Business in Denmark

Among the places attractive to those who dream of starting and running their own business, Denmark occupies a significant place. It is a country that is highly regarded among entrepreneurs for its favorable business conditions and regularly tops business-related rankings. Extremely appealing to foreign investors, Denmark provides a favorable business climate. An important aspect is to familiarize yourself with local regulations, applicable taxes, deadlines and the necessary fees and documents that must necessarily be submitted. The goal is to avoid pitfalls that may be encountered on the business road. Taking a closer look at the information contained on this site will help you gain a complete knowledge of running a business in Denmark.

Key information on registering and operating a business in Denmark

In the economic area, Denmark adheres to the principles of a free market, open competition and no restrictions on running your own business. When establishing a company in Denmark, the same guidelines apply to all citizens of the European Union:

• ​Choosing the right form of business and getting a thorough understanding of all legal requirements, such as permits, product labeling, patents, licenses, etc.
  
  
• The next step is to familiarize yourself with the Danish legal system, research the market and analyze the competition.
  
  
• It is important to set a start-up date and determine the expected financial aspects.
  
  
• It is necessary to prepare a financial plan with the help of an accountant, to have adequate funds for the first year of operation or to conclude a lease agreement for the premises where the company will be based.
  
  
• It is extremely important to present agreements with Danish business partners with whom you plan to cooperate.
  
  
• It is crucial to provide start-up funds (in the range of DKK 10,000 to 25,000), which will be needed for a translator, licenses, consulting support or the purchase of equipment, among other things. In this context, it is worth considering possible EU funding.
  
  
• The next step is to register the business through the online platform of the Danish Business and Enterprise Agency - Erhvervsstyrelsen. This process must be completed no later than 8 days before the start of the business. This agency acts as a branch of the Ministry of Economy and forwards the necessary company documents to the Customs and Taxation Office - SKAT, where the CPR tax identification number (personal TIN), necessary for tax and VAT settlements, is obtained. It is worth mentioning that in case the annual turnover does not exceed 50 thousand crowns, company registration becomes optional.
  
  
• You must apply for an EU/EEA citizen's residence certificate at the local Danish regional office (statsforvaltning.dk). This certificate is necessary before starting your own business, and it applies to all foreign citizens who plan to stay in Denmark for more than three months.
  
  
• You should additionally check with the Danish registrar to make sure that your chosen business name is unique.
  

Options available for running a business in Denmark

Running your own business in Denmark has its benefits and challenges, so it's worth thinking about whether you are ready for the challenge and the decision to start your own business. It is also important to choose the right legal and tax form that will best suit our skills and abilities.

The laws governing the establishment and operation of a business in Denmark include The Carrying on Business for Profit Act of June 1996; The Public Limited Companies Act of June 1973, as amended; The Private Companies Act of May 1996, as amended; and The Company Accounts Act of June 1996.

All forms of business are available to both domestic and foreign entities under the same conditions.

Different types of companies in Denmark:

1. ​Individual venture: sole proprietorship (Enkeltmandsvirksmhed),
2. Joint stock company (Anktieselskab - A/S),
3. Partnership (Interesselskab - I/S),
4. Limited liability company (Apartsselskab - ApS),
5. Limited partnership (Kommanditselskab - K/S),
6. Branch of a foreign company (Filial af udenlandsk selskab),
7. Representative office of an international company (Salgskontor),
8. Cooperative association (Andelsforening/Brugsforening).

In Denmark, one of the frequently chosen ways of doing business is self-employment, which allows you to work on your own account under your own name or company name. Such a company can also hire employees.

Self-employment - sole proprietorship (Enkeltmandszirksmhed)

A sole proprietorship is the simplest form of business in Denmark. The owner is personally liable with his/her assets for the debts and obligations of the business. Sole proprietors use a personal CPR registration number. For self-employment, registration is done through Erhvervsstyrelsen (www.erhvervsstyrelsen.dk).

Below are the positive and negative sides of self-employment.

Advantages:

• The simplicity of running such a business.
• No need to raise share capital.
• Support of the Danish administration in formal issues related to company registration.
• Low start-up costs, estimated at about DKK 10,000, or about PLN 5,000.
• Taxation of the business is done on a single tax return, which means income is taxed only once.
• The possibility of granting power of attorney to others to act on behalf of the company.
• Companies whose annual revenue does not exceed DKK 50,000 are not required to register as VAT payers.
  
  

Disadvantages:

• ​The person running such a business is liable unlimitedly with his or her assets for the company's obligations, as there is no separation between his or her assets and those of the company.
• In the event of the owner's death, the company ceases to operate, but the company's assets are not separated from those of the founder, making it difficult to possibly sell the company.
• Such a company does not have the ability to tax its income separately.
  
  

The owner must choose one of three options for taxing the company:

1. The option to be taxed according to the Kapitalafkastordning law, which allows part of the profits to be shifted to personal income and part to capital income.
2. The option to tax income as personal income, on a par with employee salaries.
3. The option to be taxed according to the Enterprise Act (Virksomhedsordning), which allows for the deduction of loan interest expenses, but also allows the company's profits to be retained as bank savings.

Joint stock company (Aktieselskab - A/S)

Another option is to create a joint-stock company, consisting of a board of directors, management or supervisory board elected at a general meeting and consisting of at least three people (in order to maintain the majority rule for decisions on important company matters).

The partners and owners of the company are not personally liable for the company's debts, although the bank may demand collateral from them in the case of loans.

What to know about setting up a joint stock company in Denmark:

• ​The joint-stock company form is designed for medium-sized and larger companies and is the only one that can be listed on the Danish Stock Exchange. An initial capital of DKK 500,000 in the form of cash or other assets is required and must be paid before the company can be registered.
  
  
• The founders of a joint-stock company must draw up and sign a memorandum of incorporation, including:
  • personal data of the founders and the board of directors,
  • name and registered office of the company,
  • the type and purpose of the business,
    initial capital.
    
    
• It is necessary to draft the Articles of Incorporation of the company.
  
  
• The share capital must be paid up.
  
  
• Shareholders elect the board of directors and the supervisory board at a charter meeting.
  
  
• A company must have at least one shareholder.
  
  
• According to the law, the founders of a company do not necessarily have to own its shares.
  
  
• The minimum number of founders is one.
  
  
• Individual shareholders must notify the company within 30 days of acquiring at least 5% of the share capital.
  
  
• Tax for shareholders is levied on the income earned, while the company is subject to separate tax regulations.
  
  
• All documents should be prepared in Danish.
  
  
• The fee for registering an A/S company through a law firm in Denmark is DKK 4,500 to 6,000.
  
  
• If the term "under registration" (under stiftelse) is added to the company's name, the company has the right to start operations from the date the articles of incorporation are signed.
  
  
• An alternative is to buy shares in an already existing company that has not yet started operations (the so-called "shelf company"), although this requires more time and resources.
  
  

After signing the articles of incorporation and depositing the initial capital into a bank account, we have 6 months to register the company with the Danish Trade Register. The registration process usually takes 2 to 3 weeks.

The registered company receives a CVR identification number. The next step, after the company is registered, is to report to the tax authority (Told-og Skatteregion).

General partnership (Interesselskab - I/S)

Another option available to those wishing to work on their own in Denmark is to form a general partnership. Such a company requires a minimum of two natural or legal persons to form a partnership, who undertake joint obligations and their mutual relations are regulated in a founding agreement.

The most important information regarding a general partnership:

1. A general partnership has no legal personality, but it has the ability to enter into contracts, has the right to be a party to court cases and can assert its own rights.
   
   
2. The assets of a general partnership consist of contributions made and property acquired by the company during its existence.
   
   
3. It is important that the name of the Danish company contains the abbreviation I/S, which indicates its legal form.
   
   
4. In order to create a general partnership, no share capital is required.
   
   
5. All documents, along with the registration application, must be sent to the Danish Commerce and Companies Agency - DCCA Erhvervsstyrelsen (erhvervsstyrelsen.dk) within 8 weeks of signing the company's agreement to obtain a Central Company Register number - CVR (www.cvr.dk).
   
   
6. If all partners of a general partnership want to have limited liability, it is necessary to register it with the DBA.
   

Limited liability company (Anpartsselskab - ApS)

One choice that is very popular in Denmark is the limited liability company. This form is often chosen by people who plan to run a family business and retain personal control over it.

The Danish company Anpartsselskab - ApS has a legal personality and is regulated by the Private Limited Liability Company Act. Establishing such a company through a law firm involves a cost of 3,000 to 5,000 Danish kroner.

Different types of limited liability companies in Denmark:

1. ​Private limited liability company Anpartsselskab - ApS.
   
   
2. The private limited liability company Ivaerksaetterselskaber - IVS, which has been available in Denmark since January 1, 2014. This company, like Anpartsselskab - ApS, is governed by the Danish Private Limited Liability Company Act. The minimum initial capital of Ivaerksaetterselskaber is 1 Danish kroner or the equivalent in euros. At least 25% of the company's profit from the last 12 months must be allocated to reserves, which are mandatory, and dividends can only be paid if the sum of share capital and reserves reaches 50,000 Danish kroner.
   

Anpartsselskab - ApS vs Aktieselskab - A/S

• The Danish regulations that govern the operation of a limited liability company and a joint-stock company have some similarities.
  
  
• Compared to the shareholders of a limited liability company, the shareholders of a joint-stock company have less autonomy in making decisions about the company's operations.
  
  
• The initial capital of an ApS company is at least DKK 50,000, while an A/S company requires a minimum of DKK 500,000 (in various forms of assets, with at least DKK 125,000 in cash).
  
  
• In both cases, the capital remains with the company, not the owners.
  
  
• The approximate cost of forming an ApA company with the help of a professional law firm is DKK 3,000 to 5,000, and for an A/S company it is about DKK 4,500 to 6,000.
  
  
• Both a limited liability company and an A/S company are required to submit annual reports (årsrapport), have a charter (vedtægter) and incorporation documents (stiftelsesdokument).
  
  
• In the case of an ApS company, it is necessary to appoint management, while an A/S company has a board of directors (optional: supervisory board) in addition to management.
  
  
• Both companies must have at least one owner.
  
  
• The law regarding both forms of companies is set forth in the Danish Companies Act (Selskabsloven).
  
  
• Both companies are subject to tax laws.
  

Limited partnership (Kommanditselskab - K/S)

There is also another company option in Denmark, namely a limited partnership, which can be established. This form requires a minimum of one general partner (e.g., a limited liability company), who will be fully liable for the company's obligations. In addition, a limited partnership must have several limited partners, who are liable for the company's obligations only to the extent of the capital they contribute to the partnership.

Basic information about the K/S partnership:

• ​The operation of a limited partnership is regulated through the Articles of Incorporation, which is required for company registration.
• Registration of the Kommanditselskab (K/S) is required with the DBA.
• A limited partnership must be registered when all its partners are legal entities.
• Registration of the company should be done by the partners within 8 weeks of signing the agreement at the Trade and Enterprise Agency (registration form available at www.eogs.dk).
• The name of the company should include the name of at least one of the general partners and the abbreviation K/S, which identifies its legal form.

Another variant of the limited partnership is a partnership with limited liability up to the amount of shares - Partnerselskaber - P/S. The partners of such a company are public limited liability companies, which are liable for the company's obligations only up to the limit of shares specified by the amounts in question or the entire share capital.

Branch of a foreign company (Filial af udenlandsk selskab)

There is an additional option for foreign entrepreneurs in the Danish labor market, which is to establish a branch of a foreign company. This does not require share capital, although the incorporation procedure is more time-consuming than for company formation.

Foreign entrepreneurs can establish a branch of their company in Denmark if the company registered in another country has an analogous legal structure that is adopted in Denmark (for example, ApS limited liability company or A/S joint stock company).

Relevant information regarding a foreign branch of a company:

1. ​The name of the branch should include the term "filial," meaning "branch," and the name of the company and the country in which it is located.
   
   
2. Registration of a branch is possible through the erhvervsstyrelsen.dk platform in Denmark.
   
   
3. In order to register a branch, relevant documents are required.
   
   
4. The registration form, once completed, must be submitted to the Trade and Enterprise Agency, containing:
   • the name of the company,
   • legal form of the company,
   • amount of share capital,
   • financial report of the previous year,
   • KRS number,
   • scope of activity,
   • address and name of the branch in Denmark,
   • the scope of the branch's activities,
   • personnel data,
   • addresses of those authorized to make decisions on behalf of the subsidiary in Denmark.
     
     
5. The minimum share capital should be DKK 80,000.
   
   
6. In order to regulate VAT taxation for a branch of a foreign company, it is necessary to report to SKAT (Tax Authority).
   
   
7. The cost of establishing a company branch in Denmark through the assistance of a lawyer is approximately DKK 8 thousand.
   
   
8. The company branch is subject to Danish law.
   
   
9. The branch manager is fully responsible for liabilities.
   
   
10. ​A copy of the company's annual financial report must be submitted annually to the Agency for Trade and Enterprise.
    
    
11. The company's branch in Denmark is subject to a 25% corporate tax.
    

Representative office of a foreign company (Salgskontor)

Entrepreneurs who wish to operate in the Danish market have another formal option to choose from. This is the creation of a representative office of a foreign company to promote products and services (although it does not have the authority to sell them directly).

A representative office of a foreign company, although it has no legal capacity, functions as an entity acting on behalf of the parent company, and the latter is fully responsible for all its obligations. It is worth noting that Salgskontor regulations are not explicitly regulated in Danish law.

Cooperative associations (Andelsforening/Brugsforening)

The legal form known as a cooperative association is formed on the basis of an association contract between individuals. Based on this agreement, it is possible both to sell and process products owned by members and to purchase and resell goods to the same individuals. Members of this cooperative association are liable for the obligations of the business to a limited extent. An important aspect is the addition of an abbreviation to the name of the cooperative association to indicate its legal form, namely "A.m.b.a." (cooperative association with limited liability).

Entrepreneurs and their obligations to employees in the matter of employment

Entrepreneurs in Denmark who decide to hire employees should carefully familiarize themselves in advance with the country's labor laws and the laws that apply to various professional groups. One example of such regulations is the Employment Documentation Act (Ansættelsesbevis loven), which stipulates that those who work for at least a month, in excess of eight hours per week, are entitled to receive a document containing key information about the terms and conditions of their employment.

In Denmark, labor rights are often supported by so-called collective bargaining agreements, which are agreements on working conditions that are negotiated between employers (employer organizations or companies) and employees represented by trade unions or employee associations.

The scope of a collective agreement includes:

• ​labor issues,
• determination of the time and place of performance of duties,
• wage arrangements,
• regulation of compensation for overtime,
• determination of vacation arrangements,
• pension issues,
• resolution of possible problems,
• safety issues in the workplace,
• other regulations governed by Danish labor law,
• a framework agreement between employers' organizations and employees, defining additional rules.

