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Denmark is a free-market capitalist economy with a strong social welfare safety net for its citizens. It is rated among the world’s best locations for doing business due to its talent pool, flexible labor market, reliable supplies of electricity and water, and well-developed financial system. The country has consistently ranked 3rd in the World Bank’s Ease of Doing Business.
The basic principle of the Danish welfare system, often referred to as the Scandinavian welfare model, is that all citizens have equal rights to social security.
Historically, Denmark is an agricultural country, but for many years now the production structure has been changing. Denmark relies on a highly developed service sector and large export-oriented industry. Altogether, the service sector employs 66 % of the Danish workforce.
In terms of taxation, registered companies in Denmark are taxed according to residence, where resident companies are taxed on their worldwide income and nonresident ones only on their Danish source income. For resident corporations, profits and losses derived from foreign permanent establishments and real estate are exempt from taxation In terms of taxation, registered companies in Denmark are taxed according to residence, where resident companies are taxed on their worldwide income and non-resident ones only on their Danish-source income. For resident corporations, profits and losses derived from foreign permanent establishments and real estate are exempt from taxation.
Danish-incorporated businesses are subject to the Danish corporate tax on the taxable income at a rate between 12% – 15%. However, shipping companies may opt-in for an advantageous tax scheme, the so-called tonnage tax scheme, rather than paying standard corporation tax. Additionally, Danish upstream oil and gas activities are not covered by the ordinary corporate income tax regime but are instead covered by special rules set out in the Danish Hydrocarbon Tax Act. Lastly, some special types of corporate entities are completely tax exempt or subject to a lower tax rate. According to a recently published legislative proposal, an increased corporation tax may apply to financial companies as of 1 January 2023. The tax rate will remain same, but the taxable income is proposed to be multiplied by a factor the proposal is currently under consideration by the Danish Parliament’s tax committee.
Income tax In Denmark, the tax authorities distinguish between two different types of income:
A-income
A-income includes, for example, a salary or unemployment benefits, pensions, fees, holiday allowance and state educational grants.
The standard VAT rate is 25%. The general or standard VAT rate will be 25%. The standard VAT rate will be applied in general for all goods and services for which no VAT exemption or 0% VAT rate is provided.
Most Danish services and goods are subject to the VAT, however, the supply of real estate (with the exception of newly constructed real estate and building plots) and the supply of financial services and products are generally not subject to VAT. The VAT is paid on an annual, biannual, quarterly, or monthly basis depending on the service or goods provider’s annual turnover.
Supplies of services or goods are subject to a 25% value added tax (”VAT”) on the invoiced amount. In connection with the supply of services or goods, the seller will be required to impose a 25% VAT on the invoiced amount. The buyer will be entitled to claim a reimbursement of the VAT, provided that the buyer itself is operating a business.
Minimum Capital: The minimum share capital required to establish an ApS is DKK 50,000 (Danish Kroner). At least 25% of the share capital must be paid up before the company can be registered.
Shareholders: An ApS can have one or more shareholders, and they can be individuals or legal entities
Directors: An ApS must have at least one director, who can be a shareholder or a third party. The director is responsible for managing the company’s daily operations.
Name and Registration: The company name must be unique and end with “ApS.” To register an ApS, you need to submit the necessary documents.
Legal Structure: An A/S is a separate legal entity from its shareholders, providing limited liability protection. Shareholders are generally not personally liable for the company’s debts or obligations.
Share Capital: A Danish A/S must have a minimum share capital of DKK 400,000 (Danish Krone) before it can be incorporated. This capital can be divided into shares of equal or different values.
Shareholders: An A/S can have one or more shareholders, who can be individuals or legal entities. Shareholders contribute to the share capital of the company and hold shares representing their ownership.
Board of Directors: The A/S is managed by a board of directors (bestyrelse) responsible for the overall management and decision-making. The board is typically composed of at least three members, who are elected by the shareholders.
Limited Partners: A Danish “K/S” can also have one or more limited partners. Limited partners have limited liability, meaning their liability is restricted to the extent of their capital contribution to the partnership.
Capital Requirements: A Danish “K/S” must have a minimum capital contribution from the general partner(s).
Registration: To establish Danish “K/S”, it must be registered with the Danish Business Authority (Erhvervsstyrelsen).
Legal Status: A sole proprietorship is not considered a separate legal entity from its owner. The owner is personally liable for all business obligations and debts. Registration: To establish a sole proprietorship in Denmark, you must register it with the Danish Business Authority (Erhvervsstyrelsen).
Taxation: As a sole proprietor, you are taxed on the profits of your business as personal income. The business’s income and expenses are reported on your personal tax return (Form 04).
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Denmark is a free-market capitalist economy with a strong social welfare safety net for its citizens. It is rated among the world’s best locations for doing business due to its talent pool, flexible labor market, reliable supplies of electricity and water, and well-developed financial system. The country has consistently ranked 3rd in the World Bank’s Ease of Doing Business.
The basic principle of the Danish welfare system, often referred to as the Scandinavian welfare model, is that all citizens have equal rights to social security.
Historically, Denmark is an agricultural country, but for many years now the production structure has been changing. Denmark relies on a highly developed service sector and large export-oriented industry. Altogether, the service sector employs 66 % of the Danish workforce.
Robust domestic economy: Although a small country with a population of just less than $6 million, Denmark has one of the strongest economies in the world and a comparatively large domestic market – making it an attractive option for foreign companies and individuals.
Ease of doing business: The World Bank’s “Ease of Doing Business Index” scores Denmark highly. It is one of the easiest places to do business in Europe, 1.The government has also developed efficient and cost-effective processes – including the simplification of several legal procedures – that make it easy and quick to establish a business in the country.
