Company in Denmark

General information

Denmark is a trading country that has managed to recover from the crisis and seize the opportunity to build an economy directed towards renewable energy sources and sustainable development. Denmark’s economy is characterised by a policy of liberalising trade and goods, and by a broad development of foreign trade. Denmark has experienced significant GDP growth in recent years. Denmark has a healthy and strong economy, making it a major global player. Due to its independence of investment, Denmark is an attractive country for foreign investors. Denmark has signed many investment protection agreements with other European countries, thus guaranteeing transparency of transactions.

Types of companies

There are several types of companies for foreign investors:

• Limited liability company (Anpartsselskaber, ApS)

The minimum share capital required to establish a company is DKK 50 000. ApS is the most commonly used form of business activity in Denmark. Its establishment requires the preparation and signing by the shareholders of the articles of association and the statute.

• Værksætterselskab – IVS

New type of company introduced into the Danish system in 2014 The basis distinguishing it from ApS is the reduction of the minimum capital requirements to DKK 1.

• Capital company (Aktieselskaber, A/S)

It is the most developed legal form of doing business in Denmark. The minimum share capital required to establish a joint stock company is EUR 67,000. The establishment of Aktieselskaber is similar to that of ApS, but the necessary element of the registration procedure is a meeting of shareholders to approve the application for the establishment of the company and the election of the management board and the supervisory board. At least one of the shareholders of the company must be a national of a Member State of the European Union.

• Limited partnership (K/S, Kommanditselskaber)

K/S must have one or more ‘general partners’, responsible without limitation for the company’s obligations, and several ‘limited partners’, whose liability is limited to the maximum amount of the capital they have contributed to the company. General partners may be limited liability companies. A limited partnership is established on the basis of the articles of association required for its registration.

• General partnership (I/S, Interessentskaber)

A general partnership may be established by at least two partners, which may be both natural persons and legal persons undertaking joint obligations. Partners of a general partnership are jointly and severally liable for the company’s obligations. Except in the case of tax matters, a general partnership shall be regarded as a separate legal entity.

• European Economic Interest Grouping (GEIE)

It is a corporate structure based on European Union law. It corresponds to a limited partnership, but its founders must come from at least two different EU countries. This form of economic activity is particularly attractive for small and medium-sized enterprises, because the structure of the company is simple and does not require share capital. It is possible to relocate a company within the framework of the single European market.

Company registration procedure

Registration of the company:

• In order to set up a company, it is necessary to draw up and sign the amemorandum of association, to draw up the articles of association/company’s statute, and to make a capital payment.
• Then you have to fill in the registration form and submit it together with earlier documents at the registration.
• The Danish Agency for Enterprise and Trade (Erhvervsstyrelsen) also assigns a Central Business Register number (CVR).
• You should also notify the newly established company to the Customs and Tax Office (SKAT) for the purpose of VAT settlements.

Shareholders:

No restrictions on the number of shareholders, however, the company must have at least one shareholder. Foreign shareholders are also allowed.

Directors:

The supervisory board of directors is only required if the company has more than 35 employees for three consecutive years and wishes to exercise their right to be represented on the board. The supervisory board must have a minimum of 3 members.

Management Board:

It must have at least one member. Depending on the structure chosen, the management board either runs the company itself or together with the board of directors. The members of the management board represent the company externally.

Capital:

The minimum amount is DKK 1 (or its equivalent in euros). All minimum capital must be paid into the company account at the time of registration.

Time to set up a company:

The time to set up a company is about 3 weeks from the submission of all documents.

Registered office:

The company must have a registration address in the country. On the market there are entities offering virtual office services, which provide the registration address, mail service and the company’s telephone exchange.

Taxes and finances

The Danish tax system is simple and friendly for citizens and foreign investors.

Company tax residence

A company is resident if it is registered in Denmark or is managed and controlled from Denmark. Residents pay tax on income from domestic activities, which are exempt from taxation outside Denmark. Non-residents pay tax only on income earned in Denmark. It is levied on the company’s revenues  from its activities, passive income and capital gains.