All employers in Denmark are required to provide their employees with insurance against occupational diseases and accidents, and to provide health and safety training. Also important is the provision of a fair wage and the prohibition of discrimination. If these rules are not followed, unions in Denmark have the right to organize strikes, lockouts or industrial action on behalf of workers to negotiate better wage conditions. Unions can also initiate labor conflicts in order to reach a collective agreement.

Denmark also has a law that regulates the posting of workers to work abroad.

Health and safety rules applicable in Denmark

Individuals who are self-employed or who are employees in a Danish company are required to comply with the labor regulations and occupational health and safety rules in Denmark. The sanction for failure to comply with these regulations is exposure to fines or even suspension of the work performed. The relevant guidelines can be found on the website of the Danish Labor Inspection Authority (UIP).

Key responsibilities of employers in Denmark include:

• ​Safeguard workers by providing the necessary protective equipment.
• Informing workers about safety rules.
• Supervising the performance of work in a safe manner.
• Creating a safe working environment.
• Preventing injuries during work.
• Taking care of hygiene in the workplace.
• Conducting annual health and safety training for employees, which must be properly documented and submitted to the UIP.
• Continuous cooperation with the concerned health and safety institution in Denmark.
  
  

Among the main tasks of workers in Denmark are:

• compliance with occupational health and safety regulations, 
• wearing appropriate personal protective equipment,
• respecting the guidelines and rules set forth in regulations and instructions,
• participating in annual training related to occupational health and safety.

If a Danish company has a minimum of 10 employees, it is obliged to establish a structure responsible for health and safety issues and appoint inspectors to oversee the implementation of safety regulations. The same applies to companies that engage employees in variable or temporary positions, where working hours exceed two weeks.

Practical tips for registering a company with the Registry of Foreign Service Providers (RUT)

Individuals who decide to launch and operate their own business in Denmark are required to register the company with the Registry of Foreign Service Providers - RUT, even before starting work. It is also necessary to report any changes to the company, no later than 1 business day before they are made.

Worth knowing about the RUT:

• ​Failure to report a Danish company to the Registry or providing out-of-date information can lead to an investigation by the Labor Inspector or the imposition of a fine on the company owner (the amount of the fine is DKK 10,000 or even DKK 20,000 in the case of multiple violations).
  
  
• The Labor Inspector may also impose a fine for each day of delay in reporting services to the Registry.
  
  
• The Registry of Foreign Service Providers has an accessible telephone number that allows Danish business owners to obtain key information regarding registration with the RUT and Danish labor law.
  
  
• Registration of a company with the RUT is possible through the virk.dk website.
  
  
• Any employee or employer working in Denmark, is required to register with the Register of Foreign Service Providers. After registration, one is given an individual RUT number, which is necessary when dealing with the Danish authorities.
  
  
• Each employee should provide his or her employer with a confirmation with the RUT number (this is especially true for the construction, horticultural, agricultural, forestry and other clean-up industries).
  
  
• Required information during registration is:
  • contact information,
  • location of work being conducted,
  • type of service offered,
  • sector classification code of the company,
  • planned date of work,
  • company name and address,
  • personal data of delegated employees,
  • duration of the delegation,
  • CVR number and VAT registration number.

Any natural or legal person for whom services are provided in Denmark qualifies as a Danish service provider.

Overview of important tax issues in Denmark: VAT and settlements within certain deadlines

If you do business in Denmark or are employed there, you are subject to the country's tax system. The tax system there is characterized by a gradual increase in tax rates depending on the income you earn. The amount of the income limit, from which taxable income begins, depends on the amount of income earned. In Denmark, it is possible to deduct certain expenses from tax, such as insurance premiums, child support, pension contributions, commuting expenses and food. However, the Danish tax authority has the right to verify the accuracy of these expenses within seven years.

Highlights of taxation in Denmark:

1. ​For 2019, the following income tax percentages apply:
   • 8% for income below DKK 50,217,
   • 39.2% for income between DKK 50,217 and DKK 558,043,
   • 56.5% for income in excess of DKK 558,043.
     
     
2. Denmark also has an optional church tax of 0.92%.
    
3. The Danish manipulation tax, paid to local government units, is variable. The amount free of this tax is set annually (in 2019 it was 10.10% on gross wages; those whose income did not exceed DKK 37,200 were exempt from the tax fee).
   
   
4. To register with the regional customs and tax authority, use the services of the Danish Commerce and Companies Agency.
   
   

In a self-employment situation in Denmark, the tax authority (SKAT; www.skat.dk) treats income from providing services on a self-employed basis as income for the business owner. Therefore, the taxation of the business is declared in a single tax filing. Self-employed individuals who pay taxes and contributions are also entitled to pension and health benefits similar to those enjoyed by employed individuals. Periodically, on a quarterly or semiannual basis, it is necessary to file a tax return (which includes income tax and VAT) through the Danish Tax Authority's online platform (SKAT), using the LetLøn system, which facilitates employee payroll records. Advance income tax payments can be paid on March 20 and November 20. On these dates, it is possible to pay a higher advance payment in order to receive a tax refund with interest, above the interest rate offered by banks. On the other hand, on November 20, a reduced interest rate of 0.4 is stipulated, resulting in lower interest compared to bank interest rates.

As for companies operated in Denmark, there is a corporate income tax (CIT) of 22%. Danish companies with an annual turnover of more than DKK 20,000 also become VAT payers, at a rate of 25%.

A flat income tax of 32% is applied to individuals in Denmark. This tax is remitted to the local government. In addition, there is also a progressive tax, the rate of which is 5.64% (for income up to DKK 42,000) or 15% (for income above this amount). This tax is paid to the state treasury. Liability for this tax covers income from labor and income from capital. The value of this burden cannot exceed 59%.

In the context of VAT, there are certain rules in Denmark. Businesses with an annual turnover of more than DKK 50,000 are subject to this tax. The VAT rate is 25%. However, there is a VAT exemption for certain services, such as the sale or rental of real estate (including the supply of energy, water and gas), medical care, education, banking, insurance transactions and cultural activities. In these cases, the VAT rate is 0%.

Foreign workers residing in Denmark for a period of 3 months to 3 years and earning a minimum salary of DKK 47,500 are subject to a 25% flat tax, which is increased by a 9% contribution to the Danish labor market.

All companies, both domestic and foreign, selling services or goods in Denmark are required to pay a flat 25% VAT. This is a value-added tax added to the price of services and goods sold by companies.

Business owners in Denmark must register their companies as VAT payers before providing services and goods. Registration can be done on the RUT website (Register of Foreign Suppliers - virk.dk). There is a reverse charge procedure under which foreign companies, when supplying goods and services to Danish companies, are not required to collect Danish VAT. In such a situation, the invoice contains only the net value of the goods or services, using the reverse charge formula, which means that the buyer is responsible for charging and paying the VAT on the service or goods in question. In the case of such services, we have, for example:

• ​cleaning,
• construction work,
• maintenance and repair,
• entertainment,
• sports events,
• exhibitions,
• employee leasing,
• conferences.

The SE number (assigned by SKAT) is provided by foreign companies operating in Denmark as a VAT payer ID (if there is no VAT registration, only the TIN is provided). In a situation where the owner of a Danish company acts as an employer at the same time, he is required to register as an employer in Denmark. Persons working abroad, whether permanently or seasonally, are subject to different tax regulations related to their origin and duration of stay in Denmark.

Foreign companies, even if they are not registered as VAT payers in Denmark, can claim VAT refunds on taxable expenses incurred in Denmark.

Recipients of services in Denmark are required to register as VAT payers and pay this tax, even when providing services to companies that are not registered as VAT payers.

What you should know about CIT:The SE number (assigned by SKAT) is provided by foreign companies operating in Denmark as a VAT payer ID (if there is no VAT registration, only the TIN is provided). In a situation where the owner of a Danish company acts as an employer at the same time, he is required to register as an employer in Denmark. Persons working abroad, whether permanently or seasonally, are subject to different tax regulations related to their origin and duration of stay in Denmark.

Foreign companies, even if they are not registered as VAT payers in Denmark, can claim VAT refunds on taxable expenses incurred in Denmark.

Recipients of services in Denmark are required to register as VAT payers and pay this tax, even when providing services to companies that are not registered as VAT payers.

What you should know about CIT:

1. ​The corporate income tax rate is 28%.
   
   
2. Legal entities, such as limited liability companies and joint stock companies, are subject to taxation. However, in the case of partnerships, only the partners of these companies are taxed.
   
   
3. In Denmark, there is a principle of consolidation of corporate taxation, which means that the parent Danish company together with its subsidiaries and branches are subject to it.
   
   

​We also recommend reading our article on accounting in Denmark.​

Choosing the right legal form: ApS, A/S, sole proprietorship and branch office compared

Choosing the right legal form is one of the most important decisions when starting a business in Denmark. It affects your personal liability, tax treatment, reporting obligations, access to social security and how Danish customers and partners perceive your company. Below you will find a practical comparison of the most common forms used by both Danish and foreign entrepreneurs: private limited company (ApS), public limited company (A/S), sole proprietorship and branch office.

ApS – private limited company

An ApS (Anpartsselskab) is the most popular form for small and medium-sized businesses in Denmark and for foreign investors who want a local company with limited liability.

Key characteristics:

• Minimum share capital: DKK 40,000. The capital can be paid in cash or as non-cash contributions (subject to valuation).
• Liability: Limited to the company’s assets. Owners (quotaholders) are not personally liable for company debts, except in cases of fraud or gross negligence.
• Owners and management: Can be owned by one or more individuals or companies, Danish or foreign. At least one director is required; a board of directors is optional for small ApS companies.
• Registration: The company is registered with the Danish Business Authority via Virk.dk and receives a CVR number. Registration is normally completed within a few days if documentation is in order.
• Taxation: ApS is a separate legal and tax entity. Corporate income is taxed at 22%. Profits can be distributed as dividends (subject to withholding tax rules for foreign owners) or retained in the company.
• Accounting and reporting: Mandatory bookkeeping and annual financial statements filed with the Danish Business Authority. Smaller ApS companies may be exempt from statutory audit if they stay below specific size thresholds.

An ApS is usually the preferred choice if you want limited liability, a professional image on the Danish market and the possibility to reinvest profits in the company.

A/S – public limited company

An A/S (Aktieselskab) is designed for larger businesses, companies seeking external investors or planning a stock exchange listing.

Key characteristics:

• Minimum share capital: DKK 400,000. At least 25% of the capital (and always at least DKK 100,000) must be paid in at incorporation, unless all capital is paid in from the start.
• Liability: Limited to the company’s assets, similar to an ApS.
• Owners and management: Can have one or more shareholders. An A/S must have a board of directors or a supervisory board and an executive board. There are stricter rules on corporate governance and decision-making.
• Taxation: Corporate income tax at 22%. Dividend and interest payments to foreign shareholders are subject to Danish withholding tax rules and applicable double tax treaties.
• Reporting and audit: Annual financial statements must be audited, even for smaller A/S companies. Disclosure and governance requirements are more extensive than for an ApS.

An A/S is appropriate if you need a strong capital base, plan to attract institutional investors or want to signal a large, stable structure to Danish business partners.

Sole proprietorship – personally owned business

A sole proprietorship (enkeltmandsvirksomhed) is the simplest form of doing business in Denmark. It is often used by freelancers, consultants and small traders.

Key characteristics:

• No minimum capital: There is no legal requirement for share capital. You can start with very limited funds.
• Liability: The owner is personally and unlimitedly liable for all business obligations. Business and private assets are not separated.
• Registration: The business is registered with the Danish Business Authority and receives a CVR number if it is VAT liable or has employees. The owner uses their CPR number for tax and social security.
• Taxation: Profits are taxed as personal income. You can usually choose between different tax schemes for self-employed (e.g. the business tax scheme) to optimize the split between personal income and capital income. The effective tax burden depends on your total income, but the top marginal tax rate on personal income can exceed 50% when including labour market contribution.
• Social security: As a self-employed person you are generally covered by the Danish welfare system if you are tax resident and pay Danish taxes, but you are not automatically covered by the same unemployment insurance as employees unless you join a voluntary unemployment fund (A-kasse).
• Accounting: You must keep proper accounting records. Smaller sole proprietors do not file public annual reports, but must declare business income in their personal tax return and keep documentation for the Danish Tax Agency.

A sole proprietorship is suitable if you are starting on a small scale, want low start-up costs and are comfortable with personal liability.

Branch office – foreign company operating in Denmark

A branch office (filial) allows a foreign company to operate in Denmark without creating a separate Danish legal entity. The branch is legally part of the foreign company.

Key characteristics:

• No share capital in Denmark: There is no Danish minimum capital requirement, as the branch is backed by the capital of the foreign head office.
• Liability: The foreign parent company is fully liable for all obligations of the Danish branch.
• Registration: The branch must be registered with the Danish Business Authority and receives its own CVR number. A branch manager resident in the EU/EEA is usually required, and the parent company’s constitutional documents must be filed (often with certified translations).
• Taxation: The branch’s profits attributable to its Danish activities are subject to Danish corporate income tax at 22%. The foreign head office is taxed in its home country, with double taxation relief depending on applicable tax treaties.
• Accounting and reporting: The branch must keep Danish accounts and file annual financial information. In many cases, the parent company’s financial statements must also be filed in Denmark.

A branch office can be attractive if you want to test the Danish market under the umbrella of an existing foreign company and are prepared for the parent company to assume full liability.

Key factors when choosing a legal form

When deciding between ApS, A/S, sole proprietorship and branch office, consider the following practical aspects:

• Liability and risk: If you want to protect personal or group assets, an ApS or A/S is usually preferable to a sole proprietorship or branch.
• Capital and financing: If you can meet the capital requirement and plan to reinvest profits, an ApS offers a good balance between protection and flexibility. For larger projects and external investors, an A/S may be more appropriate.
• Tax planning: Corporate forms (ApS, A/S, branch) are taxed at a flat 22% corporate rate, while sole proprietors are taxed under the progressive personal income tax system. The optimal structure depends on expected profit levels, your personal tax situation and whether profits will be distributed or retained.
• Market perception: Danish customers, banks and business partners often view an ApS or A/S as more stable and professional than a sole proprietorship, especially in B2B sectors and for cross-border contracts.
• Administrative burden: Sole proprietorships have simpler reporting, while companies and branches must comply with corporate law, bookkeeping rules and public filing of annual reports. An A/S has the most extensive governance and audit obligations.
• International structure: If you already have a foreign company, you can choose between setting up a Danish ApS owned by the foreign company or opening a Danish branch. The decision will influence your tax position, liability and reporting in both countries.