Strong services sector: The services sector is the leading contributor to Denmark’s “GDP”, employing about 80% of the population. This includes a highly developed and concentrated banking and finance industry.
Strategic Location: Denmark is strategically located in Northern Europe, making it a gateway to other Scandinavian and European markets. Its well-developed transportation infrastructure, including ports, airports, and road networks, facilitates easy access to neighboring countries.
Skilled Workforce: Denmark has a highly educated and skilled workforce. The country places great emphasis on education and vocational training, producing a talent pool of skilled professionals. The workforce is known for its innovation, efficiency, and proficiency in English, which is widely spoken in the business community.
Innovation and Technology: Denmark is a leader in innovation and technology, particularly in sectors such as clean energy, sustainability, life sciences, and information technology. The government actively supports research and development initiatives and provides grants and incentives to promote innovation and entrepreneurship.
In terms of taxation, registered companies in Denmark are taxed according to residence, where resident companies are taxed on their worldwide income and nonresident ones only on their Danish source income. For resident corporations, profits and losses derived from foreign permanent establishments and real estate are exempt from taxation In terms of taxation, registered companies in Denmark are taxed according to residence, where resident companies are taxed on their worldwide income and non-resident ones only on their Danish-source income. For resident corporations, profits and losses derived from foreign permanent establishments and real estate are exempt from taxation.
Danish-incorporated businesses are subject to the Danish corporate tax on the taxable income at a rate between 12% – 15%. However, shipping companies may opt-in for an advantageous tax scheme, the so-called tonnage tax scheme, rather than paying standard corporation tax. Additionally, Danish upstream oil and gas activities are not covered by the ordinary corporate income tax regime but are instead covered by special rules set out in the Danish Hydrocarbon Tax Act. Lastly, some special types of corporate entities are completely tax exempt or subject to a lower tax rate. According to a recently published legislative proposal, an increased corporation tax may apply to financial companies as of 1 January 2023. The tax rate will remain same, but the taxable income is proposed to be multiplied by a factor the proposal is currently under consideration by the Danish Parliament’s tax committee.
Income tax In Denmark, the tax authorities distinguish between two different types of income:
A-income
A-income includes, for example, a salary or unemployment benefits, pensions, fees, holiday allowance and state educational grants.
The standard VAT rate is 25%. The general or standard VAT rate will be 25%. The standard VAT rate will be applied in general for all goods and services for which no VAT exemption or 0% VAT rate is provided.
Most Danish services and goods are subject to the VAT, however, the supply of real estate (with the exception of newly constructed real estate and building plots) and the supply of financial services and products are generally not subject to VAT. The VAT is paid on an annual, biannual, quarterly, or monthly basis depending on the service or goods provider’s annual turnover.
Supplies of services or goods are subject to a 25% value added tax (”VAT”) on the invoiced amount. In connection with the supply of services or goods, the seller will be required to impose a 25% VAT on the invoiced amount. The buyer will be entitled to claim a reimbursement of the VAT, provided that the buyer itself is operating a business.
Minimum Capital: The minimum share capital required to establish an ApS is DKK 50,000 (Danish Kroner). At least 25% of the share capital must be paid up before the company can be registered.
Shareholders: An ApS can have one or more shareholders, and they can be individuals or legal entities
Directors: An ApS must have at least one director, who can be a shareholder or a third party. The director is responsible for managing the company’s daily operations.
Name and Registration: The company name must be unique and end with “ApS.” To register an ApS, you need to submit the necessary documents.
Legal Structure: An A/S is a separate legal entity from its shareholders, providing limited liability protection. Shareholders are generally not personally liable for the company’s debts or obligations.
Share Capital: A Danish A/S must have a minimum share capital of DKK 400,000 (Danish Krone) before it can be incorporated. This capital can be divided into shares of equal or different values.
Shareholders: An A/S can have one or more shareholders, who can be individuals or legal entities. Shareholders contribute to the share capital of the company and hold shares representing their ownership.
Board of Directors: The A/S is managed by a board of directors (bestyrelse) responsible for the overall management and decision-making. The board is typically composed of at least three members, who are elected by the shareholders.
Limited Partners: A Danish “K/S” can also have one or more limited partners. Limited partners have limited liability, meaning their liability is restricted to the extent of their capital contribution to the partnership.
Capital Requirements: A Danish “K/S” must have a minimum capital contribution from the general partner(s).
Registration: To establish Danish “K/S”, it must be registered with the Danish Business Authority (Erhvervsstyrelsen).
Danish Sole Proprietorship
Legal Status: A sole proprietorship is not considered a separate legal entity from its owner. The owner is personally liable for all business obligations and debts. Registration: To establish a sole proprietorship in Denmark, you must register it with the Danish Business Authority (Erhvervsstyrelsen).
Taxation: As a sole proprietor, you are taxed on the profits of your business as personal income. The business’s income and expenses are reported on your personal tax return (Form 04).
Denmark is a free-market capitalist economy with a strong social welfare safety net for its citizens. It is rated among the world’s best locations for doing business due to its talent pool, flexible labor market,
Author: Chandrawat & Partners
Topic: Doing Business in Denmark
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Chandrawat & Partners stands as a dynamic and rapidly expanding full-service firm, specializing in the delivery of exceptional professional and corporate services to a diverse clientele, both foreign and local. We proudly represent companies and individuals across a wide spectrum of sectors through distinct entities established in various countries worldwide.
Chandrawat & Partners stands as a dynamic and rapidly expanding full-service firm, specializing in the delivery of exceptional professional and corporate services to a diverse clientele, both foreign and local. We proudly represent companies and individuals across a wide spectrum of sectors through distinct entities established in various countries worldwide.
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