Company in Denmark

Company in Denmark - introduction

Denmark is a European country situated in the Scandinavian region. In recent years, more and more foreign entrepreneurs have chosen Denmark as the location of their business, the main reason for this choice is probably that the country has a liberal economic policy towards all member states of the European Union and the European Economic Area, and consequently, people from abroad have the same privileges as Danish citizens. Foreign entrepreneurs emigrating to Denmark are fully entitled to register their own business with Erhvervsstyrelsen (the Agency for Economic Activities and Enterprises - a branch of the Ministry of the Economy), however, before making such a decision, it is worthwhile to thoroughly familiarise ourselves with the requirements, deadlines and necessary documents regarding the various legal forms of Danish business activity, as well as to analyse all pros and cons, so that the decision is fully informed and in line with our expectations and possibilities.

What types of companies can an entrepreneur in Denmark choose from? What is the procedure for setting up a company in the Kingdom of Denmark? What is worth knowing about setting up and running a Danish business? What are the rights and obligations of a Danish entrepreneur? You will find the answers to these and other questions in the chapters below. Jump to content of the article to learn more!

Legal forms of doing business in Denmark

When deciding to set up your own business in Denmark, you can choose from a number of legal forms, of which the most popular and easiest to run is the sole proprietorship - Enkeltmandsvirksmhed. Other forms, also available to entrepreneurs from other countries, are Danish companies such as Anpartsselskab (ApS - limited liability company) Aktieselskab (A/S - joint stock company), Kommanditselskab (K/S - limited partnership), Interesselskab (I/S - general partnership); as well as Salgskontor (representative office of a foreign company), Andelsforening / Brugsforening (cooperative associations) and Filial af udenlandsk selskab (branch of a foreign company).

In addition to the above, there are also business types in Denmark such as Personligt ejet mindre virksomhed (PMV), Dania Private Limited Company (PLC) and Dania Holding Company.

Important information about self-employment in Denmark:

In Denmark, the most popular and easiest legal form of business to run is the sole proprietorship - Enkeltmandsvirksmhed - which is ideal for young entrepreneurs taking their first steps in business who do not have a lot of financial resources and cannot estimate the future turnover of the company. In the case of self-employment, there is no separation between the company's assets and the business owner's personal assets, and therefore the owner is fully liable for any debts of his or her business.

In addition, the self-employment tax is included in the annual tax return and thus the income of the Enkeltmandsvirksmhed is only taxed once during the year.

A Danish sole proprietorship must be registered with Erhvervsstyrelsen, preferably via the website erhvervsstyrelsen.dk, and the approximate cost of setting it up is DKK 10 000 (Danish kroner). When registering, the name of the company is given, usually the name of the owner, who will use a personal registration number - CPR.

If the annual income of this legal form of Danish business exceeds DKK 50 000, it must also be registered with the RUT as a VAT payer. It is also worth knowing that the owner of this type of business has the right to hire employees, but is then obliged to pay employee contributions and provide a safe working environment for his or her employees.

Another option may be a small self-employed business - Personligt ejet mindre virksomhed (PMV), which does not need to be registered with the Danish Central Business Register (CVR). Once the company receives its unique registration number, you must pay a registration fee which is less than € 100, excluding legal fees. With this Danish form, no start-up capital is needed and the owner is liable for the company's obligations with his or her private assets, but you must change from a small own business to a self-employed form when the annual turnover exceeds DKK 50 000 or an employee is employed in the company.

Important information about Danish companies:

An entrepreneur in Denmark can choose from companies such as Interesselskab - I/S (general partnership), Aktieselskab - A/S (joint stock company), Iværksætterselskaber - IVS and Anpartsselskab - ApS (limited liability companies). For Danish companies, accounting is much more complicated and requires expertise, which is why owners of this type of Danish business often opt to use certified accountants. Danish companies are governed by tax law and the Companies Act (Selskabsloven) and require both a statute (vedtægter) and a memorandum of association (stiftelsesdokument) containing information such as the name, registered office address, personal details of the founders and management board, initial capital and the type and purpose of the company, in addition to being required to submit an annual report (årsrapport).

A critical aspect that should not be overlooked is the need for a registered business address. If your company lacks a physical location, it is vital to address this as soon as possible. Opting for a virtual office service can effectively provide you with a professional business address, ensuring you meet regulatory requirements and establish a credible business presence right from the start.

According to our records, the Finance, Insurance, and Real Estate sector have the largest number of registered companies (totaling 205,499), followed by Services (204,134) and Retail Trade (30,476) in Denmark. The Standard Industrial Classification (SIC Code) is utilized to categorize companies into specific industries. The top three SIC Codes for Denmark are Holding company (21.39%), Membership organization (17.3%), and Real property lessor (7.99%). Novo Nordisk is Denmark's largest company. Briefly describing the business profile, it is a global healthcare company specializing in diabetes care and other chronic conditions. Renowned for its insulin innovations, the company has a strong emphasis on sustainability and community support. It continues to expand its focus beyond diabetes, investing in research and development for new therapies. Another example of a huge, successful Danish company are DSV PANALPINA A-S, NTG Nordic Transport Group A/S, FLSmidth & Co. A/S, ADI Global Distribution Denmark A/S and Danske Bank.

Largest danish companies excel in diverse sectors, spanning from transportation and logistics to healthcare and energy. These businesses underscore Denmark's international influence and dedication to innovation and sustainability. This is the list of companies influencing the Danish economy in 2023.

Rank of top 10 largest companies in Denmark (data retrieved in 2022):

1. Maersk
2. Novo Nordisk
3. DSV
4. Ørsted
5. Vestas Wind Systems
6. Carlsberg
7. Danske Bank
8. Tryg
9. Aktieselskabet Schouw & Co.
10. Rockwool

If you want to find information about companies, such as their website / domain, headquarters, company description, revenue, founders, location and more, please use the Danish company search tool. Examine over 528,675 companies accessible in the online databases and see also the top industries and major players, including those with the highest sales and companies with the highest number of employees. You can also get a lot of valuable information from sites like Wikipedia. Danish companies are also regularly included in the famous Fortune global 500 list.

What types of companies are distinguished in Denmark?

1. Interesselskab - I/S (general partnership):
   • a general partnership must be registered via erhvervsstyrelsen.dk at Erhvervsstyrelsen (Agency for Enterprise and Trade) up to 8 weeks after signing the company agreement in order to obtain a CVR number - (Central Company Register - www.cvr.dk),
   • the name should include the abbreviation I/S,
   • at least two natural or legal persons are required to form a general partnership,
   • the partners are obliged to draw up and sign a memorandum of association specifying the terms and conditions of cooperation,
   • share capital is not mandatory,
   • the company must be registered with the DBA (Danish Business Authority) if each partner has limited liability,
   • the company may enter into contracts, sue and be sued even though it has no legal personality,
   • compared to a Danish limited liability company, the partners of a general partnership have more limited influence over its operation.
2. Kommanditselskab - K/S (limited partnership):
   • this company must be registered via erhvervsstyrelsen.dk at the Agency for Trade and Companies (in case all partners of the company are legal entities) within 8 weeks, starting from the day on which the memorandum of incorporation defining the company's activities was signed,
   • the name of the company must include the abbreviation K/S,
   • it requires at least one general partner, which may be a limited liability company, fully liable for all its obligations, as well as several limited partners who are liable for the company's obligations with the initial capital contributed,
   • Partnerselskaber (P/S) is a slightly different type of limited partnership, i.e. a company with limited liability up to the amount of shares, whose partners, who are liable for its obligations with all or part of the initial capital, are public limited liability companies,
   • The company must be registered with the DBA.
3. Aktieselskab - A/S (joint stock company):
   • start-up capital of DKK 500 000 (cash or other assets) must be deposited in a bank account before the company is registered,
   • a memorandum of association is required containing information such as name, registered office address, initial capital, personal details of the board of directors and founders of the company, purpose and type of business,
   • the company must then be registered within 6 months both with Erhvervsstyrelsen, preferably via the website erhvervsstyrelsen.dk, for a CVR registration number, and with the Tax and Customs Administration using the website skat.dk,
   • the registration process takes approximately two to three weeks,
   • the company's operations can be commenced on the day the articles of association are signed if the words 'under stiftelse' are added to the company name (during registration),
   • the cost of registration is DKK 670, while the estimated cost of registration through a law firm is DKK 5 000,
   • the company consists of both a board of directors and management and an elected board of directors at a general meeting, which should consist of at least 3 persons in order to maintain a voting majority when voting on important company matters,
   • a legal form dedicated to both large and medium-sized companies,
   • must have a statute,
   • both co-owners and shareholders of the company are not liable for the company's debts with their private assets, however they may be obliged to live-in any bank loans,
   • is conditioned by tax law,
   • individual shareholders who have acquired at least 5 % of the share capital have 30 days to notify the company,
   • share capital is required,
   • in Denmark, only a joint stock company can be listed on the stock exchange,
   • at least 1 owner and 1 shareholder is required,
   • it is not required, according to the law, that the founders of the company are the owners of its shares,
   • the company is subject to separate tax legislation and the taxation of the shareholders is based on the income earned,
   • in Denmark, it is also possible to purchase shares in a "shelf company", i.e. a company that already exists but has not yet started operations (so-called "shelf company"), but this is more costly and time-consuming,
   • start-up capital of no less than DKK 50 000 is required,
   • the company's capital is not owned by the owner, but by the company,
   • The Selskabsloven (Companies Act) regulates the law of this Danish legal form.
4. Iværksætterselskaber - IVS (limited liability company):
   • the company must be registered through the website erhvervsstyrelsen.dk at Erhvervsstyrelsen,
   • the cost of registering a company is DKK 670, while the estimated cost of registration by a law firm is DKK 3 000-5 000,
   • in Denmark, a private limited company can only be established from 1 January 2014,
   • the required start-up capital is at least DKK 1 (or the equivalent of DKK 1 in euro),
   • the company is governed by the Private Limited Liability Company Act,
   • for this company, a minimum of 25% of the annual profit must be transferred to the reserve fund,
   • the sum of the reserve funds and share capital must be DKK 50 000 for dividends to be paid.
5. Anpartsselskab - ApS (limited liability company):
   • the company must be registered through the website erhvervsstyrelsen.dk at Erhvervsstyrelsen,
   • the cost of registering a company is DKK 670, while the estimated cost of registration by a law firm is DKK 3 000-5 000,
   • the company is subject to both the Private Limited Liability Company Act and tax law,
   • this company has legal personality and is the ideal form for a family business, as the owner can have absolute custody of the company,
   • for this form, incorporation documents (stiftelsesdokument) are required,
   • Articles of association (vedtægter) must be drawn up,
   • minimum starting capital is DKK 50 000,
   • the capital does not belong to the owner, but to the company,
   • a minimum of 1 owner and management is required,
   • governed by Selskabsloven, the Companies Act.
6. Denmark Holding Company:
   • A Danish holding company must be registered with the Trade and Companies Agency,
   • registration takes 1 day,
   • a private holding company is Anpartselskab (ApS),
   • share capital is a minimum of DKK 125 000,
   • has shares in other foreign subsidiaries,
   • 1 shareholder is sufficient for this company,
   • the holding company's accounts are audited each year and belong to the public registers,
   • dividends and profits of the company are tax-free,
   • according to the Danish Tax Reform Act of 2009, portfolio investors own shares with a value of less than 10% of the share capital and have to pay the capital gains company, subsidiary investors own shares with a value of between 10% and 50% of the share capital and are exempt from paying taxes on profits, while associated investors own shares with a value of 50% of the share capital and are also exempt from paying capital gains taxes,
   • 100% of the company's shares may come from abroad,
   • subsidiary companies are not restricted in their operations.
7. Denmark Private Limited Company - PLC:
   • A PLC is a limited liability company Anpartsselskab (ApS),
   • A PLC cannot engage in only 7 business activities, which are: trust business, trust management, insurance, collective investment schemes, reinsurance, banking, fund management.
   • the minimum share capital is DKK 50 000,
   • the shareholders of such a company are liable only by the amount of their contribution for the company's liabilities,
   • PLC has the possibility to expand into the market of countries belonging to the European Union,
   • Denmark Private Limited Company requires at least 1 shareholder and a director from Denmark,
   • the name of each company (even in English) should end with the Danish abbreviation ApS,
   • in Denmark, this legal form must be registered with two government agencies (the Articles of Association and Memorandum must be registered with both the Danish Trade and Companies Agency and the Companies Register),
   • ready-made templates for the Memorandum, containing information such as the costs of setting up the company, the allocation of shares, the personal details of the board of directors, the promoters and the auditor, can be found at the Danish Business Authority.