Before registering your business, it is advisable to analyse your expected turnover, risk profile, number of owners and long-term plans. A Danish accountant or tax adviser can help you compare scenarios and choose the legal form that best supports your business strategy in Denmark.

Step-by-step process of registering a company with the Danish Business Authority (Virk.dk)

Registering a company in Denmark is done online via the Danish Business Authority’s portal Virk.dk. The entire process is digital, relatively fast and, in many cases, can be completed within a few days. Below you will find a practical, step-by-step overview of how to register a private limited company (ApS), public limited company (A/S) or sole proprietorship, including the key decisions and documents you need to prepare.

1. Decide on the company type and structure

Before you start the online registration, you must decide which legal form best suits your business. The most common options are:

• ApS (Anpartsselskab) – private limited company with minimum share capital of DKK 40,000
• A/S (Aktieselskab) – public limited company with minimum share capital of DKK 400,000
• Sole proprietorship (Enkeltmandsvirksomhed) – no minimum capital, the owner is personally liable
• Branch office of a foreign company – no separate Danish legal entity, but must be registered with the Danish Business Authority

The choice of form affects your liability, capital requirements, accounting and tax obligations, so it is worth discussing it with a Danish accountant or advisor before you proceed on Virk.dk.

2. Prepare the necessary information and documents

To complete the registration on Virk.dk, you will need to have specific information ready. For most company types you should prepare:

• Company name – must be unique and not misleading; you can check availability on Virk.dk before registering
• Company purpose (objects) – a short description of the business activities
• Registered address in Denmark – a physical address (not only a P.O. box); for foreign owners this is often a business address service
• Information about owners and management – full name, address, date of birth and national ID or passport details for shareholders and directors
• Share capital details – amount of capital, number of shares/quotas and their nominal value
• Articles of association (for ApS and A/S) – in Danish or English, including rules on management, general meetings and profit distribution
• Memorandum of association / foundation document (for ApS and A/S) – signed by the founders

If the owners or directors are foreign, you may also need notarised and possibly apostilled documents from your home country, especially when registering a branch of a foreign company.

3. Obtain NemID/MitID and set up access to Virk.dk

Most registrations on Virk.dk require secure digital identification. In Denmark this is done via NemID or MitID:

• Danish residents typically use their personal MitID to log in
• Foreign owners and directors may need a MitID Erhverv or a special business identifier to act on behalf of the company

If you cannot obtain MitID yourself, you can authorise a Danish representative (for example, an accountant) to handle the registration on Virk.dk on your behalf.

4. Deposit share capital and obtain bank confirmation (ApS and A/S)

For limited liability companies, you must document that the required share capital has been paid:

• ApS: minimum DKK 40,000 in cash or non-cash contributions
• A/S: minimum DKK 400,000 in cash or non-cash contributions

Typically, you open a temporary capital deposit account with a Danish bank and transfer the share capital. The bank issues a confirmation, which you upload to Virk.dk as part of the registration. In some cases, a Danish auditor can also confirm non-cash contributions.

5. Complete the online registration form on Virk.dk

Once you have all the information and documents, you can start the actual registration:

1. Go to Virk.dk and choose the relevant form for your company type (ApS, A/S, sole proprietorship or branch)
2. Log in with NemID/MitID or through your authorised representative
3. Fill in the company’s basic data: name, address, purpose, contact details
4. Enter information about owners, board members and directors
5. Specify share capital and ownership structure (for ApS and A/S)
6. Upload required documents: articles of association, foundation document, bank confirmation and any powers of attorney
7. Choose whether the company should be registered for VAT and as an employer at the same time

At the end of the form you confirm the information and submit the registration electronically. In most cases, documents can be uploaded in Danish or English.

6. Pay the registration fee

For ApS, A/S and branches, a registration fee is payable to the Danish Business Authority. The fee is paid online during the Virk.dk process, usually by payment card. Sole proprietorships are typically registered without a fee.

The registration is not processed until the fee has been paid successfully, so make sure the payment step is completed and confirmed in the system.

7. Processing by the Danish Business Authority and CVR number

After submission, the Danish Business Authority reviews your application. If everything is in order, the company is registered in the Central Business Register (CVR). You will then receive:

• CVR number – the unique company registration number used in all dealings with Danish authorities and business partners
• Confirmation of registration via digital post (e-Boks) or to the contact email if applicable

Processing time is usually short, but if documents are incomplete or there are questions about ownership or management, the authority may request additional information, which can extend the process.

8. VAT registration and registration as an employer

During or immediately after company registration, you should register for:

• VAT (moms) – mandatory if your taxable turnover exceeds DKK 50,000 within a 12‑month period
• Employer registration – if you plan to hire employees in Denmark

Both registrations are done via Virk.dk, usually through the same interface where you manage your CVR data. You will receive confirmation of VAT registration and reporting deadlines, which depend on your expected turnover.

9. Register for digital post and set up mandatory digital communication

All Danish companies must use digital communication with public authorities. After obtaining a CVR number, you must:

• Activate a digital mailbox (e-Boks or another approved solution) for the company
• Link the mailbox to the CVR number and authorise persons who can read and send messages
• Ensure that NemID/MitID Erhverv is set up correctly for the company

Important letters from the Danish Tax Agency (Skattestyrelsen), the Danish Business Authority and other institutions will be sent only in digital form, so regular access to the digital mailbox is essential.

10. Post-registration obligations and practical next steps

After successful registration on Virk.dk, there are several practical steps to complete before you start operating:

• Convert the temporary capital account into a regular business bank account and link it to your CVR number
• Set up bookkeeping and accounting procedures in line with Danish rules, including secure storage of records for at least 5 years
• Check whether your business requires special licences or permits (for example, construction, transport, food, healthcare)
• Register with relevant insurance schemes, such as workers’ compensation, if you will employ staff

All changes to company data (address, management, share capital, articles of association) must be reported via Virk.dk within the deadlines set by Danish law. Keeping your information up to date in the CVR register is a legal obligation and helps avoid fines and administrative problems.

Requirements for company management: director’s duties, registered address and corporate governance in Denmark

Company management in Denmark is regulated by the Danish Companies Act and related legislation. Whether you run a private limited company (ApS), a public limited company (A/S) or a branch, you must comply with clear rules on directors’ duties, registered address and basic corporate governance. Understanding these requirements from the start helps you avoid personal liability, fines and problems with Danish authorities or banks.

Management structure in ApS and A/S

A Danish ApS must have at least one management body. The most common structure is:

• a management board (executive director / managing director), or
• a board of directors together with an executive management.

An A/S must always have a board of directors or a supervisory board and an executive management. At least one member of the executive management must be registered with the Danish Business Authority (Erhvervsstyrelsen) as the company’s director (CEO/managing director).

There is no requirement that directors are Danish citizens, but they must be at least 18 years old, legally competent and not disqualified from acting as company managers in Denmark (for example due to bankruptcy or a court ban). Certain regulated sectors, such as financial institutions, may have additional fit-and-proper requirements.

Director’s duties and personal liability

Directors and board members have a duty to act in the best interest of the company and all shareholders, not only the majority owner. Their key obligations include:

• ensuring that the company complies with Danish law, including tax, accounting, employment and data protection rules
• monitoring the company’s financial situation on an ongoing basis
• ensuring that bookkeeping is accurate and up to date and that annual reports are prepared and filed on time
• making sure that the company has sufficient capital and liquidity to meet its obligations when due
• reacting without undue delay if the company is in financial difficulty.

If there is reason to believe that the company cannot meet its obligations as they fall due, the management must immediately assess whether the company is insolvent. If insolvency cannot be remedied, the management is obliged to file for bankruptcy with the Danish Maritime and Commercial Court or another competent court. Failure to act in time can lead to personal liability for losses incurred by creditors.

Directors can also be held personally liable for intentional or grossly negligent breaches of their duties, for example:

• systematic non-payment of VAT, A-tax or social contributions
• concealment of assets or manipulation of accounts
• continuing to trade when the company is clearly insolvent.

In serious cases, directors may be disqualified from managing companies in Denmark for a number of years. Many foreign entrepreneurs therefore choose to work with a local accountant or advisor to ensure that management decisions are properly documented and compliant.

Registered address and contact details

Every Danish company must have a registered office address in Denmark. This address is publicly available in the Central Business Register (CVR) and is used by all Danish authorities for official correspondence. Key points include:

• The address must be a physical location where the company can be reached. A pure PO box is not sufficient as the only registered office.
• Virtual office or c/o addresses are allowed if the service provider offers a real business address and mail handling, and the arrangement is properly documented.
• The company must ensure that mail sent to the registered address is regularly collected and handled. Ignoring letters from authorities does not stop deadlines or enforcement.
• Any change of address must be reported digitally to the Danish Business Authority via Virk.dk without undue delay. The change is usually registered the same or next business day.

In addition to the registered office, the company must register its main business activity (NACE code) and any secondary activities. This information is important for tax, statistics and, in some cases, for determining whether special permits or insurances are required.

Corporate governance and decision-making

Danish corporate governance rules are relatively flexible for private companies, but certain formalities must always be respected. The main decision-making bodies are the general meeting of shareholders and the board of directors or executive management.

The general meeting approves the annual report, decides on distribution of profits, appoints and removes board members and auditors, and decides on major structural changes such as capital increases, mergers or liquidation. Ordinary general meetings must be held at least once a year within the deadline for approving the annual report, which is typically within 5 months after the end of the financial year for most small and medium-sized companies.

Minutes must be prepared for general meetings and board meetings. These minutes should record:

• date and place of the meeting
• participants
• agenda items
• decisions taken and, if relevant, voting results.

Minutes must be kept safely for at least 5 years together with other corporate documents. They may be requested by auditors, banks or authorities, especially in case of disputes or inspections.

Shareholders’ agreements and internal rules

Many foreign-owned companies in Denmark supplement the statutory rules with internal governance documents, such as:

• shareholders’ agreements regulating voting rights, transfer of shares, exit mechanisms and dispute resolution
• rules of procedure for the board of directors, defining meeting frequency, reporting requirements and division of responsibilities between board and management
• authorisation policies specifying who can sign contracts, approve payments or represent the company towards banks and authorities.

These documents are not filed with the Danish Business Authority but are important for clear governance and for demonstrating to banks and partners that the company is professionally managed.

Registration of management and beneficial owners

All members of the executive management and board of directors must be registered in the CVR register. Changes in management, such as appointment or resignation of a director, must be reported digitally via Virk.dk as soon as possible.

In addition, Danish companies must register their beneficial owners (UBO) with the Danish Business Authority. A beneficial owner is usually any natural person who directly or indirectly owns more than 25% of the shares or voting rights or otherwise exercises control over the company. If no such person can be identified, the company must register its senior managing officials as beneficial owners. Failure to register or update UBO information can result in fines.

Digital obligations of management

Company management is responsible for ensuring that the business can communicate digitally with Danish authorities. This includes:

• obtaining and managing NemID/MitID for the company’s signatories
• activating and monitoring the company’s digital mailbox (e-Boks / Digital Post)
• authorising employees, accountants or payroll providers to act on behalf of the company in online systems such as TastSelv Erhverv (tax), eIndkomst (payroll reporting) and Virk.dk.

Authorities send most decisions, reminders and deadlines only digitally. The management must therefore ensure that the digital mailbox is checked regularly and that important messages are not overlooked. Missing a deadline due to not reading digital post does not exempt the company from penalties or interest.

Audit requirements and cooperation with auditors

Corporate governance in Denmark also covers the company’s relationship with its auditor. Small ApS companies can opt out of statutory audit if they meet at least two of the following criteria for two consecutive financial years:

• balance sheet total not exceeding DKK 7 million
• net revenue not exceeding DKK 14 million
• average number of full-time employees not exceeding 10.

If the company exceeds these thresholds or is an A/S, audit is mandatory. The general meeting appoints the auditor, but the management is responsible for providing the auditor with correct and complete information and for implementing any necessary improvements in internal controls and procedures.

Practical recommendations for foreign entrepreneurs

Foreign owners and directors often manage Danish companies from abroad. In such cases it is particularly important to:

• appoint at least one person who is familiar with Danish rules and can react quickly to letters from authorities
• ensure that bookkeeping, payroll and tax filings are handled by a reliable local accountant or service provider
• keep clear internal documentation of decisions, especially regarding financing, loans from shareholders, transfer pricing and cross-border services
• review the company’s governance structure regularly as the business grows, for example by adding independent board members or formalising internal policies.

Well-organised management, a correct registered address and transparent corporate governance are not only legal obligations in Denmark. They also build trust with Danish customers, employees, banks and authorities, and significantly reduce the risk of personal liability for directors and owners.

Employment contracts, working time rules and minimum conditions under Danish labour law

Danish labour law is based on a combination of legislation and collective agreements negotiated between social partners. For foreign entrepreneurs this can be unusual: many key employment conditions are not set directly in statutes, but in sectoral agreements with trade unions. However, there are still a number of mandatory rules you must follow when drafting employment contracts, planning working time and ensuring minimum conditions for employees in Denmark.

Employment contracts and mandatory information

In Denmark, an employment contract does not have to be in a specific form, but written terms are effectively mandatory for most employees. Under the Danish Employment Contracts Act, you must provide a written statement of employment terms if the employee:

• works on average more than 3 hours per week, and
• is employed for more than 8 consecutive weeks.

The written terms must be given no later than 7 calendar days after the employment starts. They can be provided as a traditional contract or as a letter of employment, but they must clearly describe at least the following:

• identity of employer and employee (name, address, CVR number)
• place of work (or statement that the employee works at various locations)
• job title or description of duties
• start date and, if applicable, end date or conditions for fixed-term employment
• length and conditions of any probationary period
• normal working hours per week and distribution of working time
• salary, allowances, bonuses and other components of remuneration, including payment intervals
• holiday entitlement and reference to the Danish Holiday Act or relevant collective agreement
• notice periods for termination for both employer and employee
• reference to any applicable collective agreement or local agreement

If you fail to provide correct and complete written terms, the employee may be entitled to compensation. It is therefore important to use updated templates that reflect current Danish rules and any collective agreement that binds your company.

Probationary periods and fixed-term contracts

Probationary periods are common in Denmark but must be clearly stated in the contract. For white-collar employees covered by the Salaried Employees Act (funktionærloven), the probationary period may not exceed 3 months. During this time, the employer can normally terminate the contract with 14 days’ notice. Longer or more restrictive probationary terms are generally invalid.

Fixed-term contracts are allowed, but they must be objectively justified (for example, project work, temporary replacement, seasonal work). Repeated renewals of fixed-term contracts without a valid reason may result in the employment being considered permanent, with full protection under Danish law.

