire previous calendar year, their holiday entitlement is calculated based on the number of full months they have worked, with 2.08 days of holiday allocated for each full month of work.
Collective agreements in Denmark are designed to safeguard employees in various matters related to working conditions. These agreements provide guidelines for matters such as working conditions, wages, workplace safety, working hours, holidays, settlement of overtime, pensions, and other similar issues. Collective agreements are created through collaboration between employees and employers. An employer has the option to join a collective agreement if it desires to do so, particularly if the company is already a member of an employers' union. It should be noted, however, that a company's compliance with collective agreements established by an employee association is not guaranteed solely by the presence of employees in a specific trade union.
Termination of an employee’s contract
In Denmark, the length of the notice period for an employee varies based on the duration of their employment. Both employers and employees have the option to negotiate the notice period. Rules on the dismissal of employees are regulated by collective agreements and vary depending on the industry and the position of the employee. In general, an employee who has worked for at least nine months and is over the age of 18 cannot be dismissed without proper justification. If an employee believes that they have been unjustly dismissed, they may take the case to court or an appeals tribunal. If the employer is found to be at fault, they must provide the employee with compensation. However, there are instances where an employer may dismiss an employee immediately without notice if the employee engages in grossly wrongful conduct.
Entrepreneurs who operate businesses in Denmark must adhere to Danish health and safety regulations, which can be found on the official website of the Danish Working Environment Authority. Companies with at least 10 employees are required to establish a health and safety organization led by designated inspectors. The main responsibilities of these inspectors are to enforce the company's existing safety regulations, even in cases where the company has temporary or fluctuating workplaces. Failure to comply with these health and safety regulations may result in fines and the suspension of work.
Employers in Denmark have various obligations under health and safety legislation, including ensuring a safe working environment, paying attention to occupational hygiene, training employees in safety rules, providing personal protective equipment to employees, ensuring that employees carry out their work safely and in accordance with health and safety rules, and taking measures to prevent work-related injuries.
In Denmark, individuals who earn small amounts of money are exempt from paying taxes and receive a "frikort". However, entrepreneurs and foreign investors are not eligible for this exemption and are required to have a tax identification number and a tax card. The tax card is issued electronically and can be accessed via TastSelv. To obtain a tax identification number and tax card, applicants must submit an application either electronically or by submitting a completed form 04.063.
Applicants can apply for a tax identification number and tax card no earlier than 60 days before their first planned day of work in Denmark. In order for the application to be complete, it must be accompanied by copies of documents such as proof of identity (identity card or passport), a residence permit in Denmark, a signed employment contract if applicable, and in the case of married persons, a marriage certificate.
When establishing a company in Denmark, it is necessary to register it in the Register of Foreign Service Providers (RUT). This register provides Danish institutions with access to the most important information about companies operating in the Danish market. Registration with the RUT should occur even before the company starts operating in Denmark, and any changes to the operation of the company should be notified at least one working day before they are implemented. The registration process is quick and is submitted digitally via the virk.dk website. Foreign investors do not need to submit the application in Danish and can choose to submit it in English, German, or Polish. A digital signature and ID are not required.
When registering, the company's name, address, type of services, location, date of activity, CVR number, VAT registration number, sector classification code, contact details of the registrant, and details of any delegated persons must be provided. After registration, a receipt with a personal RUT number is received, which is necessary when contacting any Danish authorities. Employees employed by a Danish company, particularly in gardening, cleaning, construction, agricultural and forestry services, should submit their receipt to their employer.
Failure to register or notify changes to the Register of Foreign Service Providers can result in a fine or prosecution by the Labor Inspector. The standard fine for this type of offense is DKK 10,000 to 20,000, but can be calculated on a per-day basis in some cases.
The process of terminating a company in Denmark requires several formalities to be followed, including amending the tax return. Depending on where you live and the type of work you do, the country where you have to pay tax may vary. There are two types of tax capacity, limited and full, which are determined by factors such as where you live and work, where your center of vital interests is, and where your partner or spouse lives. If a person's living situation is more complex, such as residing and working in both Denmark and their home country, then the center of vital interests and the location of the partner or spouse will be used to determine the permanent residence. Along with amending the tax return, the individual must also inform the tax office of their new address and deregister from the Danish national register, which can be done at the local resident service point. Failure to complete the termination process properly can result in a fine or prosecution by the authorities.
The Danish economy has several major sectors such as food, renewable energy, information technology, maritime transport, and biotechnology. Companies in these sectors can receive state funding. It is common for foreign investors to open a restaurant or café in Denmark due to the popularity of dining out among Danes. Other popular choices for businesses include hair salons, travel services, hotels, and banking, insurance, or transport. Jewelry stores are also in high demand as Danes seek safe investment options due to negative interest rates.