Other legal forms of Danish business:

1. Salgskontor (representative office of a foreign company):
   • has no legal personality,
   • in Denmark, the law does not stipulate a foreign company's representative office, so this form may only operate on behalf of the parent company, which is fully responsible for all the Salgskontor's obligations,
   • this form was created to promote products and services, but cannot sell them.
2. Andelsforening/Brugsforening (cooperative associations):
   • when registering an association via erhvervsstyrelsen.dk, include the abbreviation A.m.b.a. in the name referring to its legal form - cooperative association with limited liability,
   • the members of this legal form are only liable to a limited extent for its obligations,
   • in Denmark, an association may be formed on the basis of an association agreement between natural persons, which allows both the processing and sale of products belonging to them, and the sale of goods or the purchase of goods by them.
3. Filial af udenlandsk selskab (branch of a foreign company):
   • registration of a branch can be done on the Danish website erhvervsstyrelsen.dk.
   • The registration form should contain: personal data, the company's legal form, the sum of the share capital, data and addresses of the entities authorised to make decisions on behalf of the Danish branch, the financial statements for the last year, the name of the foreign company, the object of the company's activity, the name and address of the company's branch in Denmark, the object of the branch's activity,
   • the name of the company branch must contain both the word "filial" ("branch") and the name of the company and the country of its registered office,
   • the estimated cost of setting up a Danish branch by a law firm is DKK 8 000,
   • the director of the Danish branch is fully responsible for all its obligations,
   • does not require share capital, but takes longer to set up than a company. Foreign entrepreneurs are entitled to a Danish branch of their company if the company registered in another EU country has a similar legal form to the one in Denmark (e.g. limited liability company ApS or joint stock company A/S),
   • requires share capital of min. DKK 80 000,
   • the branch must also be registered with the Danish Customs and Tax Administration,
   • this form is subject to Danish law,
   • in Denmark, the branch is subject to both 25 per cent corporation tax and VAT,
   • a copy of the annual accounts must be sent to the Trade and Companies Agency every year.

How to set up a business in Denmark?

In Denmark, every entrepreneur, whether from home or abroad, has the right to have their own business registered, as the country is guided by liberal economic policies, free competition and free market principles. Despite the fact that the Danish tax system is quite complicated and the tax percentages are high, foreigners are keen to set up their businesses in Denmark, as it is a pioneer among welfare states.

1. The cost of registering a company in Denmark is DKK 670 (DKK 3 000-5 000 if a law firm is used).
2. Every company in Denmark must be registered both with the Tax Office (SKAT - Told-og Skatteregion) and with the Register of Foreign Service Providers (RUT); failure to register with the RUT or failure to update information may result in a fine of DKK 10 000 for the company owner (if the provisions are repeatedly violated, the fine may rise to DKK 20 000). or bring a prosecution.
3. In addition, in Denmark, you must also register your business with the Labour Market and Supplementary Pensions Office (Arbejdsmarkedets Tillaegspension - ATP) and pay regular social security contributions.
4. When registering a sole proprietorship in Denmark, you must provide a pre-selected company name including the name of the owner, while in the case of Danish companies, their names should include the relevant abbreviations for the different legal forms, such as I/S (Interesselskab), K/S (Kommanditselskab) or A.m.b.a. (cooperative association with limited liability). The address of the company, the personal details of the owners and shareholders, as well as the type, scope and date of commencement of the business must also be stated.

5. 

6. In Denmark, NemID (EasyID) is an identifier that functions like a digital signature and all Danish companies receive it.

Formalities and costs associated with a Danish company

There is a lot of paperwork and costs involved in running your own company in Denmark: from registering it, through the day-to-day matters of day-to-day accounting, invoicing and company documentation in general, to the timely submission of annual tax returns or company reports.

What formalities and costs are involved in setting up and running a company in Denmark?

1. Once you have chosen the appropriate legal form for your Danish business, you will need to register it with Erhvervsstyrelsen via erhvervsstyrelsen.dk.
2. For a sole proprietorship (Enkeltmandszirksmhed), the set-up cost is a minimum of DKK 10 000 (PLN 5 000), while the estimated cost of registering Danish companies through a law firm is between DKK 3 000 and 5 000.
3. After registering your company at Erhvervsstyrelsen, you will need to send your registration application and all attachments to DCCA (Danish Commerce and Companies Agency) for a CVR number (www.cvr.dk), as well as registering your business with Skattestyrelsen (Customs and Tax Administration) and RUT (Register of Foreign Suppliers, virk.dk - concerning VAT payers).
4. For Danish companies, you must have start-up capital of DKK 50 000 (Danish LLC), or DKK 500 000 (A/S, with a minimum of DKK 125 000 in cash).
5. Sole proprietorships in Denmark are required to choose one of the available forms of taxation:
   • taxation of profit as personal income,
   • taxation according to the Enterprise Act - Virksomhedsordning - the business owner has the right to retain the profit from the business in the form of bank savings or a tax deduction for credit interest expenses,
   • taxation according to the Share Capital Act - Kapitalafkastordning - the business owner has the right to transfer part of the business profit to capital income and part to own income.
6. Danish entrepreneurs are required to make contributions and pay company such as:
   • income tax of 8% (income below DKK 50 217), 39.2% (income from DKK 50 217 to DKK 558 043), 56.5% (income above DKK 558 043); CIT - corporate income tax is 28%.
   • Danish companies are taxed on a consolidated basis, which means that both the main company and its subsidiaries and all branches are taxed.
   • VAT on goods and services of 25% paid by companies in Denmark with an annual turnover in excess of DKK 50 000. Foreign companies that are not payers of Danish VAT are also entitled to a refund. A Danish business should register as a VAT payer even if it provides services to companies that are not registered as VAT payers.
7. In Denmark, SKAT sends taxpayers a form, Årsopgørelse, on the basis of which it is necessary to correctly fill in the annual tax return, taking into account all tax allowances, e.g. for costs incurred during the tax year, and then submit it via skat.dk, logging in with code TASTSELV (the tax office has 7 years to verify the validity of the allowances taken into account, which is why it is necessary to keep all documents related to the deducted costs for this period).

8. 

9. When deciding whether to set up and run your own business in Denmark, it is advisable to consult the following addresses:
   • address of the registration authority: Erhvervs-og Selskabsstyrelsen, Kampmannsgade 1, DK-1780 Copenhagen V; Tel: +45 33 30 77 00; Fax: +45 33 30 77 99; E-mail: ckk@erhvervsstyrelsen.dk.
   • statsforvaltning.dk,
   • erhvervsstyrelsen.dk (Erhvervsstyrelsen - Enterprise and Trade Agency; Danish Commerce and Companies Agency - DCCA),
   • virk.dk (RUT - Register of Foreign Suppliers),
   • toldskat.dk, (Customs and Tax Office - SKAT),
   • rkantor.com (online exchange office).
10. In Denmark, a special organisation, Invest in Denmark, has been established to provide assistance and information to entrepreneurs on various topics related to, among other things, investment or business.

Rights and obligations of a Danish employer

Employee recruitment in Denmark is governed by strict anti-discrimination laws, promoting equal opportunities for all applicants. Danish entrepreneurs who wish to employ workers in their company should be aware of a number of additional obligations including drawing up and concluding contracts, paying contributions, paying taxes, as well as ensuring a safe working environment for employees. Before you get started hiring an employee, a Danish employer should be thoroughly familiar with both the health and safety regulations, as failure to comply with them may lead to a ban on the continuation of work or a financial penalty for the company, and the laws regulating the employment of persons within the Kingdom of Denmark. The website of the Danish Labour Inspection Authority (UIP) provides all relevant information on the labour laws applicable in Denmark.

What are the obligations of a Danish employer?

1. An employer in Denmark should comply with the Employment Document Act - Ansættelsesbevis loven - regarding the need for the employer to draw up a contract that contains relevant information about the terms and conditions of an employee's employment with his or her company (applies to persons who have been employed by the company for a minimum of one month for more than eight hours per week).
2. Providing its employees with both decent wages and insurance against occupational diseases and accidents at work.
3. Organising health and safety (H&S) training.
4. Reporting the health and safety training carried out to the UIP.
5. Organising a safe working environment for employees, instructing them on applicable safety rules and providing them with personal protective equipment.
6. Treating all employees equally.
7. Complying with the law (EU Directive 96/71 of 16 December 1996) conditioning the rules of the agreement on the posting of workers abroad. Companies from other EU countries may post workers to Denmark as part of the provision of services, but posted workers should have both the right of permanent residence in their country of origin and the right to work there and be permanently employed by a foreign company. According to the Danish Aliens Act, a posted employee does not need to obtain a visa, but should be able, after completing work in Denmark, to return to a foreign company.
8. LetLøn is a free system dedicated to maintaining payroll employee documentation in Denmark.
9. Oplysingsseddel (the equivalent of a PIT) - is an earnings document needed for the annual tax return, which every Danish employer is obliged to provide to their employees after the end of the tax (or work) year.
10. The Danish Labour Inspection Authority (Arbejdstilsynet) can unannouncedly inspect any company for compliance with health and safety regulations and registration with the RUT. The Danish Labour Inspectorate cooperates with both SKAT and the police to monitor Danish companies primarily on whether the company employs persons with a work and residence permit in Denmark. No court order is necessary to inspect Danish companies, and the Labour Inspectorate has the right to carry out surveillance: retail, market and risk assessment surveillance, as well as to inspect offshore installations.

Employees in Denmark are also obliged to follow the rules of the Danish company, to comply with both the rules and regulations on health and safety at work and, therefore, to attend compulsory health and safety training, as well as to follow company instructions and to use the personal protective equipment provided by the employer. Employees in Denmark are usually protected by collective agreements, which are agreements between employees (employee associations or trade unions) and employers (companies, employer organisation) regarding Danish working conditions. A Danish collective agreement regulates, among other things, workplace safety, wages, pensions, working time, conditions and place of work, settlement of overtime, holidays, a set of additional rules (framework agreement between LO and DA), as well as problem solving and other rules that are regulated by Danish labour law.

Danish tax system

Company is an indispensable part of any Danish business, but depending on the type of company, the detailed scope and tax rates vary. The tax system in Denmark is quite complex and the percentage rates of Danish taxes are high, but the prospect of a sizable income and the possibility to take advantage of tax reliefs makes many foreign entrepreneurs choose Denmark as the headquarters of their business.

An entrepreneur, when running his/her own business in Denmark, has to deal with taxes such as:

1. Income tax, the percentage rates of which are:
   • 8% for income below DKK 50 217,
   • 39.2% for income between DKK 50 217 and DKK 558 043,
   • 56.5% for income above DKK 558 043,
   • 28% for legal entities.
2. Voluntary church tax of 0.92%.
3. Fixed VAT on goods and services of 25% paid by companies in Denmark with an annual turnover of more than DKK 50 000.

4. 

5. Denmark's corporate tax rate stands at 22 %, which is lower than the OECD average.
   
   In Denmark, the reverse charge procedure means that foreign companies that want to sell goods and services to Danish companies do not have to charge Danish VAT. In this case, the tax is not charged on the invoice, only the net value of the service or good must be entered, using a formula such as Reversed charge, which means that the recipient must charge and pay VAT. The customer's registration number (SE-number) or special Central Business Register number (CVR) must also be entered. Services that fall under this procedure are: employee leasing, entertainment, conferences, cleaning, construction, maintenance and repair work.
   A foreign company registered in Denmark as a VAT payer is required to provide the SE-number assigned by the Danish Tax Authority, while the TIN alone is sufficient if the company is not registered as a Danish VAT payer.
6. In Denmark, the tax-free amount - Personfradrag - is DKK 46 700 for 2021. However, foreign employees employed in Denmark for a period of three months to three years whose earnings are not less than DKK 47 500 are required to pay a flat tax of 25% plus a Danish labour market contribution of 9%.
7. Individuals in Denmark are required to pay both a linear municipality tax to the local authority, the average rate of which is 25%, and a progressive tax to the treasury, the percentage rate of which depends on the amount of income: for income above the tax-free amount plus income from capital it is 3,64%, while it is 15% for income above DKK 389 900 plus income from capital.
8. In addition, a tax of 8% is levied on personal income for the employment fund and an 8% health insurance contribution. In Denmark, a progressive company taxes both capital and labour income, but for individuals the tax on income can be a maximum of 51.5%.