Working time rules and overtime

Denmark implements the EU Working Time Directive through the Danish Working Environment Act and related regulations. The key rules are:

• Average working time must not exceed 48 hours per week, including overtime, calculated over a reference period of up to 4 months (in some collective agreements up to 12 months).
• Employees are entitled to at least 11 consecutive hours of rest in every 24-hour period.
• Employees must have at least one full day off per week, which should normally be Sunday. Over a 7-day period, the minimum continuous rest must be 35 hours.
• Night workers are subject to additional health and safety protections and limits on average night working hours.

Danish law does not set a single statutory maximum for “normal” weekly working hours. In practice, full-time employment is usually 37 hours per week, as defined in many collective agreements. If your company is covered by an agreement, you must follow its detailed rules on working time, overtime, shift work and supplements.

There is no statutory overtime premium rate in general Danish law. Overtime pay, time off in lieu and supplements for evening, night or weekend work are usually regulated by collective agreements or individual contracts. If you are not bound by a collective agreement, you should clearly describe in the contract how overtime is compensated and under what conditions it can be required.

Rest breaks and scheduling

Employees are entitled to appropriate rest breaks during the working day. In many sectors, a 30-minute lunch break is standard for full-time employees. Whether the break is paid or unpaid depends on the contract or collective agreement. If the employee must remain available for work during the break, it will often be considered working time.

Work schedules should be communicated in advance. For shift work and variable hours, many collective agreements require a minimum notice period for changes to the schedule and provide compensation if changes are made at short notice. Even if you are not covered by an agreement, it is good practice to set clear rules for scheduling and changes in the employment contract or staff handbook.

Holidays and public holidays

The Danish Holiday Act grants employees 5 weeks of paid holiday per holiday year, corresponding to 25 days for a full-time employee. Under the current “concurrent holiday” system, employees earn 2.08 days of paid holiday for each month of employment and can generally take the holiday as they earn it within the same holiday year.

In addition to statutory holiday, many collective agreements grant extra “feriefridage” (special holidays), often 5 days per year, which are either paid or unpaid depending on the agreement. These additional days are not mandated by law but are very common in practice.

Denmark has a number of public holidays, such as New Year’s Day, Maundy Thursday, Good Friday, Easter Monday, Ascension Day, Constitution Day (partial), Christmas Day and Boxing Day. Whether employees are entitled to paid days off on public holidays depends on the contract or collective agreement. In many sectors, full-time employees receive pay on public holidays, while hourly paid employees may only be paid if they would normally have worked that day.

Minimum conditions and pay

Denmark does not have a general statutory minimum wage. Instead, minimum pay levels are set in collective agreements negotiated between trade unions and employer organisations. These agreements typically specify:

• minimum hourly wages for different job categories and seniority levels
• supplements for evening, night and weekend work
• overtime rates and rules for time off in lieu
• pension contributions, including minimum employer contribution rates

If your company is party to a collective agreement, you must at least comply with the agreed minimum rates. Even if you are not formally bound, Danish courts and authorities may compare your pay and conditions with relevant collective agreements when assessing whether you offer “usual and customary” conditions in the sector.

In practice, foreign employers operating in Denmark should ensure that wages are at least at the level of the dominant collective agreement in the relevant industry, especially when posting workers from abroad. This is important both for compliance and for avoiding conflicts with trade unions.

Equal treatment and non-discrimination

Danish law strictly prohibits discrimination in employment on grounds such as gender, pregnancy, maternity or paternity leave, age, disability, race, ethnic origin, religion or belief, sexual orientation and political opinion. Equal treatment rules apply to recruitment, pay, promotion, training and termination.

Employees performing the same work or work of equal value must receive equal pay, regardless of gender. Employers with a certain number of employees may be required to prepare gender-segregated pay statistics or other documentation to monitor equal pay. Discrimination claims can lead to compensation and reputational damage, so it is essential to have clear, objective criteria for pay and career development.

Notice periods and termination

Notice periods in Denmark depend on the type of employee and length of service. For salaried employees covered by the Salaried Employees Act, the employer’s notice period increases with seniority:

• 1 month during the first 6 months of employment
• 3 months after 6 months of employment
• 4 months after 3 years of employment
• 5 months after 6 years of employment
• 6 months after 9 years of employment

The employee’s notice period is usually 1 month, unless a longer period is agreed in the contract. For hourly workers not covered by the Salaried Employees Act, notice periods are often set in collective agreements or individual contracts and can be shorter, especially in the first months of employment.

Termination must always be reasonably justified. For salaried employees with at least 1 year of service, dismissals must be “reasonably justified” by the employee’s or the company’s circumstances. Unfair dismissals can result in compensation. Special protection applies to employee representatives, pregnant employees and employees on parental leave.

Parental leave and family-related rights

Danish employees have extensive rights to parental leave. The system combines maternity, paternity and parental leave, with a total leave period that can extend over many months. While the state pays parental benefits up to a certain ceiling, many collective agreements provide additional employer-paid salary during parts of the leave.

As an employer, you must:

• allow the employee to take the statutory leave they are entitled to
• respect protection against dismissal due to pregnancy or parental leave
• coordinate with the employee and authorities regarding applications for parental benefits

Family-related rights also include time off for child’s illness and care days in many collective agreements. These rights should be clearly described in your internal policies and, where relevant, in employment contracts.

Practical recommendations for foreign employers

To comply with Danish labour law and market practice when hiring employees in Denmark, you should:

• identify whether your business is or will be covered by a Danish collective agreement and understand its implications for pay and working conditions
• use up-to-date, bilingual (English–Danish) employment contract templates that reflect current legislation and sector standards
• clearly define working hours, overtime rules, breaks and shift patterns in the contract or staff handbook
• ensure that holiday, public holiday pay and any extra days off are handled in line with the Holiday Act and relevant agreements
• establish internal procedures for notice periods, terminations and documentation of performance issues
• implement equal treatment and anti-discrimination policies and train managers in Danish rules

Working with a Danish accountant or payroll and HR specialist can significantly reduce the risk of non-compliance and help you adapt your employment practices to local requirements while remaining attractive as an employer on the Danish labour market.

Social security and pension contributions for employees and self-employed in Denmark

Social security and pension contributions in Denmark work differently from many other EU countries. There is no single, high social security contribution paid as a percentage of salary. Instead, the system is based on relatively low, fixed employer contributions, general taxation and mandatory labour‑market pension schemes agreed in employment contracts or collective agreements.

Public social security in Denmark – who is covered

Most social benefits in Denmark are financed from general taxes and residence, not from classic social security contributions. As a rule, an employee or self‑employed person becomes covered by the Danish social security system if they are socially insured in Denmark under EU rules or a bilateral agreement and actually work or run a business in Denmark.

Key public benefits linked to Danish social security include:

• state pension (folkepension) – based mainly on years of residence in Denmark
• unemployment benefits (via an unemployment fund – A‑kasse – with separate membership fees)
• sickness and maternity/paternity benefits
• family benefits and child allowance

Foreign entrepreneurs should always check whether they or their employees are covered by Danish or foreign social security (A1 certificate, place of work, duration of posting). Being insured in another country usually means no Danish social security contributions are due, but documentation is essential.

Employer social contributions for employees

Employers in Denmark do not pay a percentage social contribution on top of gross salary. Instead, they pay several fixed or low‑rate contributions per employee, often quarterly or annually. The exact amounts depend on sector and risk profile, but typically include:

• ATP (Arbejdsmarkedets Tillægspension) – statutory labour market supplementary pension
• contributions to statutory industrial injury insurance schemes
• financing schemes for sickness, maternity and training (for example AUB, AES, barsel funds)

These costs are relatively moderate compared to many other EU countries, but they must be included in payroll budgeting and pricing of services.

ATP – statutory labour market pension

ATP is a mandatory supplementary pension scheme for most employees aged 16–66 who work at least 9 hours per week on average. Contributions are shared between employer and employee and are fixed amounts, not a percentage of salary.

For a full‑time employee (37 hours per week), the total ATP contribution per month is in the range of a few hundred DKK, of which approximately two thirds is paid by the employer and one third by the employee. For part‑time employees, the contribution is reduced according to hours worked.

Employers must:

• register with ATP
• calculate the correct ATP rate based on working hours
• withhold the employee’s share from salary
• pay both shares to ATP on time, usually together with other labour‑market contributions

Occupational pension schemes (employer pensions)

In addition to ATP, most employees in Denmark are covered by an occupational pension scheme (arbejdsmarkedspension) agreed in a collective agreement or individual contract. These schemes are not part of public social security, but in practice are treated as a standard employment benefit.

Typical parameters for occupational pensions:

• total pension contribution: often between 12–18% of gross salary
• employer share: usually around 2/3 of the total (for example 8–12%)
• employee share: usually around 1/3 of the total (for example 4–6%), withheld from salary
• coverage: retirement savings plus insurance for disability and death

In sectors covered by collective agreements, minimum pension contributions and conditions are binding. Foreign employers operating in Denmark must respect these rules if they fall under a collective agreement, even when the company is foreign.

Social security and pensions for self‑employed

Self‑employed persons in Denmark are generally covered by the public social security system through residence and taxation, but they do not pay classic social contributions as a percentage of profit. Instead:

• they pay income tax and labour market contribution (AM‑bidrag) on business income
• they can voluntarily join an unemployment fund (A‑kasse) for self‑employed
• they are not automatically covered by ATP as self‑employed, unless they also have employment income covered by ATP

Because there is no mandatory occupational pension for self‑employed, it is strongly recommended to set up private pension savings. Popular options include:

• ratepension (installment pension)
• aldersopsparing (age savings)
• livrente (life annuity)

Pension contributions paid by a self‑employed person can usually be deducted from taxable income within annual limits set in Danish tax law. The exact deduction cap depends on the type of pension product and should be checked each year.

Labour market contribution (AM‑bidrag) versus social contributions

Both employees and self‑employed in Denmark pay a labour market contribution (AM‑bidrag) of 8% of gross income from work or business before income tax. Although it finances the labour market and social security system, it is treated as a tax, not a social security contribution.

For employees, AM‑bidrag is withheld by the employer together with A‑tax (income tax). For self‑employed, it is calculated and paid through advance tax and annual tax return. When planning salary levels and net income, it is important to include the 8% AM‑bidrag in calculations.

Cross‑border situations and social security

Foreign companies and entrepreneurs active in Denmark must pay particular attention to which country’s social security rules apply. Key points:

• within the EU/EEA and Switzerland, the general rule is that social security is due in the country where the work is physically performed
• posted workers can remain insured in their home country if they hold a valid A1 certificate and meet posting conditions
• outside the EU, bilateral social security agreements may apply or, in their absence, Danish rules will usually apply to work carried out in Denmark

If Danish social security applies, the employer must register in Denmark, pay ATP and other mandatory labour‑market contributions and, where relevant, set up occupational pension schemes in line with Danish standards or collective agreements.

Practical obligations for employers and entrepreneurs

When hiring staff or starting a business in Denmark, make sure to:

• determine social security coverage (Denmark or another country) and obtain necessary documentation
• register as an employer with the Danish tax authority (Skattestyrelsen) and with ATP
• set up correct payroll procedures for AM‑bidrag, A‑tax, ATP and occupational pension contributions
• check whether a collective agreement applies and what minimum pension contributions it requires
• inform employees clearly about their pension scheme, contributions and insurance coverage

For self‑employed, it is crucial to plan long‑term pension savings and insurance (sickness, disability, accident) privately, as public benefits alone may not be sufficient to maintain the desired standard of living after retirement or in case of loss of earning capacity.

Payroll administration in Denmark: reporting to eIncome (eIndkomst) and withholding A-tax and AM-contribution

Running payroll in Denmark means complying with detailed rules on reporting salaries and withholding Danish income tax and labour market contributions. Correct and timely reporting to the eIncome system (eIndkomst) is essential, as the Danish Tax Agency (Skattestyrelsen) uses this data to calculate employees’ tax, social security and benefits. Errors or delays can quickly lead to penalties and unnecessary audits.

What is eIncome (eIndkomst) and who must report

eIncome is the central electronic register where all employers and certain payers must report payments to individuals. Reporting to eIncome is mandatory for:

• All Danish employers paying salary, bonuses, benefits in kind or holiday pay
• Foreign companies with employees working in Denmark and a Danish payroll obligation
• Companies paying fees to board members, freelancers or other individuals subject to Danish tax

Reporting is done via the TastSelv Erhverv portal, payroll software integrated with eIncome, or by file upload using the official XML format. Each report is linked to the employee’s CPR number and the employer’s CVR number and SE number.

Deadlines for payroll reporting to eIncome

For most employers, payroll must be reported to eIncome no later than the last day of the month following the payment date. If salary is paid at the end of the month, reporting and payment of withheld amounts are typically due in the following month. Larger employers with high payroll volumes may be subject to shorter deadlines and more frequent settlement periods.

Late or missing eIncome reports can result in:

• Estimated assessments of tax and AM-contribution by the tax authorities
• Interest and surcharges on late payments
• Administrative fines for serious or repeated non-compliance

Withholding A-tax (A-skat) from employees’ salaries

A-tax is the Danish withholding tax on personal income from employment. Employers are responsible for calculating and withholding A-tax each time salary is paid. The calculation is based on the individual employee’s tax card (skattekort), which the employer must retrieve electronically from Skattestyrelsen.

Key elements of A-tax withholding include:

• Tax card types: primary tax card (hovedkort) and secondary tax card (bikort). The employer must use the card indicated by the employee and the tax authorities.
• Personal allowance: the annual personal allowance is built into the tax card and automatically reduces the taxable income each month.
• Withholding rate: the tax card specifies the percentage to be withheld as A-tax after the allowance is applied.

Employers must not guess or manually set the tax rate. If no valid tax card is available, the employer must withhold A-tax at a high standard rate specified by the tax authorities until the correct card is received.

AM-contribution (AM-bidrag) – labour market contribution

In addition to A-tax, employers must withhold the mandatory labour market contribution (AM-contribution) from employees’ gross salary. The AM-contribution rate is 8% of the employee’s gross A-income before A-tax is calculated.

The correct order of calculation is:

1. Calculate gross salary and taxable benefits
2. Withhold 8% AM-contribution on this amount
3. Apply the employee’s personal allowance and tax rate to the remaining amount to calculate A-tax

Both A-tax and AM-contribution are reported together in eIncome and paid to Skattestyrelsen by the statutory deadlines.

Other amounts to report via eIncome

Besides A-tax and AM-contribution, employers must report several other payroll components through eIncome, including:

• Holiday pay and holiday allowances (feriepenge)
• Taxable benefits in kind, such as company car, free telephone or housing
• Employer and employee pension contributions
• Taxable allowances and bonuses
• Fees to board members and certain contractors taxed as A-income

Correct classification of each payment type is crucial, as it affects taxation, social security and employees’ rights to benefits.