CIT rate

22%; entrepreneurs operating in the oil and gas industry are subject to the rate of 25%. Normal operating expenses may be deducted. The method and rate of depreciation depends on the asset class. Losses may be transfered indefinitely and may be deducted at any time in the future provided that the revenue does not exceed DKK 8 205 000 (this amount is amended and adjusted annually). Retrospective deduction is not permitted. Capital gains are included in … and are subject to the same rate (22%).

Double taxation

Double taxation is excluded on the basis of tax treaties concluded with other countries.

Counteracting tax avoidance

Denmark has introduced a transfer pricing system and the regulations largely follow the guidelines issued by the OECD. Transfer pricing refers to transactions between related companies. The arm’s length principle applies. The tax office has the right to require the preparation of full transfer pricing documentation during the audit. There are sets of thin capitalisation rules. The debt-equity ratio is 4:1. Deduction of interest is limited to 2.9% of the tax base of the assets and deduction is limited to 80% of revenues. The CFC rules apply when: a Danish company has control (direct or indirect) over the majority of votes in another company (also Danish or foreign); more than 50% of the income of the subsidiary and a minimum of 10% of its assets are of a financial nature. In this case, the entire income of the subsidiary is subject to the same tax rules as the parent company. Tax relief is granted for tax paid abroad by the subsidiary. International companies with a total turnover of more than DKK 5.6 billion have to prepare a report on their activities in each country for the Danish tax office. The general rules of counteraction are aimed at contracts where taxpayers use EU directives and other tax agreements and regulations to obtain benefits from false contracts.

Accounting

Tax year is a calendar year. A different model of the year may be adopted if the tax authorities give their consent, but it must always be 12 months. The tax return must be submitted electronically within 6 months from the end of the tax year. For the year ending between 1 February and 31 March, the tax return must be submitted by 1 August. Tax payment must be made in advance and payment must be made by 20 March and 20 November. Consolidated financial statements are mandatory for affiliated Danish companies and branches of foreign companies. The limitation period is 1 May in the fourth year from the end of the tax year in which the liability arose. This period may be extended by 2 years. Companies are required to present a balance sheet, income statement and management report.

Withholding taxes

• Dividends paid to non-residents are subject to 27% tax. Companies can reclaim 5% of this, resulting in a 22% tax rate.
• Interest paid to non-residents is generally exempt from taxation, but in some situations interest paid to foreign affiliates is subject to 22% tax.
• Royalties paid to non-residents – 22% rate, unless tax agreements or EU regulations reduce it.

VAT

The standard rate is 25%. Some services are exempt from taxation and for exported goods and services which are subject to VAT, the rate is 0%. The obligation to register VAT rests with companies whose annual turnover exceeds DKK 50000. Non-residents supplying taxable products and services are also obliged to register. Entrepreneurs are obliged to submit tax returns and pay tax every month if their annual turnover exceeds DKK 50 million; every quarter if the turnover is in the range of DKK 5-50 million and every 2 years if the turnover is less than DKK 5 million. Newly registered companies are billed on a quarterly basis unless their expected turnover exceeds 55 million DKK.

Other taxes

• Real estate tax – some properties are subject to taxation, the rate is 1% of the value of the building.
• Stamp duty Registration of some assets is subject to a stamp duty of 0.6% to 1.5% plus DKK 1660.
• Customs duty is levied on products originating outside the EU. Excise duty is levied on tobacco, alcohol, chocolate, products containing sugar, cars.
• Ecological taxes – there are many ecological taxes, among others they are imposed on carbon dioxide emissions and water consumption.

Other information

Our customers register Danish companies mainly when they actually do business there. It turns out that there are many practical obstacles if the activity is carried out with the help of e.g. a Polish company, e.g. in the transport of pigs or construction services. In this case, the only solution may be to open a Danish company or a branch of a Polish company in Denmark.