Remember that when doing business in Denmark, you are required to register with the Register of Foreign Service Providers - RUT, preferably through the virk.dk website, providing information such as address and company name, CVR number, type of service, contact details, VAT registration number, date of work, duration of posting, details of employees who are posted, sector classification code of the company, duration of the respective posting. For services such as horticulture, construction, cleaning and forestry, the Danish employee must present the RUT number to his or her employer.

Advantages and challenges of running a company in Denmark for foreign entrepreneurs

Denmark is often ranked as one of the best countries in the world for doing business. For foreign entrepreneurs, it combines a stable economy, predictable regulations and a highly digitalised public administration. At the same time, it is a high‑cost, highly regulated market with specific cultural and legal expectations that can surprise newcomers. Understanding both the advantages and the challenges will help you decide whether a Danish company is the right structure for your international operations.

Main advantages of running a company in Denmark

One of the key advantages is the transparent and predictable legal environment. Company law, tax rules and employment regulations are clearly defined, publicly available in English and applied consistently. This reduces legal uncertainty and makes long‑term planning easier for foreign investors.

Denmark also offers a very business‑friendly digital infrastructure. You can register most company forms online via the Danish Business Authority, communicate with authorities through secure digital mail (e‑Boks) and sign documents electronically with MitID. VAT returns, payroll reporting (eIndkomst) and corporate tax filings are submitted electronically, which significantly reduces administrative time once the systems are set up correctly.

Another important advantage is the flexible labour market model. Danish employment law combines relatively easy hiring and dismissal rules with strong social security and unemployment insurance outside the company. This gives employers more flexibility than in many other EU countries, provided that they respect collective agreements, notice periods and holiday rules.

From a tax perspective, Denmark has a competitive and stable corporate income tax rate of 22%. There is no local corporate income tax at municipal level, and tax rules are generally aligned with EU and OECD standards. For international groups, Denmark offers participation exemption on qualifying shareholdings, no withholding tax on many types of intra‑EU and treaty‑protected dividends and interest, and access to an extensive network of double tax treaties.

Denmark is also attractive for innovative and technology‑driven businesses. There are specific tax incentives for research and development, including the possibility to receive a cash refund of a part of tax losses related to R&D costs up to a defined ceiling. In addition, various public schemes support innovation, green transition and export activities, often in cooperation with innovation funds, regional business hubs and export promotion agencies.

For foreign entrepreneurs, another practical benefit is the high level of English proficiency. Most Danes speak English fluently, and many official guidelines, forms and online portals are available in English. This significantly lowers the entry barrier for non‑Danish speakers, especially in the initial phase of setting up a company and hiring staff.

Key challenges for foreign entrepreneurs in Denmark

Despite these advantages, Denmark is not a low‑cost jurisdiction. Labour costs are high compared with many other countries, driven by relatively high gross salaries and mandatory employer contributions to labour market schemes and pension plans. Even though there is no statutory minimum wage, collective agreements in many sectors set binding minimum pay levels and additional benefits, which foreign employers must respect when they fall under these agreements.

The overall tax burden on individuals is also high. Progressive income tax rates, including state, municipal and labour market contributions, result in a high marginal tax rate for employees. This can affect salary expectations and net pay negotiations, especially when recruiting international specialists who compare Denmark with lower‑tax countries.

Another challenge is the complexity of compliance obligations. While the systems are digital, they are also detailed and strictly enforced. Companies must register correctly for VAT (Moms), payroll taxes, labour market contributions and, where applicable, industry‑specific schemes. Reporting deadlines are strict, and penalties for late or incorrect filings can be significant. For foreign owners and directors, the Danish language of many legal sources and collective agreements can make it difficult to fully understand all obligations without local professional support.

Corporate governance and documentation requirements can also be demanding. Even small and medium‑sized companies must keep proper accounting records, prepare annual financial statements in accordance with the Danish Financial Statements Act and, if thresholds are exceeded, undergo a statutory audit or extended review. Failure to comply can lead to fines, compulsory dissolution proceedings or personal liability for management in serious cases.

Foreign entrepreneurs should also be aware of the cultural aspects of doing business in Denmark. Decision‑making processes are often consensus‑oriented, hierarchies are relatively flat and communication is direct. Building trust and long‑term relationships is important, and informal networks can play a significant role in business development. This can be an advantage for those who adapt well, but a challenge for entrepreneurs used to more hierarchical or fast‑paced business cultures.

Finally, immigration and work permit rules can be a barrier when hiring non‑EU staff or when the foreign owner is a non‑EU citizen who wishes to live and work in Denmark. Although there are specific schemes for highly qualified employees and entrepreneurs, the application process is formal and requires careful planning to align residence permits, company registration and actual start of operations.

How to make the Danish business environment work in your favour

To benefit from the advantages and minimise the challenges, foreign entrepreneurs should approach the Danish market with thorough preparation. This includes choosing the right legal form, understanding tax and social security implications, mapping sector‑specific regulations and clarifying whether collective agreements apply to the planned activities.

In practice, most foreign‑owned companies in Denmark work closely with local accountants, payroll providers and legal advisers. Professional support helps ensure correct registrations, timely filings and compliance with Danish accounting, tax and employment rules. It also allows owners and managers to focus on developing the business instead of navigating administrative details.

With the right structure and ongoing compliance, Denmark can be a very attractive base for serving the Nordic region and the wider EU market. A Danish company offers credibility, access to a skilled workforce and a stable, rule‑based environment – provided that foreign entrepreneurs are prepared for the higher cost level and the need for precise, ongoing administration.

Requirements for foreign owners and directors (EU and non‑EU citizens)

Foreign entrepreneurs can own and manage Danish companies on the same terms as Danish citizens, but there are specific requirements depending on whether you are an EU/EEA or a non‑EU citizen. These rules affect how you register the company, who can be registered as director or beneficial owner, and whether you need a Danish address, CPR or MitID.

Ownership of a Danish company by foreigners

There are no general restrictions on foreign ownership of Danish companies. Both EU/EEA and non‑EU citizens can own 100% of the shares or quotas in a Danish private limited company (ApS) or public limited company (A/S). Foreign owners must, however, be identified in the Danish Business Register (CVR) and, where applicable, in the register of beneficial owners.

A beneficial owner is usually any individual who directly or indirectly owns or controls more than 25% of the capital or voting rights, or otherwise exercises controlling influence. Information about beneficial owners must be reported to the Danish Business Authority shortly after incorporation and kept up to date.

Requirements for directors and management

Danish companies must have a management body. For an ApS this is typically one or more executive directors (management board), optionally combined with a board of directors. For an A/S a board of directors or supervisory board is mandatory, together with an executive management.

Foreign citizens can be appointed as directors or board members. There is no requirement that directors be Danish nationals or residents. However, at least one person in the management must be able to represent the company towards the authorities and use the mandatory digital systems (MitID Erhverv and e‑Boks). In practice, this often means appointing:

• a director or authorised signatory with access to MitID Erhverv, or
• a Danish service provider (e.g. accountant or corporate service firm) as digital representative or authorised agent.

Directors’ details (name, nationality and address) are registered in the CVR and are publicly available. Directors must be at least 18 years old and not subject to disqualification (e.g. bankruptcy quarantine or criminal bans on acting as a director).

EU/EEA citizens – residence and work aspects

EU/EEA and Swiss citizens can freely establish and manage a business in Denmark under the freedom of establishment. You do not need a work permit to act as owner or director, but you must comply with general residence rules:

• for stays longer than 3 months you normally need to register your right of residence with SIRI (Danish Agency for International Recruitment and Integration)
• if you move to Denmark, you must obtain a CPR number, register your address and usually choose a tax card before you start receiving salary or director’s fees.

Many EU/EEA owners manage Danish companies from abroad. In such cases, you still need to ensure that the company can communicate digitally with Danish authorities and that tax and social security rules are correctly handled for cross‑border work.

Non‑EU citizens – work and residence permits

Non‑EU citizens can also own and direct Danish companies, but if you wish to live or work in Denmark as an active owner or director, you generally need a residence and work permit. Common schemes include:

• Start‑up Denmark – for innovative start‑ups approved by the Danish Business Authority
• Pay Limit Scheme – for highly paid employees and executives with an annual salary above a statutory threshold
• Fast‑track and other business schemes – for companies certified by SIRI or for specific professional groups.

If you only own shares and do not physically work in Denmark, a work permit is usually not required. However, the line between passive ownership and active management can be important for immigration and tax purposes, so the actual role and presence in Denmark should be carefully assessed.

Danish address, CVR and contact person

Every Danish company must have a registered office address in Denmark. A foreign owner can use:

• own premises or rented office space in Denmark
• a virtual office or business address provided by a service company, provided it meets the legal requirements for a real business address.

If the management of the company is located outside Denmark, the Danish Business Authority may require the appointment of a Danish contact person who can receive official documents and represent the company in certain matters. This is often an accountant, lawyer or corporate service provider.

Identification, CPR and MitID for foreign owners

To interact with Danish authorities, submit tax returns and sign digital documents, the company needs access to MitID Erhverv and a digital mailbox (e‑Boks). Foreign owners and directors without a Danish CPR number can in many cases:

• obtain a Danish personal identification number (CPR) if they move to Denmark or meet specific conditions
• use an alternative identification solution approved by the Danish authorities, or
• authorise a Danish representative (for example, an accountant) to handle digital communication on behalf of the company.

In addition, banks and other financial institutions are obliged to carry out strict customer due diligence under anti‑money laundering rules. Foreign owners and directors must therefore provide valid identification, proof of address and information about the origin of funds when opening a Danish business bank account.

Tax residency and personal taxation of foreign owners and directors

Being an owner or director of a Danish company does not automatically make you tax resident in Denmark. Tax residency is typically triggered if you have a permanent home in Denmark or stay in Denmark for more than 6 consecutive months. However, even without Danish tax residency you may be taxed in Denmark on:

• salary or director’s fees for work physically performed in Denmark
• certain share‑based remuneration related to a Danish employer
• dividends from Danish companies, subject to Danish withholding tax and any applicable double tax treaty.

Foreign directors who regularly attend board meetings in Denmark should pay particular attention to where their work is considered to be performed and how this affects their personal tax position in both Denmark and their home country.

Compliance obligations for foreign owners and directors

Foreign owners and directors are subject to the same corporate law and compliance obligations as Danish nationals. This includes:

• ensuring timely filing of annual reports and tax returns
• keeping proper accounting records and documentation in accordance with Danish bookkeeping rules
• maintaining up‑to‑date information in the CVR, including changes in ownership, management, address and beneficial owners
• complying with Danish rules on anti‑money laundering, sanctions, data protection (GDPR) and employment law if the company has employees.

Failure to comply can result in fines, compulsory dissolution of the company and, in serious cases, personal liability for directors and de facto managers, regardless of their nationality or country of residence.

For foreign entrepreneurs, working with a Danish accountant or corporate service provider significantly reduces the risk of non‑compliance and helps ensure that all formal requirements for foreign owners and directors are fulfilled from the start.

Registering for VAT (Moms) and other mandatory registrations (eIndkomst, ATP, etc.)

In Denmark, most companies must register for VAT (Moms) and several other schemes before they start operating. The registrations are handled primarily through the Danish Business Authority (Erhvervsstyrelsen) and the Danish Tax Agency (Skattestyrelsen) via the online platform Virk.dk. Proper registration is essential to issue invoices, pay salaries, report taxes and avoid penalties.

When you must register for VAT (Moms)

A Danish company must register for VAT if its taxable turnover in Denmark exceeds, or is expected to exceed, DKK 50,000 within a 12‑month period. This applies to most types of commercial activities, including online services and consultancy. Voluntary VAT registration below this threshold is possible and often recommended if you have significant input VAT on purchases.

Foreign companies supplying goods or services in Denmark may also need Danish VAT registration, for example when:

• They have a fixed establishment in Denmark
• They sell goods from a warehouse in Denmark
• They provide certain services to private customers (B2C) in Denmark

Intra‑EU distance sales of goods to Danish consumers are generally covered by the EU One‑Stop Shop (OSS) rules, with a common EU threshold of EUR 10,000 per year for all cross‑border B2C supplies of telecommunications, broadcasting, electronic services and intra‑EU distance sales of goods. Above this threshold, VAT is normally due in the customer’s country and can be reported via OSS.