Payment of withheld A-tax and AM-contribution

After reporting to eIncome, employers must transfer the withheld A-tax and AM-contribution to Skattestyrelsen. Payment is made using the payment ID generated in TastSelv Erhverv or payroll software. The payment deadline normally matches the reporting deadline for the relevant settlement period.

Failure to pay on time leads to interest charges and possible surcharges. The tax authorities closely monitor differences between reported and paid amounts, so reconciliations should be performed regularly.

Payroll for foreign employers and cross-border workers

Foreign companies with employees working in Denmark often have Danish payroll obligations, even if the employer has no permanent establishment. In such cases the company must:

• Register for a Danish CVR/SE number
• Set up access to TastSelv Erhverv and eIncome
• Withhold Danish A-tax and AM-contribution when the income is taxable in Denmark

Special rules apply to posted workers, short-term assignments and employees covered by double taxation treaties. It is important to assess where the employee is tax resident and whether Denmark has the right to tax the salary. Incorrect handling can result in double taxation or unexpected tax bills for both employer and employee.

Data quality, corrections and year-end control

Because eIncome data is used directly for employees’ annual tax assessments, data quality is critical. Employers should:

• Check each payroll run for missing CPR numbers, wrong income types or negative amounts
• Correct errors by submitting amended eIncome reports as soon as they are discovered
• Perform year-end reconciliations between payroll records, eIncome data and financial accounts

When corrections are made, the tax authorities automatically update the employee’s tax information. Prompt corrections help avoid employee complaints and additional correspondence with Skattestyrelsen.

Why work with a Danish payroll specialist

Danish payroll rules are detailed and change regularly, especially regarding reporting formats, deadlines and the interaction between tax, social security and employment law. For many foreign entrepreneurs and growing companies, outsourcing payroll administration in Denmark to a local accountant or payroll bureau is the most efficient solution.

A professional payroll provider will ensure that:

• All salaries and benefits are correctly classified and taxed
• eIncome reporting is complete and submitted on time
• A-tax and AM-contribution are calculated and paid correctly
• Changes in legislation are implemented without disrupting your business

Reliable payroll administration in Denmark reduces risk, saves time and gives both employers and employees confidence that their tax and social security obligations are handled correctly.

Collective agreements (overenskomster) and cooperation with Danish trade unions

Collective agreements (overenskomster) are a central element of the Danish labour market model. Instead of detailed statutory regulation of wages and many working conditions, these issues are largely negotiated between employers (or employer organisations) and trade unions. For foreign entrepreneurs this can be surprising, but understanding when and how collective agreements apply is crucial to avoid disputes, inspections and back payments.

How collective agreements work in Denmark

Denmark has no statutory minimum wage. In practice, minimum pay levels, supplements and many working conditions are set in sectoral or company-level collective agreements. These agreements are negotiated between trade unions (e.g. 3F, HK, Dansk Metal, FOA) and employer organisations (e.g. DI, Dansk Erhverv) or individual companies.

A collective agreement typically regulates, among other things:

• Minimum hourly wages and pay scales (often differentiated by job type, seniority and qualifications)
• Overtime pay, shift allowances and work on Sundays and public holidays
• Working time, breaks, on-call duty and rules for scheduling shifts
• Holiday, additional paid days off and holiday supplements
• Special leave (e.g. maternity, paternity and parental leave supplements, care days)
• Pension contributions (often 8–12% of pay, split between employer and employee)
• Notice periods, severance pay and rules for dismissal procedures
• Training, competence development and reimbursement schemes
• Health and safety cooperation and the role of employee representatives

Collective agreements are usually concluded for a fixed term (often 2–3 years) and are regularly renegotiated. Rates and conditions can therefore change, and employers must ensure they are using the latest version of the agreement.

When does a collective agreement apply to your business?

In Denmark, collective agreements do not automatically apply to all companies in a sector. They bind:

• Companies that are members of an employer organisation that has signed the agreement
• Companies that have signed a company-level agreement with a trade union

However, even if your company is not formally covered, you may still be under pressure to follow the relevant agreement in practice. Trade unions can launch a so-called organisational conflict (e.g. strike, blockade, sympathy actions) to persuade a company to sign an agreement. This is legal under Danish labour law, provided certain rules are followed.

In many industries (construction, cleaning, transport, hospitality, manufacturing) it is considered standard to be covered by a collective agreement. Large Danish contractors and public authorities often require subcontractors to follow the relevant agreement as a condition for cooperation or participation in tenders.

Foreign companies and posted workers

Foreign companies operating in Denmark, including those posting workers from other countries, are not automatically exempt from collective agreements. Trade unions actively monitor foreign service providers and may contact you to sign an agreement if your employees work under conditions that are significantly below the Danish level.

For posted workers, Denmark applies the EU rules on minimum conditions. In practice, this means that foreign employers must respect at least the core conditions set by the relevant Danish collective agreement, including:

• Minimum pay and key supplements
• Maximum working hours and minimum rest periods
• Paid holidays and holiday pay
• Health and safety standards

If a foreign company refuses to sign an agreement, unions can still use collective actions to push for Danish-level conditions. Disputes can lead to claims for back pay, reputational damage and difficulties in obtaining or keeping contracts in Denmark.

Cooperation with Danish trade unions in practice

Cooperation with trade unions in Denmark is usually pragmatic and solution-oriented. Many conflicts can be avoided by early dialogue and transparency about pay and working conditions. For a foreign entrepreneur, it is often beneficial to:

• Identify which union is relevant for your sector and type of employees
• Clarify whether there is a standard sectoral agreement that should apply to your business
• Review wage tables, pension rules and supplements before hiring staff or posting workers
• Keep written documentation of employment terms, payslips and working time records

Trade unions can also be a source of practical information about typical pay levels, training schemes and sector-specific rules. In many cases, they prefer to reach an agreement rather than escalate a dispute.

Signing a collective agreement: what to expect

If you decide or are required to sign a collective agreement, you will typically go through a negotiation process with the relevant union or employer organisation. Key points to consider include:

• Scope of the agreement – which employees and job categories are covered
• Implementation date and handling of any back pay obligations
• Adaptation of existing employment contracts to the agreement’s standards
• Registration and reporting obligations (e.g. pension schemes, holiday accounts)

Once signed, the agreement is binding for its term. You must apply its rules consistently to all covered employees, regardless of nationality. Failure to comply can lead to union claims, arbitration cases and financial compensation to employees.

Impact on payroll, pension and HR administration

Being covered by a collective agreement has a direct impact on your payroll and HR processes. You must ensure that your systems and procedures can handle, among other things:

• Correct application of minimum wage scales and supplements (e.g. evening, night, weekend work)
• Automatic calculation of overtime and time-off in lieu where applicable
• Payment of pension contributions to the agreed pension provider and at the agreed rates
• Holiday pay administration, including any holiday supplements above the statutory 12.5%
• Correct handling of sick pay, maternity and paternity pay supplements according to the agreement

For many foreign companies, cooperation with a Danish accountant or payroll provider is essential to ensure compliance with both tax and labour obligations arising from collective agreements.

Dispute resolution and the Danish Labour Court system

Disputes about the interpretation or breach of collective agreements are usually handled within the Danish labour law system, not the ordinary courts. Typical mechanisms include:

• Local negotiations between the company and union representatives
• Mediation by the employer organisation and the union’s central office
• Arbitration tribunals specialised in labour disputes
• The Danish Labour Court (Arbejdsretten) for conflicts about collective agreements and industrial actions

This system is designed to resolve disputes relatively quickly and maintain industrial peace. However, proceedings can still be time-consuming and costly, especially if the company has not kept proper documentation of pay and working hours.

How a Danish accounting and payroll partner can help

For foreign entrepreneurs, the combination of collective agreements, Danish tax rules and social security obligations can be complex. A local accounting and payroll partner can help you:

• Identify which collective agreement is relevant for your business
• Translate agreement provisions into concrete payroll rules and procedures
• Set up correct wage types, supplements and pension contributions in your payroll system
• Prepare compliant employment contracts and payslips
• Document compliance in case of union inspections or audits by Danish authorities

By understanding how collective agreements and cooperation with Danish trade unions work, you can significantly reduce the risk of conflicts, ensure predictable labour costs and build a stable, law-compliant business in Denmark.

Insurance obligations for businesses in Denmark: workers’ compensation, liability and other key policies

Insurance is a core part of running a compliant and financially secure business in Denmark. Some insurances are mandatory under Danish law, while others are strongly recommended because of typical contractual requirements, industry practice and risk management. Below is an overview of the key policies you should consider when operating a company in Denmark, whether through an ApS, A/S, sole proprietorship or branch.

Workers’ compensation insurance (arbejdsskadeforsikring)

If you employ staff in Denmark, you must take out workers’ compensation insurance with a private Danish insurance company. This obligation applies from the first employee, regardless of whether they work full-time, part-time, on a temporary basis or as a student worker.

The mandatory workers’ compensation insurance typically covers:

• Occupational accidents – sudden events causing injury during working hours or on the way to or from work
• Occupational diseases – illnesses recognised as work-related under Danish rules
• Compensation – for loss of earning capacity, permanent injury, treatment expenses and in some cases compensation to dependants in case of death

Premiums are calculated mainly based on your industry, the type of work performed and your payroll. High‑risk sectors such as construction, transport or manufacturing pay higher premiums than office-based businesses. If you fail to take out workers’ compensation insurance, you risk fines, retroactive premium payments and personal liability for uncovered claims.

Industrial injury insurance and Labour Market Insurance (AES)

In addition to private workers’ compensation insurance, Danish employers must pay contributions to the Labour Market Insurance scheme (Arbejdsmarkedets Erhvervssikring – AES). These contributions finance statutory compensation for occupational injuries and diseases. AES rates are set annually and depend on your industry code (branchekode). Contributions are normally charged per employee and reported together with other labour market contributions via the Danish tax system.

Foreign companies with employees working in Denmark are usually covered by the same rules as Danish employers. If your staff are posted from another EU/EEA country and remain covered by the social security system of their home state, special coordination rules may apply, but you still need to assess whether Danish workers’ compensation insurance is required for the assignment.

Employer’s liability and general liability insurance

While workers’ compensation insurance covers injuries to employees, it does not protect your business against claims for damage caused to customers, suppliers or third parties. For this reason, most companies in Denmark take out:

• General liability insurance (erhvervsansvarsforsikring) – covers personal injury and property damage unintentionally caused by your business activities, products or employees
• Product liability insurance – particularly important for manufacturers, importers and distributors; covers damage caused by defective products under Danish and EU product liability rules

Liability limits are typically agreed per claim and per year, for example DKK 5–10 million per incident and DKK 10–20 million per insurance year for small and medium‑sized businesses. Higher limits are common in construction, engineering and export‑oriented sectors. Many Danish customers, public authorities and large contractors require documented liability coverage as a condition for signing a contract.

Professional indemnity insurance

Companies providing advisory or professional services should consider professional indemnity insurance (professionel ansvarsforsikring). This policy covers financial loss suffered by clients due to professional errors, negligence or omissions. It is particularly relevant for:

• Accountants, bookkeepers and tax advisers
• Lawyers and legal consultants
• Architects, engineers and IT consultants
• Business and management consultants

For some regulated professions, minimum insurance limits are set by law or by professional bodies. For example, authorised public accountants and lawyers must maintain professional indemnity insurance with specified minimum coverage per claim and per year. Even where it is not legally mandatory, Danish clients often expect proof of professional indemnity insurance before entering into a long‑term advisory agreement.

Property, contents and business interruption insurance

If your company owns or leases premises, machinery, IT equipment or stock in Denmark, you should review the need for:

• Property and contents insurance – covers buildings, fixtures, inventory, machinery, IT hardware and stock against fire, water damage, theft, vandalism and other defined risks
• Business interruption insurance – compensates for lost profit and fixed costs if your operations are interrupted due to an insured event, such as fire or major water damage

Landlords in Denmark often require tenants to take out contents and liability insurance and may themselves insure the building. Always check your lease agreement to understand who is responsible for which type of coverage and what minimum sums insured are required.

Motor insurance for company vehicles

If your business owns or uses vehicles registered in Denmark, you must have at least third‑party motor liability insurance (ansvarsforsikring) for each vehicle. This is a legal requirement from the day the vehicle is registered. Many companies also purchase:

• Comprehensive insurance (kaskoforsikring) – covers damage to the company’s own vehicles, for example after collisions, vandalism or theft
• Roadside assistance – useful for businesses that depend on transport or service visits

For foreign companies temporarily using vehicles in Denmark, EU and international rules on motor insurance apply, but you should ensure that your existing policies explicitly cover business use in Denmark and the rest of the EU.

Cyber, data protection and crime insurance

Digitalisation and mandatory electronic communication with Danish authorities increase the importance of cyber risk management. Many businesses in Denmark now consider:

• Cyber insurance – covers costs related to data breaches, ransomware, business interruption due to cyberattacks, forensic IT services, notification of affected individuals and crisis communication
• Data protection liability cover – helps manage claims and certain costs arising from breaches of GDPR obligations, including defence costs in regulatory investigations
• Crime insurance – protects against internal fraud, embezzlement and certain types of external financial crime

While not legally mandatory, these policies are increasingly requested by Danish business partners, especially in IT, finance, e‑commerce and professional services.

Insurance for self‑employed and company owners

Self‑employed persons and owners of Danish companies are not automatically covered by workers’ compensation insurance for their own injuries. If you work actively in your business, you should consider:

• Voluntary workers’ compensation‑like cover for owners and self‑employed
• Health insurance and accident insurance
• Key person insurance, especially if the company’s revenue depends heavily on one or two individuals

These policies can be structured either privately or through the company, depending on tax and social security considerations. A Danish accountant or insurance adviser can help you choose the most efficient setup.

Sector‑specific and contractual insurance requirements

Certain industries in Denmark are subject to additional insurance obligations or strong market expectations. Examples include:

• Construction and installation – extended liability and construction all‑risk insurance; often specific coverage limits required by public and large private clients
• Transport and logistics – carrier’s liability insurance and cargo insurance in line with CMR and other transport conventions
• Healthcare and care services – professional liability and patient‑related coverage according to sector rules
• Financial services – special capital and insurance requirements set by the Danish Financial Supervisory Authority (Finanstilsynet)

Before starting operations, review tender documents, framework agreements and industry standards to identify any minimum insurance limits, specific policy clauses or requirements for Danish‑licensed insurers.

Practical steps for arranging business insurance in Denmark

To ensure your company meets Danish insurance obligations and avoids unnecessary gaps in coverage, it is advisable to:

1. Map your activities in Denmark, including number of employees, locations, vehicles and contractual obligations
2. Clarify whether you are an employer under Danish law and from which date workers’ compensation insurance is required
3. Collect information on payroll, industry code (NACE/branchekode), expected turnover and assets, as insurers will request these details
4. Obtain offers from several Danish insurers or brokers, comparing coverage limits, exclusions, deductibles and premium levels
5. Review policy wording carefully, especially territorial scope (coverage in Denmark, EU and worldwide) and any special conditions for foreign‑owned companies
6. Update your insurance portfolio regularly when you hire more staff, change premises, expand activities or enter new contracts

Cooperation with a Danish accountant or adviser experienced in local insurance and tax rules can help you structure premiums, allocate costs correctly in your accounts and document compliance during inspections or audits.

Environmental and sector-specific permits required for certain types of activities in Denmark

In Denmark, many types of business activities require environmental or sector-specific permits before you start operating. The rules are strictly enforced and inspections are common, so it is important to clarify your permit obligations early in the planning phase. Below you will find an overview of the most relevant permits for foreign entrepreneurs and small and medium-sized companies.

When does your business need an environmental permit?

Danish environmental regulation is based on the Environmental Protection Act and a detailed list of activities that are classified as potentially polluting. In practice, you must check whether your activity is listed in the so‑called “environmental approval order” (miljøgodkendelsesbekendtgørelsen). Typical examples include:

• Manufacturing with significant use of chemicals, solvents, paints or adhesives
• Metal processing, surface treatment, galvanising and powder coating
• Food production, slaughterhouses, dairies and larger bakeries
• Waste management, recycling plants, scrap yards and storage of hazardous waste
• Large workshops, car painting, body shops and vehicle washing facilities
• Storage of fuels, oils and other hazardous substances above certain volume thresholds

If your activity is covered, you must obtain an environmental permit (miljøgodkendelse) from the local municipality or, for larger and more complex plants, from the Danish Environmental Protection Agency. The permit will typically regulate emissions to air and water, noise limits, waste handling, storage of chemicals and reporting obligations. Operating without a required permit can lead to orders to stop operations, daily fines and, in serious cases, criminal liability for the management.

Noise, odour and local nuisance rules

Even if your business does not need a full environmental permit, you must comply with local rules on noise, odour and other nuisances. Municipalities set binding noise limits for different zones (residential, mixed, industrial), usually expressed as maximum decibel levels during day, evening and night. Typical issues arise for:

• Workshops and logistics companies operating at night or early morning
• Restaurants, bars and clubs with outdoor serving or music
• Food production and animal-related activities causing odour

Before signing a lease, it is wise to ask the municipality for the applicable noise limits at the address and whether any complaints have been registered. In many cases, you must document noise calculations or implement mitigation measures such as sound insulation, restricted operating hours or noise barriers.

Waste management and hazardous substances

All businesses in Denmark must sort waste and comply with municipal waste regulations. For most companies this means:

• Separate collection of paper, cardboard, glass, metal, plastic, food waste and residual waste
• Use of approved waste carriers and treatment facilities
• Keeping documentation (invoices, contracts) for waste disposal

If you handle hazardous waste (for example oils, solvents, paint residues, chemicals, contaminated packaging or electronic waste), you must:

• Register with the municipal hazardous waste scheme or an approved private operator
• Store hazardous waste in labelled, closed containers on impermeable surfaces with spill protection
• Ensure that transport and treatment are carried out by licensed companies

Companies that import or produce electrical and electronic equipment, batteries or packaging may also have producer responsibility obligations, including registration and reporting in dedicated national schemes.

Water, wastewater and emissions to air

Discharging process water or wastewater to the public sewer system or directly to surface water often requires a specific discharge permit from the municipality or utility company. This applies in particular to:

• Food processing and industrial kitchens with high fat or organic load
• Car washes and workshops with oil, heavy metals or detergents
• Industrial processes using chemicals or cooling water

Permits usually set limit values for substances such as oils, heavy metals, organic matter and pH, and may require installation of grease traps, oil separators or pre-treatment systems. For certain activities, emissions to air (for example dust, fumes, volatile organic compounds) are also regulated and may require filters, scrubbers or other abatement technology.

Construction, zoning and change of use

Before you start operating from a specific location, you must ensure that the premises are legally suitable for your activity. In Denmark this involves:

• Zoning and local plans: The municipal local plan (lokalplan) defines which types of activities are allowed in a given area (residential, mixed, light industry, heavy industry, retail, etc.). If your planned use does not fit, you may need a dispensation or a change of plan, which can be time-consuming.
• Building permits: Structural changes, extensions, new buildings, installation of ventilation systems, flues or significant technical installations often require a building permit from the municipality. Fire safety, accessibility and energy performance are checked as part of the process.
• Change of use: Converting, for example, an office into a restaurant, a warehouse into a workshop or a residential unit into a clinic typically requires municipal approval for change of use, including an assessment of parking, noise, fire safety and sanitary facilities.

Food, hospitality and hygiene permits

If your business handles food or beverages, you must register or obtain approval from the Danish Veterinary and Food Administration before starting operations. This applies to:

• Restaurants, cafés, bars and catering companies
• Food trucks and mobile food stands
• Food production, processing and wholesale
• Importers and exporters of food and food ingredients

You must implement a documented food safety system based on HACCP principles, ensure proper temperature control, cleaning routines, pest control and staff hygiene training. After registration, your business will be inspected and receive a public “smiley” report that must be displayed at the premises and online. Violations can lead to fines, orders to correct deficiencies and, in serious cases, temporary closure.

Alcohol, tobacco and entertainment licences

Serving alcohol on the premises normally requires a licence from the local police and municipality. The conditions depend on the type of establishment, opening hours, location and any previous issues with noise or public order. You must document responsible management, age control procedures and compliance with fire and safety rules.

Shops selling tobacco, e‑cigarettes or nicotine products must comply with strict rules on registration, product display, age limits and marketing. Certain entertainment activities, such as nightclubs, gaming arcades or events with large audiences, may require additional permits related to crowd safety, fire safety and public order.

Transport, logistics and vehicle-related activities

Companies involved in transport and logistics may need sector-specific approvals, for example:

• Licences for commercial road transport of goods or passengers
• Approval for operating a taxi, limousine or bus service
• Permits for oversized or heavy transports on public roads
• Environmental permits for logistics centres, warehouses and truck depots with significant traffic and noise

Workshops, car painting facilities and vehicle washing stations often fall under environmental rules due to chemicals, solvents, noise and wastewater. In many cases, both an environmental permit and a wastewater discharge permit are required.

Energy, renewables and climate-related permits

Denmark actively promotes renewable energy, but installations must still comply with planning and environmental rules. Depending on size and location, you may need permits for:

• Solar farms and large rooftop solar installations
• Wind turbines and wind farms
• Biogas plants and biomass boilers
• Combined heat and power (CHP) units

Permits typically address visual impact, noise, connection to the grid, safety distances, emissions and, for larger projects, environmental impact assessments. Even smaller energy projects in industrial areas may require notification to the municipality and the grid operator.

Sector-specific permits in construction and high‑risk industries

Certain high‑risk activities are subject to additional sector-specific rules. Examples include:

• Demolition and asbestos removal, which require special authorisation and certified staff
• Handling of explosives, fireworks or pyrotechnics
• Storage and use of large quantities of flammable or explosive substances
• Operation of certain types of pressure equipment and lifting equipment

In these sectors, you must usually combine environmental permits with occupational health and safety approvals, technical inspections and regular certification of equipment.

How to check which permits you need

The starting point for any new business in Denmark should be a systematic review of permit requirements. A practical approach is to:

1. Describe your planned activities in detail, including processes, materials, opening hours and expected volumes.
2. Identify the location and check the municipal local plan, zoning and any restrictions on noise, traffic or use.
3. Contact the municipality’s business or environmental department to clarify whether your activity is listed as requiring an environmental permit or only notification.
4. Check whether you fall under food, alcohol, transport, health, construction or other sector-specific rules and contact the relevant authority if in doubt.
5. Plan sufficient time for applications, as environmental and building permits can take several weeks or months, especially for complex projects.

Why early compliance matters for foreign entrepreneurs

Danish authorities expect full compliance from the first day of operation. Inspections are risk‑based and often target new businesses, activities with potential environmental impact and sectors with a history of violations. For foreign entrepreneurs, the most common problems are:

• Signing a lease or starting construction before checking zoning and permit requirements
• Importing machinery or setting up production lines without an environmental or discharge permit
• Opening a restaurant or workshop before food, alcohol or wastewater registrations are in place

Working with a Danish accountant or advisor who understands both tax and regulatory requirements can help you coordinate permit applications with your business registration, budgeting and timelines. Proper planning reduces the risk of delays, unexpected investment in additional equipment and fines for non‑compliance.

Digital obligations: NemID/MitID, e-Boks and mandatory digital communication with Danish authorities

Running a business in Denmark means handling almost all communication with public authorities digitally. As an entrepreneur you must be prepared to use Danish digital solutions from the very beginning: MitID (which has replaced NemID), e-Boks and the mandatory digital self-service platforms of the authorities. Without them you cannot register a company, file tax returns or receive official letters.

MitID – your digital ID for business in Denmark

MitID is the national electronic identification system used to log in to public portals and many private services such as banks. NemID is being phased out and new users are issued MitID only. As a foreign entrepreneur you will usually need a Danish civil registration number (CPR) or at least a central business registration number (CVR) and a so‑called MitID Erhverv (MitID for business) to act on behalf of your company.

MitID is required in particular for:

• registering and updating your company data on the Danish Business Authority portal (Virk.dk)
• accessing tax accounts and filing VAT and tax returns in TastSelv Erhverv (business self‑service at skat.dk)
• reporting salaries and social contributions via eIndkomst
• signing many digital forms, applications and contracts with Danish authorities and banks

For foreign owners and directors without a Danish CPR number, it is often necessary to appoint a local representative or obtain a special identifier (such as a tax number or personal ID issued by the Danish authorities) before MitID Erhverv can be set up. In practice, cooperating with a Danish accountant or corporate service provider significantly speeds up this process.

MitID Erhverv – acting on behalf of your company

MitID Erhverv is the business version of MitID. It allows you to log in as a company and delegate rights to employees or external advisers. The company’s legal representative (for example the managing director) is responsible for creating user roles and granting access to specific services such as SKAT, eIndkomst or the Danish Business Authority.

Proper configuration of MitID Erhverv is crucial for internal control and compliance. You should clearly define who in your organisation may:

• submit VAT and tax returns
• approve payments and refund claims
• file changes in the company’s registration data
• access payroll and employee information

Rights can be changed or revoked at any time, which is important when employees leave the company or when you change external advisers.

e-Boks – mandatory digital mailbox for companies

e-Boks is a secure digital mailbox used by Danish authorities and many private institutions. For most companies in Denmark, using e-Boks is mandatory. Once your business is registered and has a CVR number, public authorities will send almost all correspondence exclusively to your company’s e-Boks.

Through e-Boks you receive, among others:

• letters and decisions from the Danish Tax Agency (Skattestyrelsen)
• notifications from the Danish Business Authority and the Danish Business Register (CVR)
• reminders about deadlines for VAT, tax returns and annual reports
• correspondence from municipalities, labour market authorities and other public bodies

Ignoring e-Boks is risky. Deadlines for appeals, payments or submissions usually run from the date a letter is delivered to e-Boks, not from the moment you actually read it. Failing to react in time can lead to fines, interest or even deregistration of the company. It is therefore essential to log in to e-Boks regularly or to set up email or SMS alerts and clear internal procedures for monitoring incoming messages.

Mandatory digital self-service with Danish authorities

Danish law requires companies to use digital self‑service for most interactions with public authorities. Paper forms and traditional letters are accepted only in very exceptional cases. In practice, this means that as an entrepreneur you must be able to:

• register your company, changes in ownership, management and address via Virk.dk
• file VAT returns and pay VAT electronically within the statutory deadlines
• submit corporate income tax returns and preliminary tax assessments online
• report salaries, A‑tax and labour market contribution (AM‑bidrag) through eIndkomst
• file annual reports and financial statements digitally with the Danish Business Authority

Most of these services are available only after logging in with MitID Erhverv. For foreign companies operating in Denmark through a branch or permanent establishment, the same digital obligations apply as for Danish entities.

NemKonto – mandatory bank account for payments from authorities

Every company in Denmark must have a NemKonto, which is a designated bank account used for payments from public authorities. Tax refunds, VAT reimbursements and many other public payments are transferred only to the NemKonto. The account can be a Danish or, in some cases, a foreign bank account, but it must be correctly registered as the company’s NemKonto.

Without a NemKonto you may experience delays in receiving refunds and other payments. Registration is usually done digitally, often with the assistance of your bank or accountant, and requires valid digital identification.

Digital communication and data protection

Digital communication with Danish authorities is designed to be secure and efficient. Messages in e-Boks and data submitted via Virk.dk or skat.dk are encrypted and protected under Danish and EU data protection rules. As a company, you are responsible for ensuring that access to MitID Erhverv and e-Boks is limited to authorised persons only and that login details are stored safely.

It is good practice to implement internal policies covering:

• who may log in to public portals on behalf of the company
• how passwords and MitID devices are stored and updated
• how often e-Boks is checked and who is responsible for reacting to messages
• how to document submissions and downloads from public portals for audit purposes

Practical tips for foreign entrepreneurs

Foreign entrepreneurs often face additional challenges when setting up digital access in Denmark. To avoid delays and penalties:

• plan the creation of MitID Erhverv and e-Boks immediately after obtaining the CVR number
• ensure that at least two people (for example director and accountant) have access to the company’s digital services, so that communication is not blocked if one person is unavailable
• activate notifications from e-Boks to your email or phone and check that they do not end up in spam
• keep copies of all important submissions and confirmations from Virk.dk, skat.dk and other portals
• if you do not speak Danish, consider granting access to a Danish‑speaking adviser who can monitor correspondence and react quickly

Proper management of digital obligations is a key element of compliance in Denmark. Using MitID, e-Boks and mandatory digital communication correctly not only protects you from fines and unnecessary disputes with authorities, but also significantly simplifies the day‑to‑day administration of your business.

Bank account, capital requirements and practical banking issues for foreign entrepreneurs in Denmark

Opening and maintaining a business bank account in Denmark is a key step for both Danish and foreign entrepreneurs. Danish banks apply strict “Know Your Customer” (KYC) and anti‑money‑laundering (AML) rules, so you should plan extra time for the onboarding process and be ready with detailed documentation about the company, its owners and the nature of the business.

Capital requirements for Danish companies

Capital requirements depend on the legal form you choose:

• ApS (private limited company) – minimum share capital is DKK 40,000. It can be paid in cash or as non‑cash contributions (in‑kind), but banks usually require cash for practical reasons when opening an account.
• A/S (public limited company) – minimum share capital is DKK 400,000. At least 25% of the capital (but minimum DKK 100,000) must be paid in at incorporation, unless the full amount is paid immediately.
• Sole proprietorship (enkeltmandsvirksomhed) – no statutory minimum capital. You can start with any amount, but in practice you need funds to cover initial costs and bank fees.
• Branch of a foreign company – no separate Danish share capital requirement, but the foreign parent must be duly capitalised and registered in its home country.