Standard VAT rate and reporting periods

Denmark applies a single standard VAT rate of 25% on most goods and services. There are no reduced VAT rates. Some supplies are exempt from VAT, such as most healthcare services, education, financial and insurance services, and certain cultural activities.

Once registered, your VAT reporting frequency depends on your annual turnover:

• Quarterly reporting – default for many small and medium‑sized companies
• Bi‑monthly or monthly reporting – required for larger businesses with higher turnover

Deadlines for filing VAT returns and paying VAT are set by Skattestyrelsen and depend on the assigned reporting period. Late filing or payment leads to interest and surcharges.

How to register for VAT in Denmark

VAT registration is done online when you create or update your company profile in the Central Business Register (CVR). The typical steps are:

1. Register the company with the Danish Business Authority (Erhvervsstyrelsen) to obtain a CVR number
2. Log in to Virk.dk with MitID Erhverv or an authorised representative
3. Select registration for VAT (Momsregistrering) and indicate:
   • Expected start date of VAT‑liable activities
   • Estimated annual turnover
   • Type of business activity (NACE code)
4. Submit the registration and wait for confirmation from Skattestyrelsen

VAT registration should be completed before you start invoicing customers. Invoices must include your CVR number and meet Danish invoicing requirements, including date, invoice number, description of goods or services, VAT amount and total price.

eIndkomst – reporting salaries and A‑tax

Any Danish employer paying salaries or fees subject to Danish tax must register as an employer and use the eIndkomst system. eIndkomst is the mandatory digital system for reporting income, A‑tax (withholding tax), AM‑bidrag (labour market contribution) and certain benefits to Skattestyrelsen.

Key points for employers:

• Employer registration is required before you pay the first salary
• A‑tax and AM‑bidrag must be withheld from employees’ salaries and reported via eIndkomst
• Reporting is usually done monthly, no later than the 10th of the following month for most employers

Failure to report correctly or on time can result in penalties and interest. Many companies use Danish payroll providers to handle eIndkomst reporting and ensure compliance with current tax tables and rules.

ATP – Labour Market Supplementary Pension

ATP (Arbejdsmarkedets Tillægspension) is a mandatory supplementary pension scheme for most employees in Denmark. Employers must register for ATP and pay contributions for employees who:

• Are aged 16 or older
• Work at least 9 hours per week on average for the same employer

ATP contributions are shared between employer and employee. The exact contribution depends on the number of working hours and employment type (full‑time, part‑time, hourly). The employer withholds the employee’s share from the salary and pays both parts to ATP, typically together with other labour market contributions.

Other mandatory registrations for Danish companies

In addition to VAT, eIndkomst and ATP, most companies must complete several other registrations and set‑ups to operate legally and communicate with Danish authorities.

MitID Erhverv and e‑Boks

MitID Erhverv is the digital identification solution used by companies to log in to public services such as Virk.dk, Skattestyrelsen and ATP. At least one person (often a director or authorised signatory) must be set up as a user and can then grant access to employees or external advisers.

e‑Boks is the secure digital mailbox where Danish authorities send official letters and decisions to companies. Activation of e‑Boks is mandatory, and you are expected to read and respond to messages within the deadlines stated in the letters. Paper correspondence is rarely used.

NemKonto (Easy Account)

Every company must have a NemKonto, which is a designated bank account used for payments from public authorities, such as VAT refunds, tax adjustments or subsidies. You usually assign an existing business bank account as your NemKonto through your bank or via NemKonto’s self‑service solution.

Employer’s liability insurance and industrial injury insurance

Most Danish employers must take out industrial injury insurance (arbejdsskadeforsikring) for their employees. This is not a tax registration, but it is a legal requirement and must be in place from the first day an employee starts working. Depending on the sector, additional insurances may be mandatory or strongly recommended.

Sector‑specific registrations

Certain industries require additional approvals or registrations, for example:

• Food and hospitality businesses – registration with the Danish Veterinary and Food Administration
• Transport companies – licences from the Danish Road Traffic Authority
• Financial services – authorisation from the Danish Financial Supervisory Authority (Finanstilsynet)

Before starting operations, you should check whether your business model triggers any sector‑specific requirements.

Registration process for foreign entrepreneurs

Foreign owners and directors often need extra steps to complete Danish registrations. Non‑resident individuals may need a Danish tax number (CPR or tax ID) and access to MitID Erhverv through a representative or local director. Foreign companies without a Danish establishment may appoint a local tax representative in some cases, especially for VAT purposes.

All registrations are handled in Danish, and documentation such as passports, articles of association and proof of address may be required. Using a local accountant or corporate service provider can significantly speed up the process and reduce the risk of errors.

Consequences of missing or late registrations

If you start business activities in Denmark without the required registrations, you can face:

• Back‑dated VAT registration and assessment of unpaid VAT
• Penalties and interest for late VAT, A‑tax and AM‑bidrag payments
• Problems with employees’ tax and pension records
• Difficulties opening bank accounts or obtaining financing

It is therefore crucial to plan VAT, eIndkomst, ATP and other registrations as part of your company formation process and keep your data up to date whenever your business changes.

Accounting, bookkeeping and audit requirements for Danish companies

Proper accounting and bookkeeping are key obligations for every company operating in Denmark. Danish rules are relatively transparent, but they are strictly enforced by the Danish Business Authority (Erhvervsstyrelsen) and the Danish Tax Agency (Skattestyrelsen). Below you will find an overview of the main requirements regarding bookkeeping, financial statements and audit for Danish companies.

Who is subject to the Danish Financial Statements Act?

Most limited liability companies in Denmark, such as ApS (private limited company) and A/S (public limited company), must prepare annual financial statements in accordance with the Danish Financial Statements Act (Årsregnskabsloven). The Act divides companies into reporting classes:

• Class A – very small enterprises (typically sole proprietors and personally owned small businesses) that are often exempt from filing annual financial statements with Erhvervsstyrelsen, but must still keep proper accounts for tax purposes.
• Class B – small companies (most ApS) that must prepare and file annual financial statements, but can use simplified reporting rules.
• Class C – medium and large companies with more extensive disclosure and presentation requirements.
• Class D – listed companies and certain large financial institutions subject to the most comprehensive reporting rules and often IFRS.

The classification is based mainly on three criteria: net turnover, balance sheet total and average number of employees. Crossing two out of three thresholds for two consecutive years will move the company into a higher class with stricter requirements.

Bookkeeping obligations and accounting records

All Danish companies must keep orderly, verifiable accounting records that document every business transaction. Bookkeeping must comply with the Danish Bookkeeping Act (Bogføringsloven) and general good accounting practice.

Key requirements include:

• Use of a reliable bookkeeping system (digital solutions are strongly encouraged and, for many companies, effectively standard).
• Recording transactions on an ongoing basis so that accounts are up to date and can be reconciled with bank statements and other documentation.
• Keeping documentation for all income and expenses (invoices, receipts, contracts, bank statements, payroll documentation, etc.).
• Ensuring that accounting data is traceable from source document to financial statements and tax returns.

From a practical perspective, most Danish companies use digital accounting software integrated with online banking, payroll systems and the tax/VAT reporting platforms, which significantly reduces the risk of errors and missed deadlines.

Retention of accounting records

Accounting records and supporting documentation must be stored securely and be accessible for inspection by the authorities. In Denmark, the general retention period is at least 5 years from the end of the financial year to which the records relate. This applies to:

• General ledger and sub-ledgers
• Invoices issued and received
• Payroll records and employment-related documentation
• Bank statements and loan agreements
• Contracts and other documents relevant to the accounts

Records may be kept electronically, but the company must ensure data integrity, backup and protection in line with both bookkeeping rules and data protection regulations.

Financial year and annual financial statements

A Danish company may choose any financial year of 12 months, although many use the calendar year. The chosen financial year must be registered with Erhvervsstyrelsen and applied consistently.

At the end of each financial year, companies that fall under the Danish Financial Statements Act must prepare annual financial statements that typically include:

• Management statement
• Auditor’s report (if the company is subject to audit)
• Income statement and balance sheet
• Notes to the financial statements
• Management commentary (for larger entities)

Annual financial statements must be prepared in Danish kroner (DKK), unless the company is allowed to use another functional currency, and in Danish or another accepted language, depending on the company’s situation and filing practice.

Deadlines for filing annual reports

Companies that are required to file annual financial statements must submit them electronically to the Danish Business Authority via the official reporting system. The general deadline is:

• Within 5 months after the end of the financial year for most ApS and A/S companies.

For certain large or special entities, shorter deadlines may apply according to specific legislation or stock exchange rules. Failure to file on time can result in fines for management and, in serious or repeated cases, compulsory dissolution of the company.

Audit requirements and audit exemption

Not all Danish companies are required to have their financial statements audited. The audit requirement depends primarily on company size and legal form.

As a general rule, an ApS or A/S must have its annual financial statements audited by a state-authorised or registered public accountant, unless it qualifies for an audit exemption. A company can opt out of statutory audit if it does not exceed two out of three of the following thresholds for two consecutive financial years:

• Net turnover: up to DKK 8 million
• Balance sheet total: up to DKK 4 million
• Average number of full-time employees: up to 12

If the company exceeds two of these thresholds, or if specific sector rules apply (for example, financial institutions), a statutory audit is mandatory. Even if the company is exempt, owners may voluntarily choose an audit or a limited assurance engagement (review) to increase credibility with banks, investors and business partners.

Management responsibility and internal controls

The board of directors and executive management are responsible for ensuring that bookkeeping, accounting and internal controls are adequate. This includes:

• Establishing clear procedures for authorising and recording transactions
• Segregating duties where possible to reduce the risk of fraud and errors
• Regularly reconciling bank accounts, receivables, payables and inventory
• Monitoring liquidity, tax and VAT obligations and payment deadlines

Auditors, where appointed, assess whether the financial statements give a true and fair view and whether the internal control environment is appropriate, but they do not replace management’s responsibility.

Interaction with tax and VAT reporting

Accurate bookkeeping is essential for correct and timely tax and VAT (moms) reporting. In Denmark:

• Corporate income tax is generally reported annually, with advance tax payments during the year.
• VAT is usually reported quarterly for small and medium-sized companies, and monthly for larger businesses, depending on turnover.
• Payroll accounting must support ongoing reporting of income tax (A‑tax), labour market contributions (AM‑bidrag) and other employer obligations via eIndkomst.

Errors in bookkeeping can quickly lead to incorrect VAT and tax returns, interest charges and potential penalties. For foreign-owned companies, using a local accountant or bookkeeper familiar with Danish rules is often the most efficient solution.

Digitalisation and mandatory electronic communication

Danish companies are expected to use digital solutions for most interactions with public authorities. This includes:

• Electronic filing of annual financial statements to Erhvervsstyrelsen
• Online submission of VAT, tax and payroll information to Skattestyrelsen
• Receiving official correspondence via e‑Boks and logging in with MitID

Modern accounting systems can be integrated with these platforms, which simplifies compliance and reduces manual work. For foreign entrepreneurs, it is important to plan early for obtaining MitID and setting up digital access for the company and its authorised representatives.

Understanding and complying with Danish accounting, bookkeeping and audit requirements is crucial for avoiding sanctions and building trust with authorities, banks and business partners. Professional support from a Danish accounting firm can help ensure that your company’s financial administration is efficient, compliant and aligned with local best practice.

Employment contracts, working time regulations and employee benefits in Denmark

Employment relationships in Denmark are strongly influenced by collective agreements, a high level of employee protection and a flexible labour market model (the so‑called flexicurity). When hiring staff in Denmark, foreign entrepreneurs must understand how employment contracts are structured, what rules apply to working time and which employee benefits are mandatory or standard in the Danish market.

Types of employment contracts in Denmark

Danish law distinguishes primarily between employees and self‑employed contractors. Most staff will be hired as employees, either on a permanent or fixed‑term basis. The key legal framework is the Danish Salaried Employees Act (Funktionærloven) and the Act on Employment Contracts (Ansættelsesbevisloven), supplemented by collective agreements (overenskomster) in many sectors.

For employees working at least an average of 3 hours per week over a reference period of 4 consecutive weeks, the employer must provide a written employment contract or appointment letter. This must be given no later than 7 calendar days after the employment relationship starts and must include at least:

• identity of employer and employee
• place of work and job title or job description
• start date and, if applicable, end date for fixed‑term contracts
• working hours (weekly or monthly)
• salary and other remuneration components, including pension and bonuses
• holiday entitlement and rules for taking leave
• notice periods for termination by both parties
• reference to any applicable collective agreement

Fixed‑term contracts are allowed but must be objectively justified (for example, project work, substitution, seasonal work). Repeated renewals without justification can lead to the contract being treated as permanent. Part‑time employees must not be treated less favourably than comparable full‑time staff solely because of their working time.

Probation period and termination

Probation periods are common in Danish contracts, especially for salaried employees. A typical probation period is up to 3 months. During probation, a shorter notice period can apply, for example 14 days, provided this is clearly stated in the contract and complies with any collective agreement.

For salaried employees covered by the Salaried Employees Act, statutory minimum notice periods for termination by the employer increase with seniority and range approximately from 1 month (for short seniority) up to several months for long‑term employees. Employees usually have a shorter notice period (often 1 month), unless a collective agreement or individual contract provides otherwise. Dismissals must be reasonably justified for employees with at least 1 year of service, and discriminatory or retaliatory dismissals are prohibited.

Working time regulations

Denmark does not have a single general law setting a fixed standard weekly working time, but in practice, full‑time employment is usually 37 hours per week, as defined in many collective agreements. Working time rules are based on EU directives and Danish working environment legislation.

Key working time principles include:

• Maximum weekly working time: average working time, including overtime, must not exceed 48 hours per week over a reference period (typically 4 months), unless a collective agreement provides for another calculation period within EU limits.
• Daily rest: employees are entitled to at least 11 consecutive hours of rest within each 24‑hour period, with limited exceptions in specific sectors.
• Weekly rest: employees must have at least 24 hours of uninterrupted rest per week, usually in connection with a Sunday.
• Night work: special rules apply to night workers, including health assessments and limits on average night working hours.

Overtime rules, supplements and compensation are usually regulated by collective agreements or individual contracts. In many sectors, overtime is compensated with a supplement (for example, 50% or 100% of the hourly rate) or time off in lieu. For white‑collar employees with higher salaries, overtime may be considered included in the fixed salary, but this must be clearly stated and must not lead to systematic breaches of working time and health and safety rules.

Minimum wage and salary structure

Denmark does not have a statutory national minimum wage. Instead, minimum pay levels are typically set in collective agreements negotiated between employer organisations and trade unions. Even if your company is not formally bound by a collective agreement, these sectoral minimums often serve as a market benchmark and may be required in public tenders or for certain work permits.

Salaries are usually paid monthly. Many employers offer a fixed base salary plus variable components such as bonuses, commissions or profit‑sharing. For foreign employers, it is important to ensure that agreed salaries comply with any applicable collective agreement and, where relevant, with minimum salary thresholds for residence and work permits for non‑EU citizens.

Holiday and public holidays

Holiday rights in Denmark are regulated by the Danish Holiday Act (Ferieloven). Employees accrue 2.08 days of paid holiday for each month of employment, which corresponds to 25 days (5 weeks) of paid holiday per year for full‑time employees. The system is based on “concurrent holiday”, meaning that employees can take holiday in the same period in which it is accrued.

The holiday year runs over a 12‑month period, and accrued holiday can generally be taken during an extended holiday period of 16 months. Employers must ensure that employees can take at least 3 consecutive weeks of main holiday during the main holiday period (typically in the summer), unless otherwise agreed.

In addition to statutory holiday, Denmark has several public holidays (for example New Year’s Day, Maundy Thursday, Good Friday, Easter Monday, Ascension Day, Constitution Day in some sectors, Christmas and Boxing Day). Whether public holidays are paid days off depends on collective agreements or individual contracts, but in most standard employment relationships, full‑time employees receive pay on public holidays that fall on working days.

Sickness, maternity, paternity and parental leave

Employees in Denmark are protected in case of sickness and family‑related leave. The exact level of pay during such absences depends on the type of employment and any collective agreement, but there are statutory minimums and public reimbursement schemes.

In case of sickness, many salaried employees are entitled to full salary for a certain period under the Salaried Employees Act or collective agreements. Employers can often receive reimbursement of part of the cost from the municipality after a qualifying period. The employee must notify the employer of sickness as soon as possible and may be required to provide documentation.

Parental leave is regulated by the Danish Act on Maternity Leave. The system combines maternity, paternity and parental leave, with a total framework of several dozen weeks that can be shared between parents, subject to specific rules on reserved weeks for each parent and eligibility for public benefits. Employers may be obliged under collective agreements to top up public parental benefits so that the employee receives full or partial salary for part of the leave period.

Pension schemes and other employee benefits

Occupational pension contributions are a key element of Danish employment packages. In many sectors, collective agreements require employers to pay a pension contribution, typically structured so that the employer pays the larger share (for example around two‑thirds) and the employee pays the remaining part through salary deduction. Total pension contributions under collective agreements often reach a significant percentage of gross salary.

Even where no collective agreement applies, it is common for employers to offer a pension scheme with contributions paid to a Danish pension provider. Offering a competitive pension is often necessary to attract qualified staff, especially in skilled and professional roles.

Other typical benefits include:

• health insurance or healthcare schemes
• paid lunch breaks in some workplaces
• mobile phone, laptop and internet connection for work purposes
• company car or mileage reimbursement for business travel
• staff discounts, training and education support

Many of these benefits have tax implications for the employee (taxable fringe benefits), so they must be correctly reported through the Danish income reporting system (eIndkomst).

Collective agreements and trade unions

Collective agreements play a central role in defining working conditions in Denmark. They regulate wages, working time, overtime supplements, pension contributions, holiday supplements, training rights and many other aspects of employment. Even if your company is not initially party to a collective agreement, trade unions may seek to negotiate one, especially in sectors with strong union presence.

Foreign employers should assess whether they will be covered by an existing collective agreement through membership in an employers’ organisation, or whether they may be asked to sign a company‑specific agreement. Non‑compliance with collective agreements can lead to industrial action and reputational risks.

Practical recommendations for foreign employers

When hiring employees in Denmark, foreign entrepreneurs should:

• prepare clear written employment contracts that meet Danish legal requirements and reflect any applicable collective agreement
• define working hours, overtime rules and flexibility in a way that respects Danish working time and health and safety regulations
• ensure correct calculation and payment of holiday, public holidays and holiday pay
• set up payroll, tax withholding and reporting procedures that correctly handle salary, pension and fringe benefits
• establish internal policies on sickness absence, parental leave and remote work that align with Danish practice

Professional payroll and accounting support in Denmark can significantly reduce the risk of non‑compliance and help foreign companies offer competitive and legally compliant employment conditions.

Social security contributions and labour market schemes (ATP, A‑kasse, feriepenge)

Social security in Denmark is based on a mix of tax‑financed welfare and mandatory labour market schemes. As an employer you do not pay classic “social security contributions” as in many other countries, but you are obliged to register for and pay a number of statutory schemes such as ATP, holiday pay (feriepenge) and various labour market contributions. Understanding these costs is crucial when planning salaries and employment budgets in a Danish company.

ATP – Danish Labour Market Supplementary Pension

ATP (Arbejdsmarkedets Tillægspension) is a mandatory supplementary pension scheme for most employees in Denmark. It is in addition to any private or occupational pension you may offer.

ATP contributions are shared between employer and employee, but the employer pays the main part. The contribution depends on the employee’s working hours. For a full‑time employee (at least 117 hours per month) the total ATP contribution is fixed and the employer pays the majority, while part is deducted from the employee’s salary. For part‑time employees the ATP rate is proportionally lower.

Employers must:

• Register with ATP via the Danish Business Authority and relevant self‑service solutions
• Report employment data and ATP basis through eIndkomst
• Withhold the employee’s share from salary and pay both parts to ATP on time

ATP contributions are tax‑deductible business expenses for the company and are not treated as taxable income for the employee at the time of payment (tax is paid when the pension is paid out).

A‑kasse – Unemployment insurance funds

A‑kasse (arbejdsløshedskasse) is the Danish unemployment insurance system. Membership is voluntary for employees, but in practice strongly recommended, especially for foreign workers who want access to unemployment benefits (dagpenge) if they lose their job.

Key points for employers:

• You are not obliged to pay A‑kasse contributions for employees; these are normally paid directly by the employee to the chosen A‑kasse.
• You may, however, agree in the employment contract that the company covers part of the A‑kasse or trade union fee as an employee benefit. In that case you should clarify the tax treatment and how the payment is administered.
• For salaried employees (funktionærer) and many collective agreements, membership in an A‑kasse and a trade union is common and often expected, but never a legal requirement imposed by the employer.

For foreign entrepreneurs hiring staff in Denmark it is important to understand that A‑kasse is separate from ATP and other statutory labour market schemes. Your main obligation is to provide correct employment information so employees can document their income and employment periods to their A‑kasse.

Holiday pay (feriepenge) and the Danish holiday system

Denmark has a statutory holiday system that gives employees the right to paid annual leave. As an employer you must either pay holiday pay (feriepenge) to an external scheme or pay salary during holidays, depending on the type of employee and agreement.

Under the current concurrent holiday system, employees earn 2.08 days of paid holiday for each month of employment, which corresponds to 25 days (5 weeks) of holiday per year. The standard holiday pay rate is 12.5% of the employee’s holiday‑qualifying salary.

In practice there are two main models:

• Hourly paid employees and employees without paid holiday in the contract – you must calculate 12.5% of all holiday‑qualifying earnings and pay this amount as holiday pay. In most cases the money is paid to FerieKonto or another approved holiday fund, which then pays the employee when they take holiday or leave the job.
• Salaried employees (funktionærer) – they usually receive normal salary during holidays instead of separate holiday pay. In addition, they often earn a holiday supplement (ferietillæg), typically 1% of the annual holiday‑qualifying salary, unless a collective agreement or contract sets a higher rate.

Holiday pay obligations apply regardless of the employee’s nationality or length of stay in Denmark. When an employee leaves the company, you must settle all accrued but unused holiday and report it correctly so the employee can receive the money.

Other mandatory labour market contributions

Besides ATP and feriepenge, Danish employers must pay several smaller statutory contributions linked to the labour market. These are usually calculated per employee or as a small percentage of salary and are reported and paid together with payroll taxes and contributions.

The most important schemes include:

• AES (Arbejdsskadeforsikring) – mandatory industrial injury insurance. You must take out a policy with an approved insurance company and pay contributions that depend on the type of work and risk level.
• AUB (Arbejdsgivernes Uddannelsesbidrag) – employer education contribution that finances vocational training and apprenticeships. The contribution is normally a fixed amount per full‑time employee per year.
• Barselsfonden (maternity/paternity fund) – sector‑specific or general funds that reimburse part of the salary you pay during maternity, paternity and parental leave. Contributions are usually fixed per employee and handled through payroll.
• Lønmodtagernes Garantifond (LG) – the Employees’ Guarantee Fund, which secures employees’ claims if an employer goes bankrupt. Contributions are small and often integrated in other labour market contributions.

In addition, all employers pay the labour market contribution (AM‑bidrag) of 8% on employees’ gross salary. This is technically an employee tax, but it is withheld and paid by the employer together with income tax, so it must be taken into account when designing payroll processes.

Practical obligations for foreign employers

If you run a company in Denmark or employ staff who work in Denmark, you must:

• Register as an employer with the Danish Tax Agency (SKAT) and obtain a CVR number
• Register for eIndkomst reporting and ensure monthly payroll reporting for all employees
• Enroll in ATP and other relevant labour market schemes and pay contributions on time
• Administer holiday pay correctly according to the Danish Holiday Act, including payments to FerieKonto or other schemes
• Take out mandatory industrial injury insurance and pay AUB and other statutory contributions

Non‑compliance can lead to fines, interest, back payments and problems with Danish authorities. For foreign entrepreneurs the system can seem fragmented, which is why many companies choose to work with a local accountant or payroll provider who can handle registrations, calculations and ongoing reporting.

Proper planning of ATP, holiday pay and other labour market schemes will help you calculate the real cost of employment in Denmark and avoid unpleasant surprises. When you prepare a salary offer, you should always add employer pension, holiday obligations and mandatory contributions on top of the gross salary to get a realistic total cost per employee.

Corporate income tax, dividend taxation and withholding tax in Denmark

Danish corporate taxation is relatively straightforward and transparent, but it differs in several important aspects from other EU systems. Understanding how corporate income tax, dividend taxation and withholding tax work in Denmark is crucial both for Danish companies and for foreign shareholders or group entities.