For ApS and A/S, the capital must be documented in the incorporation documents filed with the Danish Business Authority. Banks often issue a capital deposit confirmation that you attach to the registration on Virk.dk.

Types of business bank accounts in Denmark

Most companies in Denmark use a combination of the following accounts and services:

• Current account (driftskonto) – the main operating account used for incoming payments, supplier invoices, salaries and tax payments.
• Capital deposit account – used temporarily to deposit the initial share capital before registration of the company. After registration it is usually converted into a standard business account.
• Payroll account – some businesses maintain a separate account for salaries and related taxes (A‑tax and AM‑bidrag) to simplify cash flow management.
• Currency accounts – DKK is the standard, but you can open EUR or other currency accounts if you trade internationally.
• Payment solutions – corporate cards, online banking, MobilePay Business, acquiring for card payments and e‑commerce payment gateways.

Documents required to open a business bank account

Each bank sets its own detailed requirements, but foreign entrepreneurs should expect to provide at least:

• Company registration number (CVR) or documentation that the company is in the process of being registered
• Articles of association and incorporation documents (for ApS/A/S/branch)
• Ownership structure, including information on all beneficial owners holding 25% or more of shares or voting rights
• Valid ID and address proof for directors, signatories and beneficial owners (passport, national ID, utility bill or bank statement)
• Business plan or description of activities, expected turnover, main customers and suppliers, and countries you trade with
• For branches – extract from the foreign commercial register and board resolution establishing the branch in Denmark
• For existing companies – recent financial statements or management accounts, if available

Banks may ask additional questions about the source of funds, financing structure and any cash‑intensive or high‑risk activities. Incomplete or unclear documentation is a common reason for delays or refusals.

Practical challenges for foreign entrepreneurs

Foreign‑owned companies often face stricter checks than purely Danish businesses. Typical challenges include:

• No Danish credit history – banks may limit overdrafts and credit facilities until the company builds a track record.
• Non‑resident owners and directors – if management is based abroad, banks may require additional documentation and sometimes in‑person meetings.
• Complex ownership structures – multi‑layer or offshore structures trigger enhanced due diligence; banks may refuse accounts if they cannot clearly identify the ultimate beneficial owners.
• High‑risk sectors – activities such as crypto, money services or certain international trade routes are scrutinised more closely and may be declined.

To improve your chances, prepare a clear ownership chart, transparent explanation of the business model and realistic financial forecasts. Cooperation with a local accountant or advisor who knows Danish banking practice is often helpful.

Sequence: registration, capital deposit and account activation

The practical order of steps is important, especially for ApS and A/S:

1. You agree with a bank on opening a capital deposit account or use a lawyer/accountant’s client account for the initial capital.
2. You transfer the required share capital (e.g. DKK 40,000 for an ApS) and obtain written confirmation of the deposit.
3. You register the company with the Danish Business Authority (Virk.dk), attaching the capital deposit confirmation.
4. After registration and allocation of a CVR number, the bank converts the capital deposit account into a standard business account and releases funds for business use.

Some banks will not start the process until you have a CVR number, while others assist already at the pre‑registration stage. Clarify this early to avoid delays.

NemKonto and payments to and from authorities

Every Danish business must have a NemKonto, which is a designated bank account used for payments from public authorities, such as tax refunds or reimbursements. You usually nominate one of your business accounts as the NemKonto after it is opened. Without a NemKonto, you may experience problems receiving payments from SKAT and other authorities.

Using MitID and online banking

Access to Danish online banking is typically linked to MitID. At least one person with signatory rights needs MitID to approve payments and manage the account. For foreign directors without a Danish CPR number, obtaining MitID can take time and may require a visit to Denmark or assistance from a local representative.

Bank fees, interest and service levels

Danish banks usually charge:

• Monthly account maintenance fees for business accounts
• Transaction fees for domestic and international payments
• Card and payment solution fees (e.g. for corporate cards, MobilePay Business, acquiring)
• Negative interest or deposit fees on large DKK or EUR balances, depending on market rates and bank policy

Fees and service levels vary significantly between banks. When choosing a bank, compare not only prices but also:

• Experience with foreign‑owned companies and English‑language support
• Processing times for international transfers
• Availability of online banking in English
• Possibility to integrate with your accounting software

Cash handling and card payments

Denmark is highly digitalised and card payments are standard. Many businesses operate almost entirely without cash. If you need to handle cash, check in advance whether your bank offers cash services and on what terms. For card payments and e‑commerce, you will typically need:

• An acquiring agreement with a payment provider
• A payment gateway for online shops
• Compliance with PCI‑DSS and Danish consumer protection rules

Compliance, monitoring and account closure risks

Banks in Denmark are legally obliged to monitor transactions and update customer information regularly. You may be asked periodically to confirm ownership details, provide updated ID documents or explain unusual payments. Failure to respond can lead to restrictions or closure of the account.

To reduce risk:

• Keep your company data, ownership and contact details up to date with both the bank and the Danish Business Authority
• Ensure that transactions match the declared business model and expected turnover
• Document large or unusual payments (contracts, invoices, loan agreements)

How a Danish accountant can help with banking issues

A local accountant or accounting firm can assist you with:

• Choosing a suitable bank and preparing the documentation package
• Coordinating the capital deposit and registration process for ApS or A/S
• Setting up payment routines for VAT, A‑tax, AM‑contribution and other obligations
• Integrating bank feeds with your accounting system for efficient bookkeeping

Professional support significantly reduces the risk of delays, misunderstandings with the bank and compliance issues, especially for foreign entrepreneurs who are not yet familiar with Danish regulations and banking practice.

Tax residence and permanent establishment (PE) rules for foreign companies operating in Denmark

Understanding when a foreign company becomes tax resident in Denmark or creates a permanent establishment (PE) is crucial for correct tax planning and compliance. Danish rules are based on national legislation and double tax treaties, and they determine where profits are taxed, which returns must be filed and what accounting obligations apply.

When is a company tax resident in Denmark?

A company is generally considered tax resident in Denmark if it is incorporated under Danish law or if its place of effective management is in Denmark. In practice, the Danish Tax Agency (Skattestyrelsen) looks at where the key management and commercial decisions are made and implemented.

Indicators that a foreign company may be treated as Danish tax resident include:

• Board of directors and/or managing director are mainly based in Denmark
• Strategic decisions are regularly taken at meetings held in Denmark
• Day-to-day management and control of the business are exercised from Denmark
• The company’s main office, archives and core administrative functions are in Denmark

If a foreign company is regarded as tax resident in Denmark, it is subject to unlimited tax liability on its worldwide income at the Danish corporate income tax rate of 22%. It must register with the Danish Business Authority and the Danish Tax Agency, keep accounts in accordance with Danish rules and file annual corporate tax returns and financial statements where required.

What is a permanent establishment (PE) in Denmark?

A permanent establishment is a fixed place of business through which the business of a foreign enterprise is wholly or partly carried on in Denmark. The concept is defined in Danish tax law and further refined in double tax treaties based on the OECD Model Convention.

In general, a PE in Denmark exists when:

• There is a fixed place of business in Denmark (for example an office, workshop, factory, warehouse, construction site or shop)
• The place has a certain degree of permanence (not just a very short-term presence)
• The business of the foreign company is carried out from this place, not merely preparatory or auxiliary activities

Once a PE is created, Denmark may tax the profits attributable to that PE at 22%. The foreign company must register for tax purposes, keep separate accounts for the Danish activities and file a Danish corporate tax return for the PE.

Typical situations that may create a PE

Foreign entrepreneurs often underestimate how easily a PE can arise. The following situations commonly lead to a Danish PE:

• Fixed office or branch – renting office space, a workshop or a permanent desk in Denmark and using it to conduct core business activities
• Construction and installation projects – building or installation sites that last beyond the time threshold set in the relevant tax treaty (often 6, 9 or 12 months, depending on the country)
• Dependent agent in Denmark – a person or company in Denmark who habitually concludes contracts on behalf of the foreign enterprise or plays the principal role leading to the conclusion of contracts that are routinely approved without material changes
• Warehouses and logistics – storage facilities used not only for warehousing or delivery but also for sales, order processing or other core functions
• Service PE – in some treaties, the presence of employees or other personnel providing services in Denmark for more than a specified number of days within a 12‑month period can create a PE, even without a fixed office

Activities of a purely preparatory or auxiliary character, such as advertising, information gathering or storage of goods, usually do not create a PE, provided they remain genuinely limited to these functions and do not form an essential part of the business model.

Interaction with double taxation treaties

Denmark has an extensive network of double taxation treaties that may modify the domestic PE rules. In case of conflict between Danish domestic law and a treaty, the treaty usually prevails if it is more favourable to the taxpayer.

Key treaty aspects include:

• Definition of PE and specific time thresholds for construction and installation projects
• Rules for dependent and independent agents
• Allocation of taxing rights between Denmark and the other state
• Methods for eliminating double taxation (typically credit or exemption methods in the country of residence)

For groups operating in several countries, it is important to analyse each relevant treaty to determine whether a PE exists in Denmark and how profits should be allocated between jurisdictions.

Tax obligations once a PE or tax residence is established

When a foreign company becomes tax resident in Denmark or creates a PE, several obligations arise:

• Corporate income tax – profits attributable to the Danish entity or PE are taxed at 22%. Taxable income is calculated under Danish rules, with specific provisions for depreciation, interest limitation and transfer pricing.
• Tax registration – the company must obtain a Danish CVR number, register with the Danish Tax Agency and, where relevant, register for VAT and as an employer.
• Accounting and annual reporting – the Danish entity or PE must keep proper accounting records and, in many cases, prepare and file annual financial statements with the Danish Business Authority.
• Advance tax and payments on account – corporate tax is generally paid in instalments during the income year, with possible interest or surcharges for underpayment and bonuses for early payment.
• Transfer pricing documentation – related‑party transactions must be conducted at arm’s length and documented if certain size thresholds are exceeded.

Distinguishing a PE from a Danish subsidiary or branch

Foreign entrepreneurs can choose between operating through a PE, a registered branch or a Danish company (for example an ApS). The tax treatment differs:

• Danish subsidiary (ApS or A/S) – a separate Danish tax resident company, fully subject to Danish corporate tax on worldwide income, with access to participation exemption rules and Danish‑EU directives where conditions are met.
• Danish branch – a registered branch of a foreign company; Denmark taxes only the profits attributable to the branch, similar to a PE, but with formal registration and reporting as a branch.
• Unregistered PE – may arise unintentionally without formal registration; tax obligations still apply once a PE exists, and late registration can lead to interest and penalties.

Choosing the right structure depends on the scale and duration of activities, the home country’s tax rules, treaty provisions and commercial considerations such as liability, banking and customer expectations.

Practical steps to manage PE and tax residence risk

To avoid unexpected Danish tax liabilities, foreign businesses should:

• Analyse planned activities in Denmark before starting operations
• Review management structures to ensure that key decisions are not unintentionally centralised in Denmark
• Monitor the duration of construction, installation and service projects against treaty thresholds
• Define clearly the role and authority of local agents, sales representatives and employees in Denmark
• Maintain documentation demonstrating that any Danish activities are preparatory or auxiliary, where this is the case
• Seek professional advice and, where appropriate, obtain advance clarification from the Danish Tax Agency

Proper planning and continuous monitoring help foreign entrepreneurs operate in Denmark efficiently while staying compliant with Danish tax residence and permanent establishment rules.

Corporate income tax, taxation of sole traders and profit distribution to owners in Denmark

Corporate and personal taxation in Denmark is relatively straightforward, but the rules differ depending on whether you operate through a company (for example an ApS or A/S) or as a sole trader. Understanding how profits are taxed and how they can be distributed to owners is crucial for choosing the right structure and planning your cash flow.

Corporate income tax for Danish companies

Companies that are tax resident in Denmark are generally taxed on their worldwide income at a flat corporate income tax rate of 22%. A company is typically considered tax resident if it is incorporated in Denmark or if its effective place of management is in Denmark.

Taxable income is based on the annual financial statements, adjusted for tax purposes. In general, ordinary business expenses are deductible if they are incurred to earn, secure or maintain taxable income. Depreciation rules apply to fixed assets, and special rules exist for intangible assets, cars and buildings.

Some key points for corporate taxation in Denmark:

• Tax year: usually the calendar year, but companies can choose a different fiscal year and must report consistently.
• Tax returns: corporate tax returns are filed electronically to the Danish Tax Agency (Skattestyrelsen). The deadline is typically 6 months after the end of the income year, and no later than 30 June for companies using the calendar year.
• Prepayments: companies pay corporate tax in two instalments during the income year, with the option of a voluntary third instalment. Interest and surcharges apply if prepayments are too low.
• Losses: tax losses can generally be carried forward without time limit, but there are restrictions on using large carry-forward losses against current profits above a certain threshold per year.

Taxation of permanent establishments and foreign companies

Foreign companies operating in Denmark may become subject to Danish corporate tax if they have a permanent establishment (PE) in Denmark, such as a fixed place of business, construction site lasting beyond a certain period or a dependent agent with authority to conclude contracts. In that case, the Danish PE is taxed at 22% on the profits attributable to the Danish activities.

Profits are determined as if the PE were a separate entity, applying the arm’s length principle to transactions between the head office and the Danish PE. Double taxation treaties can limit when a PE is deemed to exist and how profits are allocated.

Taxation of sole traders and self-employed

Sole traders and self-employed individuals are not subject to corporate income tax. Instead, their business profits are taxed as personal income. Denmark applies a progressive personal income tax system, combining state tax, municipal tax and labour market contribution (AM-bidrag).

Key elements for sole traders:

• Labour market contribution (AM-bidrag): 8% on most earned income, including business profits, calculated before other income taxes.
• State and municipal tax: progressive rates apply to personal income after AM-contribution. Municipal tax rates vary by municipality, typically around 24–27%. State tax includes a bottom tax and a top tax on higher income levels.
• Top tax: an additional state tax applies above a certain annual income threshold. Combined with municipal tax and AM-contribution, the marginal tax rate on high personal income can exceed 50%.

Sole traders can choose between different tax schemes, such as the business tax scheme (virksomhedsordningen) or the capital return scheme (kapitalafkastordningen), which influence how profits, interest and withdrawals are taxed. These schemes can allow partial deferral of tax and a more company-like treatment of retained profits, but they require proper bookkeeping and compliance with detailed rules.

Withdrawing profits from a company: salary vs. dividends

Owners who work in their Danish company usually receive remuneration either as salary, dividends or a combination of both. The choice has direct tax consequences.