Corporate income tax in Denmark

The standard corporate income tax rate in Denmark is 22%. This rate applies to the taxable profits of Danish limited liability companies (ApS), public limited companies (A/S) and most other corporate entities that are tax resident in Denmark.

Danish tax residency is generally based on the place of effective management or incorporation. A company that is tax resident in Denmark is taxed on its worldwide income, subject to relief for foreign taxes under double tax treaties and Danish unilateral relief rules.

Taxable income is calculated on the basis of the annual financial statements, adjusted for tax purposes. In principle, income and expenses are recognised on an accrual basis. Business expenses are deductible if they are incurred to acquire, secure or maintain taxable income. Certain costs, such as representation expenses, are only partly deductible.

Key elements of Danish corporate taxation include:

• Depreciation – tax depreciation is allowed on fixed assets, usually on a declining-balance basis for machinery and equipment and on a straight-line basis for buildings, according to specific tax rules.
• Loss carry‑forward – tax losses can generally be carried forward indefinitely. However, there is a limitation: only up to DKK 9,145,000 (approximate threshold, adjusted periodically) of tax losses can be offset fully each year. Any remaining losses can only offset up to 60% of the taxable income exceeding this threshold.
• Loss carry‑back – as a rule, loss carry‑back is not allowed for ordinary corporate income, except in specific situations (e.g. certain financial institutions).
• Thin capitalisation – if a company’s controlled debt exceeds a debt‑to‑equity ratio of 4:1, interest on the excess debt may be non‑deductible, unless the company can demonstrate that the same level of debt could have been obtained from an independent lender.
• Interest limitation rules – Denmark applies several interest limitation regimes (asset test, EBIT test and thin capitalisation). Under the EBIT test, net financing expenses exceeding DKK 22,313,400 (approximate threshold, adjusted periodically) may be restricted to a percentage of taxable EBIT.

Corporate tax is generally paid in two instalments during the income year, with a possible third voluntary instalment. After the tax return is filed and assessed, any underpaid tax is subject to interest and a surcharge, while overpaid tax may be refunded with interest.

Participation exemption and taxation of dividends received

Denmark offers a broad participation exemption regime for dividends received by Danish companies from shareholdings in other companies. The tax treatment depends mainly on the size and nature of the shareholding:

• Subsidiary shares – if a Danish company holds at least 10% of the share capital in another company (Danish or foreign) and certain conditions are met (including that the foreign company is not located in a non‑cooperative jurisdiction and is subject to corporate tax), dividends are generally exempt from Danish corporate income tax.
• Group shares – shares in companies that are part of the same Danish or international group (based on more than 50% control) are usually treated similarly to subsidiary shares, and dividends are also typically exempt.
• Portfolio shares – dividends from shareholdings below 10% (portfolio shares) are generally taxable at the standard corporate rate of 22%, unless a specific exemption applies (for example under an applicable tax treaty combined with EU rules).

This participation exemption regime is particularly important for holding companies and international group structures using Denmark as a regional or global hub.

Withholding tax on dividends paid by Danish companies

As a starting point, Denmark levies a 27% withholding tax on dividends distributed by Danish companies to shareholders. However, the final tax burden and the applicable rate depend on the status and residence of the shareholder, as well as on EU law and double tax treaties.

Key rules include:

• Danish individual shareholders – for Danish resident individuals, the 27% withheld is usually an advance payment of personal tax on share income. The final tax on dividends is progressive: 27% on share income up to DKK 61,000 (per person, higher for married couples) and 42% on the excess. The 27% withholding is credited against the final tax, and any difference is settled via the annual tax assessment.
• Danish corporate shareholders – if the recipient is a Danish company and the shares qualify as subsidiary or group shares, dividends are generally tax‑exempt. In practice, no withholding tax is levied if the conditions for exemption are met.
• Foreign corporate shareholders (EU / treaty countries) – dividends to foreign companies may be exempt from Danish withholding tax if:
  • the foreign company holds at least 10% of the share capital (subsidiary shares), and
  • the company is resident in an EU/EEA country or a country with which Denmark has a tax treaty, and
  • the company is the beneficial owner of the dividends and is subject to corporate tax in its country of residence.
  In such cases, the withholding tax rate can be reduced to 0% under Danish law and/or the relevant tax treaty.
• Foreign portfolio investors – where the shareholding is below 10% and no exemption applies, the standard 27% withholding tax is applied. Under many tax treaties, the rate can be reduced (for example to 15%), and the foreign investor can apply for a refund of the excess Danish tax.

In some situations, an additional 5% tax may be charged if the dividend is paid to an individual and the total tax should reach 42%. For foreign investors, the practical outcome depends on the treaty and the possibility to credit or refund Danish tax in the investor’s home country.

Withholding tax on interest and royalties

Denmark generally does not levy withholding tax on arm’s‑length interest paid to unrelated parties. However, interest payments to group companies and related parties may be subject to withholding tax in certain cases.

Key points:

• Interest – interest paid to a foreign group company may be subject to a 22% withholding tax if the recipient is resident in a low‑tax jurisdiction or if the structure is considered abusive. Many payments within the EU or to treaty countries are exempt, provided that the beneficial ownership and substance requirements are met.
• Royalties – royalties paid from Denmark to foreign companies are, as a main rule, subject to a 22% withholding tax. This rate can be reduced or eliminated under applicable tax treaties or the EU Interest and Royalties Directive, provided that the recipient is the beneficial owner and meets the conditions of the directive or treaty.

Because the application of withholding tax on interest and royalties depends heavily on group structure, tax treaties and anti‑avoidance rules, proper documentation and transfer pricing analysis are essential.

Anti‑avoidance rules and substance requirements

Danish tax authorities place strong emphasis on beneficial ownership and economic substance. Even if a tax treaty or EU directive would normally provide an exemption or reduced rate, Denmark can deny the benefit if the foreign recipient is considered a mere conduit or if the main purpose of the arrangement is to obtain a tax advantage.

Important aspects include:

• real management and decision‑making in the foreign company
• adequate equity, employees and office facilities
• commercial reasons for the structure, beyond tax savings

Denmark has also implemented general anti‑avoidance rules (GAAR) and specific anti‑hybrid and controlled foreign company (CFC) rules in line with EU directives and OECD BEPS recommendations. These rules can affect the taxation of cross‑border dividends, interest and royalties.

Practical implications for foreign entrepreneurs and investors

For foreign owners of Danish companies, the combination of a 22% corporate tax rate, broad participation exemption and potentially reduced withholding tax on dividends can be attractive, especially for holding or regional headquarters structures. At the same time, the Danish system is strict on documentation, transfer pricing and substance.

Before deciding on a structure, it is important to analyse:

• the expected level and type of income in Denmark (operating profits, royalties, financing income)
• the ownership chain and residence of ultimate shareholders
• applicable tax treaties and EU directives
• the possibility to use participation exemption and to minimise withholding tax legally

Well‑planned corporate and financing structures can significantly reduce the overall tax burden while remaining fully compliant with Danish and international tax rules. For this reason, professional tax and accounting advice is highly recommended when setting up or restructuring a company in Denmark, especially in cross‑border situations.

Tax incentives and support schemes for businesses (R&D, innovation, green transition)

Denmark offers a wide range of tax incentives and public support schemes aimed at companies investing in research and development, innovation, digitalisation and the green transition. Understanding these instruments can significantly reduce your effective tax burden and improve cash flow, especially in the early stages of business development.

R&D tax incentives for companies in Denmark

Danish companies that carry out qualifying research and development activities can benefit from an enhanced tax deduction and a cash refund scheme. R&D expenses are generally deductible as operating costs, but special rules make them more attractive than ordinary costs.

Companies can choose between:

• Immediate deduction of R&D costs in the year they are incurred, or
• Capitalisation and depreciation over a period of at least 5 years

On top of the ordinary deduction, Denmark offers a tax value refund of R&D losses. If your company reports a tax loss that is attributable to R&D expenses, you can apply for a cash refund of the tax value of these costs up to a specific ceiling per income year. The refund is calculated using the standard corporate income tax rate of 22% and is paid out by the Danish Tax Agency, improving liquidity for start-ups and scale-ups that are not yet profitable.

To qualify, R&D activities must be systematic and aimed at acquiring new knowledge or developing new or significantly improved products, services, processes or technologies. Routine modifications, market research or ordinary quality control do not normally qualify as R&D.

Innovation and business development grants

In addition to tax-based incentives, Danish companies can apply for direct financial support for innovation projects. These schemes are typically administered by national agencies and regional business promotion programmes and are often co-financed by EU funds.

Support may include:

• Grants for feasibility studies, prototyping and product development
• Co-financing of collaboration projects between companies and universities or research institutions
• Innovation vouchers for purchasing external expertise, such as technological testing or IP advice
• Support for digital transformation, automation and implementation of advanced technologies

Most programmes require a minimum level of own financing from the company (for example 25–50% of total project costs) and are awarded on a competitive basis. Projects are usually assessed based on innovation height, commercial potential, scalability and societal impact, including environmental and climate effects.

Green transition and climate-related support schemes

Denmark has a strong policy focus on climate neutrality and sustainable business models. As a result, there are several support schemes for companies investing in energy efficiency, renewable energy, circular economy solutions and low-emission technologies.

Typical forms of support include:

• Investment grants for energy-efficient production equipment, heat recovery and electrification of processes
• Support for pilot and demonstration projects within green technologies, such as Power-to-X, carbon capture and storage (CCS), offshore wind-related solutions and advanced biofuels
• Funding for projects that reduce resource consumption, increase recycling rates or extend product lifetimes
• Subsidies for climate and environmental certifications or life-cycle assessments

Many green schemes are targeted at specific sectors (for example manufacturing, transport, construction or agriculture) and may have technical eligibility criteria, such as minimum CO₂ reduction per invested krone or specific energy savings thresholds.

Environmental and energy-related tax rules

Besides direct grants, the Danish tax system includes various energy and environmental taxes, along with partial refunds and exemptions that effectively work as incentives for greener solutions. Companies may obtain partial refunds of certain energy taxes when energy is used for industrial processes, and additional benefits can apply if the company implements energy-saving measures or participates in energy efficiency agreements.

Investments in energy-saving equipment and installations can often be depreciated for tax purposes, reducing taxable income over time. In some cases, accelerated depreciation rules may apply, allowing a higher deduction in the first years of use.

EU and regional funding opportunities

Companies operating in Denmark can also access EU-level funding instruments that complement national schemes. These include programmes supporting innovation, digitalisation, green technologies and cross-border cooperation. Funding is typically provided in the form of grants, equity investments or guarantees and often requires collaboration with partners from other EU or EEA countries.

Regional business promotion programmes in Denmark may offer additional support, such as advisory services, networking activities and smaller grants for innovation and export activities, particularly for small and medium-sized enterprises.

Practical considerations and compliance

To benefit from Danish tax incentives and support schemes, companies should:

• Document R&D activities and related costs carefully, including project descriptions, time registration and invoices
• Ensure that accounting and bookkeeping systems can separate R&D, innovation and ordinary operating expenses
• Monitor application deadlines and reporting requirements for grants and refund schemes
• Assess potential state aid implications when combining different support instruments

Many incentives require prior application or registration, and some cannot be claimed retroactively. It is therefore important to plan projects and investments with tax and support options in mind from the outset.

Using the available tax incentives and support schemes effectively can significantly strengthen the financial basis of your company in Denmark, especially if you operate in knowledge-intensive, innovative or green sectors. Professional advice from Danish tax and accounting specialists can help you choose the optimal structure and ensure compliance with all formal requirements.

Obligations related to data protection (GDPR) and digital communication with authorities (MitID, e‑Boks)

Running a company in Denmark means complying both with EU data protection rules and with Danish requirements for digital communication with public authorities. In practice this affects how you collect and store customer and employee data, how you secure your IT systems, and how you use tools such as MitID Erhverv and e‑Boks Erhverv in daily administration.

Key GDPR obligations for Danish companies

All Danish companies that process personal data must comply with the General Data Protection Regulation (GDPR) and the Danish Data Protection Act. This applies whether you are a sole trader, ApS, A/S or operate through a foreign company with activities in Denmark.

As a rule, you must:

• Have a clear and lawful purpose for processing personal data (e.g. payroll, invoicing, marketing with consent)
• Limit data collection to what is necessary for that purpose and delete data when it is no longer needed
• Inform data subjects (employees, customers, suppliers) in a transparent way about how you process their data
• Ensure appropriate technical and organisational security measures (access control, backups, encryption where relevant)
• Conclude written data processing agreements with all external providers that process personal data on your behalf (e.g. cloud accounting, payroll, CRM)
• Be able to document your compliance (policies, procedures, logs, risk assessments)

Personal data you typically process in a Danish company

In everyday business you will usually process at least the following categories of personal data:

• Employee data: name, address, CPR number, bank account, salary, tax card information, sickness absence, union membership (in some cases)
• Customer data: contact details, purchase history, payment information, sometimes CPR number for private customers
• Supplier and business partner data: contact details of contact persons

CPR numbers and information about health, union membership, religion or criminal offences are subject to stricter rules. You may only process them when there is a clear legal basis and with additional safeguards.

Documentation and internal procedures

Most companies in Denmark are required to maintain a written record of processing activities. Even if you are exempt as a very small and low‑risk business, it is strongly recommended to keep at least basic documentation describing:

• What personal data you collect and for what purposes
• Where the data comes from and with whom it is shared
• How long you store different types of data (e.g. accounting data typically at least 5 years under bookkeeping rules)
• What security measures you use (password policy, access rights, physical security, backups)

For higher‑risk processing (for example large‑scale monitoring, extensive profiling or processing of sensitive data) you may need to carry out a Data Protection Impact Assessment (DPIA). Certain sectors may also be required to appoint a Data Protection Officer (DPO).

Data breaches and reporting to the Danish Data Protection Agency

If you experience a personal data breach (for example loss of a laptop with unencrypted data, sending sensitive information to the wrong recipient, hacking of your systems), you must assess the risk to the affected individuals.

Where there is a risk to rights and freedoms, you must:

• Notify the Danish Data Protection Agency (Datatilsynet) without undue delay and no later than 72 hours after becoming aware of the breach
• Describe what happened, what categories and volume of data were affected, and what measures you have taken

If the risk is high, you must also inform the affected individuals directly in clear language. Failure to report or inadequate security measures can lead to orders, bans and significant administrative fines.

Marketing, cookies and consent

For marketing activities in Denmark you must combine GDPR rules with Danish marketing and cookie regulations. In practice this means:

• You generally need prior consent to send electronic marketing (email, SMS) to private individuals
• You must obtain valid consent for non‑essential cookies and similar tracking technologies on your website and document these consents
• Your privacy and cookie notices must be easy to understand and available in a language your users can reasonably be expected to understand (often Danish and/or English)

MitID Erhverv – digital identification for businesses

MitID is the Danish national digital ID solution. For companies, foundations and associations, MitID Erhverv is used to log in to public self‑service solutions and many private services (for example online banking, SKAT, virk.dk, e‑Boks Erhverv).

As a company you must:

• Register a legal representative (typically a director or owner) in the Danish Business Register (CVR) who can create and manage MitID Erhverv
• Assign roles and rights to employees and advisers (e.g. accountant, payroll provider) so they can act on behalf of the company
• Regularly review and update access rights, especially when employees change roles or leave the company

Foreign owners and directors without a Danish CPR number can usually obtain MitID through a specific identification process or use an appointed local representative or adviser with MitID to handle filings.

e‑Boks Erhverv – mandatory digital mailbox

Most companies registered in Denmark are required to have a digital mailbox (Digital Post) for communication with public authorities. This is typically accessed via e‑Boks Erhverv or another approved solution.

Through Digital Post you receive, among other things:

• Letters and decisions from the Danish Tax Agency (Skattestyrelsen)
• Messages from the Danish Business Authority (Erhvervsstyrelsen) about annual reports, registrations and deadlines
• Notifications from municipalities and other public bodies

The company is responsible for reading and acting on messages in Digital Post within the stated deadlines. Missing a deadline because you did not log in is not accepted as an excuse and may result in fines, loss of appeal rights or deregistration.

Practical setup of digital communication

To ensure smooth digital communication with authorities, you should:

• Activate Digital Post for the company as soon as you receive your CVR number
• Set up forwarding of notifications (for example to email or SMS) so that new messages are not overlooked
• Grant access in e‑Boks Erhverv to relevant employees and external advisers (accountant, payroll provider, lawyer)
• Define internal routines for checking Digital Post (for example at least weekly, and more often in busy periods such as year‑end)

Interaction between GDPR and digital tools

When you use MitID Erhverv, e‑Boks Erhverv and other digital solutions, you must still comply with GDPR. This includes:

• Limiting access to Digital Post and other systems to those who need it for their work
• Using strong authentication and secure devices for logins
• Ensuring that documents downloaded from e‑Boks and stored locally are protected and deleted in line with your retention policy
• Concluding data processing agreements with IT providers that host or process personal data for you

How a Danish accountant can support you

A local accounting firm can help you integrate GDPR and digital communication requirements into your daily routines. This typically includes:

• Setting up and managing MitID Erhverv roles and e‑Boks Erhverv access
• Implementing secure workflows for payroll, invoicing and document storage
• Coordinating deadlines and responses to messages from SKAT and other authorities
• Aligning your bookkeeping and archiving practices with both tax law and data protection rules

By combining proper GDPR compliance with efficient use of MitID and e‑Boks, you reduce legal risk and ensure that your Danish company communicates correctly and securely with all relevant authorities.

Closing, selling or restructuring a company in Denmark (liquidation, merger, share transfer)

Closing, selling or restructuring a company in Denmark requires careful planning, coordination with the Danish Business Authority (Erhvervsstyrelsen) and, in many cases, dialogue with SKAT, banks and employees. The right procedure depends on the company’s legal form (for example ApS, A/S, sole proprietorship) and on whether the business is solvent or insolvent. Below you will find an overview of the most common scenarios: voluntary liquidation, compulsory dissolution, sale of shares or business assets, and corporate restructuring such as mergers and de‑mergers.

Voluntary liquidation of a Danish company

Voluntary liquidation is typically used when the company is solvent, has no future business purpose and the owners want to withdraw remaining capital in a controlled way. In Denmark, the process is regulated mainly by the Danish Companies Act and is most often applied to private limited companies (ApS) and public limited companies (A/S).

The general steps usually include:

• Shareholders’ resolution to liquidate the company and appoint a liquidator (often a lawyer or accountant)
• Notification of the decision to Erhvervsstyrelsen via the online system Virk.dk
• Preparation of an opening balance sheet and a statement that the company is solvent
• Public notice to creditors, who are given a statutory period to file claims
• Realisation of assets, settlement of debts and termination of contracts, leases and employment relationships
• Preparation of a final liquidation balance sheet and distribution of remaining equity to shareholders
• Deregistration for VAT (Moms), payroll taxes, eIndkomst and other schemes, and final tax return to SKAT

During liquidation, the company remains a legal entity and must continue to keep accounts, file tax returns and comply with bookkeeping rules until it is finally struck off the Central Business Register (CVR). Liquidation is only possible if the company can pay all its debts; otherwise, insolvency procedures apply.

Compulsory dissolution and bankruptcy

If a company does not comply with statutory obligations, Erhvervsstyrelsen may initiate compulsory dissolution. Typical triggers include failure to submit annual reports on time, lack of a registered address, missing management or capital below the legal minimum. In such cases, the company may be referred to the Maritime and Commercial High Court, which can appoint a liquidator or declare the company bankrupt.

Bankruptcy (konkurs) is relevant when the company is insolvent, meaning it cannot meet its obligations as they fall due and the financial situation is not temporary. Bankruptcy proceedings are handled by the court and a court‑appointed trustee. The trustee realises the company’s assets and distributes the proceeds according to the statutory ranking of claims, for example:

• Costs of the estate and trustee
• Employee claims (wages, holiday pay) covered in part by the Employees’ Guarantee Fund
• Secured creditors (for example banks with pledges)
• Unsecured creditors
• Shareholders (only if anything remains)

Directors and owners must cooperate with the trustee and provide all accounting records and contracts. If mismanagement, unlawful loans to shareholders or failure to keep proper accounts is identified, personal liability and disqualification from management may follow.

Selling a Danish company: share deal vs. asset deal

When the business is profitable or has valuable contracts, technology or employees, owners often prefer to sell rather than liquidate. In Denmark, there are two main structures: a share deal and an asset deal.

In a share deal, the buyer acquires the shares in the company (for example in an ApS or A/S). The legal entity remains the same, with all assets, liabilities, contracts and employees continuing unchanged. This structure is common when the company has a stable history, clear accounts and no major legal risks. For the seller, a share deal can be tax‑efficient, especially if the shares qualify as tax‑exempt portfolio or subsidiary shares under Danish rules.

In an asset deal, the buyer acquires selected assets and possibly employees and contracts, while the legal entity remains with the seller. This allows the buyer to avoid historical liabilities and unwanted assets. However, transfer of employees is subject to the Danish rules on transfer of undertakings, which protect employees’ rights, and transfer of contracts may require consent from customers, landlords or suppliers.

Key elements of a Danish company sale typically include:

• Letter of intent or term sheet setting out structure, price and timetable
• Due diligence review of financial statements, tax, employment, contracts, IP and compliance
• Share purchase agreement or asset purchase agreement with warranties, indemnities and price adjustment mechanisms
• Notification to Erhvervsstyrelsen of changes in ownership and management, and possible changes in articles of association
• Tax planning regarding corporate income tax, withholding tax on dividends and possible exit taxation for foreign owners

Foreign sellers and buyers should pay particular attention to Danish withholding tax rules on dividends and interest, double tax treaties and the classification of the transaction in their home country.

Restructuring: mergers, de‑mergers and share transfers

Restructuring is often used to optimise the group structure, prepare for an exit, separate different business lines or improve financing. The Danish Companies Act provides detailed rules for mergers (fusioner) and de‑mergers (spaltninger), including cross‑border transactions within the EU/EEA.

In a merger, one or more companies are combined into a single entity. This can be done as:

• A merger by absorption, where one company continues and takes over all assets and liabilities of the other company
• A merger by formation of a new company, where all merging companies transfer their assets and liabilities to a newly formed entity

In a de‑merger, a company is split into two or more companies, with assets and liabilities allocated according to a de‑merger plan. This is useful when owners want to separate activities, bring in new investors or limit risk.

Both mergers and de‑mergers require:

• A written merger or de‑merger plan prepared by management
• Approval by the shareholders’ meeting in each company involved
• Registration with Erhvervsstyrelsen and publication of the transaction
• Compliance with creditor protection rules and, in some cases, independent expert reports

Under Danish tax law, mergers and de‑mergers can often be carried out as tax‑neutral reorganisations if specific conditions are met, such as continuity of ownership and correct valuation. This allows assets and liabilities to be transferred at tax values, avoiding immediate taxation of hidden reserves. However, incorrect planning can trigger corporate income tax and, for shareholders, capital gains tax, so professional tax advice is essential.

Share transfers and changes in ownership structure

Not every change requires a full merger or sale of the entire business. Many Danish companies adjust their structure through internal share transfers, capital increases or reductions, or by introducing a holding company.

Common examples include:

• Transferring shares to a Danish or foreign holding company to facilitate future sales and dividend planning
• Issuing new shares to investors through a capital increase, with pre‑emption rights for existing shareholders unless waived
• Redeeming or buying back shares to adjust ownership percentages or exit minority shareholders

All changes in share capital, ownership and management must be reported to Erhvervsstyrelsen and reflected in the company’s articles of association and owners’ register. In some cases, changes may also affect control reporting obligations and beneficial owner registration.

Tax, accounting and employment aspects when closing or restructuring

Every closure, sale or restructuring has tax and accounting consequences. Danish companies must prepare up‑to‑date financial statements, ensure that bookkeeping is complete and accessible in Denmark, and file final or interim tax returns. Corporate income tax in Denmark is levied at a flat rate of 22% on taxable profits, and restructuring may affect the timing and amount of taxable income.

When employees are affected, Danish employment law and collective agreements must be observed. Termination of employees in connection with liquidation or downsizing requires proper notice periods, payment of outstanding salary, holiday pay (feriepenge) and pension contributions. In transfers of undertakings, employees generally follow the business with unchanged rights, and the employer must inform and, where applicable, consult employee representatives.

Foreign owners should also consider whether restructuring triggers exit taxation, permanent establishment issues or reporting obligations in their home jurisdiction. Coordination between Danish and foreign advisers is often necessary to avoid double taxation or unexpected liabilities.

Because the rules on liquidation, mergers, de‑mergers and share transfers in Denmark are detailed and subject to strict formal requirements, it is advisable to involve a Danish accountant or tax adviser early in the process. Proper planning reduces the risk of personal liability for management, unexpected tax costs and delays in deregistration or registration of the new structure.

Most common mistakes when setting up a company in Denmark and how to avoid them

Many foreign entrepreneurs underestimate how formal and digital the Danish system is. Even small mistakes at the start can lead to fines, blocked registrations or unnecessary tax costs. Below are the most common pitfalls when setting up a company in Denmark – and practical tips on how to avoid them.

1. Choosing the wrong legal form

One of the first and most frequent mistakes is selecting a company type that does not match the real business needs. For example, some founders choose an enkeltmandsvirksomhed (sole proprietorship) because it is fast and cheap to register, but later discover that they are personally liable for all business debts and that it is harder to bring in investors.

On the other hand, setting up an ApS (private limited company) only because “everyone does it” can be a problem if the business will remain very small, with limited risk and low profit. An ApS requires a minimum share capital of DKK 40,000 and more formal obligations than a sole proprietorship.

To avoid this mistake, clarify from the start:

• Expected turnover and profit in the first 2–3 years
• Whether you need external investors or partners
• Risk level and potential liability (e.g. long‑term contracts, loans, employees)
• Whether you plan to sell the company or bring in new shareholders later

Based on this, compare the main options (enkeltmandsvirksomhed, I/S, ApS, A/S) and, if needed, consult a Danish accountant or lawyer before registering with the Danish Business Authority (Erhvervsstyrelsen).

2. Incomplete or incorrect registration in CVR

Another common error is rushing through the online registration and making mistakes in the data submitted to the Central Business Register (CVR). Typical issues include:

• Wrong main business activity code (branchekode/NACE code)
• Incorrect company address or missing documentation for a virtual office
• Not registering all relevant activities (e.g. both consulting and online sales)
• Incorrect start date of business activity

These errors can lead to problems with VAT registration, statistics reporting and even with banks when opening a business account. Before submitting the registration, make sure that:

• The company name is available and complies with Danish rules
• The business address is valid and accepted by the municipality and landlord
• The activity code reflects your main source of revenue
• Owners and directors meet Danish requirements (including for non‑EU residents)

3. Ignoring VAT (Moms) thresholds and deadlines

Many new entrepreneurs either register for VAT too late or too early. In Denmark, you must register for VAT if your taxable turnover exceeds DKK 50,000 over a 12‑month period. If you start with a clear plan and signed contracts, you can (and often should) register from day one.

Typical mistakes include:

• Issuing invoices with Danish VAT before being registered for VAT
• Not charging VAT when the DKK 50,000 threshold has already been exceeded
• Missing VAT reporting deadlines (monthly, quarterly or half‑yearly, depending on turnover)
• Not understanding the difference between VAT‑liable and VAT‑exempt activities

To avoid issues, decide at the start whether you will register voluntarily or wait until you reach the threshold. Once registered, set up a calendar with VAT deadlines from the Danish Tax Agency (Skattestyrelsen) and use accounting software that supports Danish VAT rules.

4. No clear separation between private and business finances

Especially in small companies and sole proprietorships, owners often mix private and business expenses. This makes bookkeeping difficult, increases the risk of tax corrections and can be problematic in case of a tax audit.

Good practice from day one:

• Open a separate business bank account (mandatory in practice for ApS and A/S)
• Pay business expenses only from the business account
• Document any private use of company assets (e.g. car, phone, computer)
• Record owner’s withdrawals and deposits correctly (e.g. shareholder loans, salary, dividends)

In limited companies, be particularly careful with shareholder loans. Unauthorised loans to shareholders or related parties can be taxed as salary or dividends and may lead to penalties.

5. Underestimating Danish bookkeeping and audit requirements

Some foreign entrepreneurs assume that simplified bookkeeping rules from their home country also apply in Denmark. In reality, Danish companies must comply with the Danish Financial Statements Act and bookkeeping rules, including digital storage of vouchers and proper documentation.

Frequent mistakes:

• Not keeping all invoices and receipts in a structured, digital form
• Using foreign accounting standards that do not match Danish requirements
• Not preparing annual financial statements on time
• Assuming that a small ApS never needs an auditor

Whether you need a statutory audit depends on size thresholds (turnover, balance sheet total, number of employees). Even if your company is exempt from audit, you still need proper accounts and timely filing with Erhvervsstyrelsen. Choose accounting software that supports Danish rules and engage a local accountant early, not only when the first deadline is approaching.

6. Misunderstanding employer obligations and employment law

Hiring your first employee in Denmark triggers several obligations that are often overlooked:

• Registration as an employer with Skattestyrelsen
• Reporting salaries via eIndkomst
• Withholding A‑tax (income tax) and AM‑bidrag (labour market contribution of 8%)
• Paying ATP (Labour Market Supplementary Pension) and, where applicable, holiday pay (feriepenge)

Many foreign companies also underestimate the importance of collective agreements, working time rules and minimum standards for holiday, sick pay and notice periods. Using a simple “template contract” from another country can lead to non‑compliance with Danish law and disputes with employees.

Before hiring, clarify:

• Whether your sector is covered by a collective agreement
• What minimum conditions you must offer (salary, holiday, pension, benefits)
• How to structure the employment contract to comply with Danish rules

7. Incorrect handling of director and owner residency issues

For non‑resident owners and directors, there are additional formalities that are often ignored. Mistakes include:

• Assuming that any foreign director can be appointed without restrictions
• Not obtaining a Danish tax number (CPR or temporary number) when required
• Ignoring potential tax residency and permanent establishment risks

Depending on your structure, the company may be considered tax resident in Denmark if it is effectively managed from Denmark. Directors and key employees may also become tax resident if they stay in Denmark for longer periods or move their centre of life here. It is important to analyse management structure and physical presence in Denmark before appointing directors and signing long‑term contracts.

8. Poor planning of salary, dividends and personal taxation

Owners of Danish companies often focus only on corporate tax and forget about their personal tax situation. Denmark has progressive personal income tax with high marginal rates, and the way you take money out of the company (salary vs. dividends) can significantly affect your total tax burden.

Common mistakes:

• Paying only dividends and no salary, even when the owner works full‑time in the company
• Not considering the impact of AM‑bidrag, municipal tax and top‑bracket tax
• Ignoring double taxation treaties between Denmark and the owner’s country of residence

Before the first financial year ends, prepare a plan for remuneration of owners and key employees. This should take into account Danish tax brackets, social contributions, pension schemes and any cross‑border tax issues.

9. Neglecting digital obligations: MitID, e‑Boks and communication with authorities

Denmark is highly digitalised. Companies are expected to communicate with authorities electronically. A frequent mistake is delaying the setup of digital access, which can result in missed deadlines and fines.

Typical issues:

• Not obtaining MitID Erhverv for the company in time
• Not activating or checking the company’s e‑Boks regularly
• Missing important messages from Skattestyrelsen or Erhvervsstyrelsen

Right after registration, ensure that:

• The company has access to MitID Erhverv
• At least one responsible person regularly checks e‑Boks
• Contact details (email, phone) are up to date in all relevant registers

10. No exit strategy: ignoring liquidation, sale or restructuring options

Many founders focus only on starting the company and do not think about what will happen if they want to close, sell or restructure it. This can lead to unnecessary tax costs and long, complicated liquidation processes.

Common oversights:

• Not understanding the difference between voluntary liquidation, compulsory dissolution and bankruptcy
• Ignoring tax consequences of selling shares vs. selling assets
• Not planning for future investors or mergers when drafting the articles of association

When setting up the company, consider:

• Whether the share structure allows for new investors or different share classes
• How you would like to exit in the future (sale of shares, management buy‑out, liquidation)
• What documentation and accounting quality will be needed to make the company attractive to buyers or investors

How to avoid these mistakes in practice

The safest way to minimise risk is to combine good preparation with local expertise. Before registering your company in Denmark:

• Prepare a simple business plan with expected turnover, costs and staffing
• Choose the legal form based on liability, capital needs and growth plans
• Clarify VAT, tax and employer obligations from the start
• Set up proper bookkeeping and digital communication tools immediately
• Consult a Danish accountant or advisor who understands both Danish rules and your home country’s regulations

With the right structure and compliance from day one, you can focus on growing your business in Denmark instead of dealing with avoidable administrative and tax problems later.

Summary

Denmark is a country that welcomes business and promotes a free market and fair competition. They treat both local and foreign entrepreneurs equally. If foreign entrepreneurs decide to start and manage their own business in Denmark, they can select from a variety of legal business forms and are eligible for benefits and incentives offered to EU and EEA members by the Danish government. Moreover, managing a business in Denmark is made much more convenient since all the necessary formalities can be handled online through official Danish websites.

Moreover, Denmark boasts the lowest social and health insurance burden of only 1% for Danish employers among the member states of the Organisation for Economic Co-operation and Development, along with a relatively low 28% income tax. Starting your own business in Denmark is also unrestricted. To register a new company, a form can be completed on the website of the Agency for Enterprise and Trade - erhvervsstyrelsen.dk. After this, the newly established company should apply through toldskat.dk to the Customs and Tax Administration. Once completed, the entrepreneur is entitled to fully operate their business in Denmark.

FAQ

1. What do I need to do to register my own business in Denmark?
   Before registering your business in Denmark, you need to choose the appropriate legal form and then complete and send, preferably via erhvervsstyrelsen.dk , a registration form with the required attachments to Erhvervsstyrelsen (Agency for Business and Enterprise), which will send the application on to SKAT (Customs and Tax Administration) for assignment of the CPR, or special tax identification number. Every Danish company is given a registration number - CVR (virk.dk).
2. When I run a company in Denmark, am I obliged to report it to the Register of Foreign Service Providers?
   If you decide to set up and run your own business in Denmark, you are required, before you start work, to report your company to the Register of Foreign Service Providers - RUT. Any changes to the company must also be notified, up to a maximum of 1 working day on which they take effect. Any entity, whether natural or legal, for which any services are performed in Denmark, belongs to the Danish service providers.
3. What company do I have to pay when running my own business in Denmark?If you are self-employed, you have to pay companies such as:
   When you run your own business, you have to pay such company as:
   • income tax, the percentage rates of which are: 8% for income below DKK 50 217, 39.2% for income from DKK 50,217 to DKK 558 043, 56.5% for income above DKK 558 043,
   • CIT - 28% on legal entities,
   • voluntary church tax of 0.92%,
   • fixed VAT on goods and services of 25% paid by companies in Denmark with an annual turnover of more than DKK 50 000.
4. When must a company be registered for VAT in Denmark?
   In Denmark, a company must be registered for VAT if its annual income exceeds DKK 50,000.
5. When running a company in Denmark, do I have to report annually?
   Yes, if you run a company in Denmark, you must prepare an annual report (årsrapport) on the company's activities and send a copy to the Trade and Companies Agency.
6. Who should apply for an EU/EEA residence certificate in Denmark?
   In Denmark, all foreign citizens who wish to set up and run their own business in the Kingdom of Denmark are required to apply for a special EU/EEA residence certificate from Statsforvaltningen (Regional Office, statsforvaltning.dk).
7. What is the reverse charge procedure in Denmark?
   In Denmark, the reverse charge procedure means that foreign companies that want to sell goods and services to Danish companies do not have to charge Danish VAT.
8. What is the easiest way to set up a business in Denmark?
   In Denmark, the easiest way to set up your own business is through the dedicated website of the Danish Business and Enterprise Agency (Erhvervsstyrelsen) - erhvervsstyrelsen.dk.
9. What legal forms of business can I choose from when wanting to register a company in Denmark?
   When wishing to register a company in Denmark, you can choose from such legal forms of Danish business as:
   • Enkeltmandsvirksmhed (sole proprietorship),
   • Anpartsselskab (ApS - limited liability company),
   • Aktieselskab (A/S - joint stock company),
   • Kommanditselskab (K/S - limited partnership),
   • Interesselskab (I/S - general partnership); as well as
   • Salgskontor (representative office of a foreign company),
   • Andelsforening / Brugsforening (cooperative associations),
   • Filial af udenlandsk selskab (branch office of a foreign company).
10. What is Årsopgørelse?
    Årsopgørelse is a document sent by SKAT to Danish taxpayers, on the basis of which the annual tax return must be correctly completed and submitted in due time via skat.dk.