Salary

Salary paid to an owner-manager is deductible for the company as a business expense, reducing the corporate tax base. For the individual, salary is treated as personal income subject to:

• 8% AM-contribution
• Municipal and state income tax, including possible top tax

Salary also forms the basis for social security-type contributions and pension contributions. From a tax perspective, high salaries can lead to high marginal tax rates for the owner, but they reduce the company’s taxable profit.

Dividends

Dividends are paid from the company’s after-tax profits and are not deductible for corporate tax purposes. The company first pays 22% corporate tax on its profits, and then the remaining amount can be distributed as dividends, subject to company law rules on capital and solvency.

For individual shareholders who are tax resident in Denmark, dividends are taxed as share income (aktieindkomst) at progressive rates. The share income tax has two brackets with different percentage rates, and the thresholds are adjusted regularly. The combined effect of 22% corporate tax and dividend tax determines the total tax burden on distributed profits.

Dividends must be decided by the general meeting based on the approved annual report or through interim dividends, and they must comply with the Danish Companies Act’s rules on distributable reserves and creditor protection.

Profit distribution to foreign owners

When a Danish company distributes dividends to foreign shareholders, Danish withholding tax may apply. The standard withholding tax rate on dividends paid to non-resident shareholders is 27%. However, this rate can be reduced or eliminated under:

• EU Parent-Subsidiary Directive (for qualifying EU corporate shareholders meeting ownership and substance requirements)
• Double taxation treaties between Denmark and the shareholder’s country of residence

In many treaty situations, the withholding tax rate is reduced to 15% or lower, provided that the beneficial owner requirements and any minimum shareholding conditions are met. Excess withholding tax can often be reclaimed through an application to the Danish Tax Agency, supported by residence certificates and ownership documentation.

Interest and royalty payments may also be subject to Danish withholding tax in certain cases, but exemptions and treaty reductions are common, especially for payments to associated companies within the EU or treaty countries.

Retaining profits vs. distributing profits

Owners of Danish companies can choose to retain profits in the company or distribute them as dividends. Retained profits are taxed only at the corporate level (22%) and can be reinvested in the business. Distributing profits triggers additional taxation at the shareholder level.

In practice, many entrepreneurs balance salary and dividends to optimise their overall tax position, taking into account:

• Personal cash needs
• Marginal personal tax rates
• Future investment plans and liquidity needs in the company
• Bank and investor expectations regarding equity and solvency

Advance tax, deadlines and compliance

Both companies and sole traders must pay attention to Danish tax deadlines to avoid interest and penalties.

• Companies: pay corporate tax in advance instalments during the income year and file the corporate tax return within the statutory deadline after year-end. Late filing or underpayment can result in surcharges and interest.
• Sole traders: pay B-tax (on-account tax) in instalments during the year, based on expected income. Adjustments can be made during the year if income expectations change. The annual personal tax return is filed electronically, and final tax is calculated after year-end.

Accurate bookkeeping and timely cooperation with a Danish accountant or tax adviser are essential to ensure that taxable income is correctly calculated, that available deductions are used and that all reporting obligations are met.

Choosing the right structure from a tax perspective

From a tax point of view, the choice between a company and a sole proprietorship depends on expected profit levels, the need to reinvest profits, risk profile and the owner’s personal tax situation. Operating through a company allows profits to be taxed initially at 22% and potentially retained for growth, while a sole trader is taxed directly at progressive personal rates but with simpler administration.

Because Danish tax rules interact with social security, pension schemes and international tax treaties, foreign entrepreneurs should analyse their specific situation before deciding on a structure. Proper planning at the start can significantly improve the net return from doing business in Denmark and avoid costly restructuring later.

Double taxation treaties and cross-border tax planning for entrepreneurs active in Denmark

Double taxation is a key issue for entrepreneurs operating in more than one country. Denmark has an extensive network of double taxation treaties and clear domestic rules that help avoid the same income being taxed twice. Understanding how these rules work in practice is essential for choosing the right business structure, planning cross-border cash flows and correctly settling Danish and foreign taxes.

Network of Danish double taxation treaties

Denmark has concluded double taxation treaties (DTTs) with most EU and EEA countries and with many other jurisdictions worldwide, including Poland, Germany, Sweden, Norway, the Netherlands, the UK, the US and others. These treaties are usually based on the OECD Model Tax Convention and regulate:

• which country has the primary right to tax specific types of income (business profits, salaries, dividends, interest, royalties, capital gains)
• how to determine whether a foreign entrepreneur has a permanent establishment (PE) in Denmark
• maximum withholding tax rates on cross-border payments
• methods for eliminating double taxation (credit or exemption method)
• exchange of information and cooperation between tax authorities

When a treaty applies, it generally overrides domestic Danish rules if it is more favourable for the taxpayer, but only within the scope of the treaty. It is therefore crucial to check both the relevant treaty and Danish tax law for each specific situation.

Permanent establishment (PE) and allocation of profits

For foreign entrepreneurs, the central question is often whether their activities in Denmark create a permanent establishment. Under most Danish treaties and domestic rules, a PE typically exists when a foreign company has:

• a fixed place of business in Denmark through which the business is wholly or partly carried on (for example an office, workshop, construction site lasting more than a specified period)
• or a dependent agent in Denmark who habitually concludes contracts on behalf of the foreign company

If a PE is created, Denmark may tax the profits attributable to that PE at the standard Danish corporate income tax rate of 22%. Profits must be allocated to the Danish PE on an arm’s length basis, as if it were a separate and independent enterprise. This requires proper transfer pricing documentation when intra-group transactions are involved.

If no PE exists under the treaty, Denmark generally cannot tax the foreign company’s business profits, even if it has customers in Denmark. However, other types of income (for example, employment income, real estate income or certain royalties) may still be taxable in Denmark according to the treaty and domestic rules.

Withholding taxes on cross-border payments

Double taxation treaties are particularly important for cross-border payments between Denmark and other countries. Key areas include:

• Dividends – Denmark may levy withholding tax on dividends paid to foreign shareholders. The standard Danish withholding tax rate on dividends is 27%, but this can be reduced under a treaty, often to 15% or lower for qualifying corporate shareholders. In some cases (for example, under the EU Parent-Subsidiary Directive implemented in Danish law, or under certain treaties), the rate can be reduced to 0% if ownership and holding period conditions are met.
• Interest – Denmark generally does not levy withholding tax on arm’s length interest payments to non-residents, except in certain controlled-debt or hybrid situations. Some treaties contain specific provisions that confirm or further limit Denmark’s right to tax interest.
• Royalties – Denmark may impose withholding tax on certain royalty payments to foreign recipients, but many treaties reduce the rate or allocate taxing rights exclusively to the state of residence. The applicable rate and definition of royalties must always be checked in the relevant treaty.

To benefit from reduced treaty rates, foreign recipients usually need to provide documentation of tax residence (for example, a certificate of residence) and sometimes additional forms required by the Danish Tax Agency (Skattestyrelsen). Without proper documentation, Danish payers may be obliged to apply the full domestic withholding tax rate and the foreign recipient would then have to claim a refund.

Methods for eliminating double taxation

Denmark uses two main methods to avoid double taxation of income that has already been taxed abroad:

• Credit method – Danish tax is calculated on worldwide income, and foreign tax paid on the same income is credited against Danish tax, usually up to the amount of Danish tax attributable to that income. This method is often used for foreign business profits, interest, royalties and employment income.
• Exemption method – certain types of foreign income are exempt from Danish tax, sometimes with progression (the foreign income is taken into account to determine the applicable Danish tax rate on other income). This method may apply, for example, to some employment income or pensions under specific treaties.

The applicable method is determined by the relevant treaty and Danish domestic rules. For companies, Denmark also has participation exemption rules under which qualifying dividends and capital gains from substantial shareholdings in foreign subsidiaries can be exempt from Danish tax, provided specific ownership and substance conditions are met.

Cross-border tax planning for entrepreneurs

Effective cross-border tax planning for entrepreneurs active in Denmark should take into account both Danish rules and the rules of the other country involved. Key planning areas include:

• Choice of legal form – operating through a Danish company (for example, ApS) versus a foreign company with or without a Danish branch can have different consequences for corporate tax, withholding taxes, social security and administrative obligations.
• Group structure – locating holding companies in jurisdictions with favourable treaties with Denmark can reduce withholding tax on dividends and facilitate tax-efficient profit repatriation, provided that anti-abuse and substance requirements are met.
• Transfer pricing – cross-border transactions within a group (services, goods, financing, intellectual property) must be priced at arm’s length. Danish transfer pricing rules require documentation for medium and large groups, and adjustments can lead to double taxation if not coordinated with foreign tax authorities.
• Use of tax losses – planning the allocation of profits and losses between Denmark and other countries can optimise the use of tax losses, taking into account Danish rules on loss carry-forward and group taxation.
• Remuneration of owners – choosing between salary, dividends and other forms of remuneration for owners who are tax resident in another country affects both Danish tax and tax in the country of residence, as well as social security contributions.

Anti-avoidance rules and substance requirements

Cross-border planning must respect Danish and international anti-avoidance rules. Denmark applies:

• a general anti-avoidance rule (GAAR) implementing EU standards, allowing the tax authorities to disregard arrangements whose main purpose is to obtain a tax advantage contrary to the object and purpose of the law
• specific anti-abuse rules for withholding tax relief on dividends, interest and royalties, including “beneficial owner” requirements and tests targeting conduit or letterbox companies
• controlled foreign company (CFC) rules that can tax certain low-taxed passive income in foreign subsidiaries at the level of the Danish parent company

To benefit from treaty relief and EU directives, companies must demonstrate real economic substance: actual decision-making in the country of residence, own premises or employees, and genuine business activities. Purely formal structures with no substance are at high risk of being challenged by the Danish Tax Agency.

Practical steps for entrepreneurs

Entrepreneurs active in Denmark should:

• identify all countries in which they operate and check whether Denmark has a double taxation treaty with each of them
• analyse whether their activities in Denmark or abroad create a permanent establishment under the relevant treaty
• review contracts, invoicing flows and group structures to ensure that withholding taxes and treaty benefits are correctly applied
• collect and regularly update certificates of tax residence and other documents needed to claim treaty relief
• coordinate Danish tax planning with advisors in other countries to avoid mismatches and unexpected double taxation

Because cross-border taxation is complex and the financial impact of errors can be significant, cooperation with a Danish accountant or tax advisor experienced in international tax is strongly recommended. Proper planning at the start of an investment or expansion into Denmark usually costs less than correcting mistakes after a tax audit.

Accounting and bookkeeping rules: mandatory records, annual reports and cooperation with a Danish accountant

Denmark has clear and relatively strict rules on accounting and bookkeeping. Whether you operate through an ApS, A/S, branch or as a sole proprietor, you must keep reliable records, store documentation for a fixed period and, in many cases, file an annual report with the Danish Business Authority and the Danish Tax Agency. Good cooperation with a Danish accountant makes it significantly easier to stay compliant and avoid penalties.

Mandatory bookkeeping and record-keeping

All businesses in Denmark are subject to the Danish Bookkeeping Act. You must record all business transactions in a systematic and timely way so that your accounts give a true and fair view of the company’s financial position.

Key requirements include:

• Bookkeeping must be up to date and traceable from source documents to financial statements and tax returns.
• All entries must be supported by documentation, such as invoices, contracts, bank statements, payroll records and receipts.
• Records must normally be kept in Denmark, or be fully and immediately accessible from Denmark in electronic form.
• Bookkeeping can be done in Danish, Norwegian, Swedish or English, but authorities may request translations if needed.

As a rule, accounting records and supporting documentation must be stored for at least 5 years from the end of the financial year. This applies to both Danish and foreign entrepreneurs operating in Denmark, including those working via a branch or with a permanent establishment.

Digital bookkeeping and e-invoicing

Denmark is highly digitalised and expects businesses to use electronic solutions. Many companies use cloud-based accounting systems that comply with Danish standards and integrate with online banking and tax reporting.

If you issue invoices to Danish public authorities, you must use electronic invoices in the OIOUBL or Peppol format. Many private-sector customers also prefer e-invoices, and using a Danish-compliant invoicing system helps you avoid errors in VAT and customer data.

Who must prepare annual financial statements?

Most limited liability companies (ApS and A/S) and branches in Denmark must prepare annual financial statements in accordance with the Danish Financial Statements Act and file them with the Danish Business Authority (Erhvervsstyrelsen) via Virk.dk.

The obligation depends on the legal form and size of the business:

• ApS (private limited company) – must prepare and file annual financial statements.
• A/S (public limited company) – must prepare and file annual financial statements, usually with audit.
• Branch of a foreign company – must file annual financial statements for the branch and/or the foreign head office, depending on the home country rules.
• Sole proprietorships – must keep proper accounts for tax purposes; filing an annual report with the Danish Business Authority is not normally required, but tax reporting to Skattestyrelsen is mandatory.

Accounting classes and thresholds

Danish companies are divided into accounting classes (A, B, C and D) based mainly on size. The class determines the level of disclosure, whether an audit is required and which accounting rules apply.

For most small and medium-sized foreign-owned companies, the relevant classes are:

• Class B – small companies (typically ApS and smaller A/S), which do not exceed two of the following three thresholds for two consecutive financial years:
  • Balance sheet total: DKK 44 million
  • Net revenue: DKK 89 million
  • Average number of employees: 50 full-time equivalents
• Class C – medium and large companies, which exceed the Class B thresholds but are not listed.

Micro and small companies within Class B may be exempt from statutory audit if they do not exceed two of the following three thresholds for two consecutive financial years:

• Balance sheet total: DKK 4 million
• Net revenue: DKK 8 million
• Average number of employees: 12 full-time equivalents

Even if an audit is not legally required, many banks, investors and business partners in Denmark expect audited or at least professionally prepared accounts.

Deadlines for annual reports and tax returns

The financial year does not have to follow the calendar year, but once chosen, it should be applied consistently. For most ApS and A/S companies, the financial year is 12 months.

Key deadlines include:

• Annual report to the Danish Business Authority – usually must be filed no later than 5 months after the end of the financial year for most private companies (ApS) and 4 months for listed companies. Some special entities have different deadlines.
• Corporate income tax return – must normally be filed no later than 6 months after the end of the income year and no later than 1 month and 10 days after the deadline for filing the annual report, if the company is required to file one.

Failure to submit the annual report on time can result in fines and, in serious or repeated cases, compulsory dissolution of the company. Late or incorrect tax returns can lead to estimated assessments and penalties.

Content of the annual report

The scope of the annual report depends on the accounting class, but typically includes:

• Management statement and, where required, a management review
• Income statement and balance sheet, with comparative figures
• Notes with detailed breakdowns of key items
• Statement of changes in equity and cash flow statement for larger entities
• Audit report, if the company is subject to statutory audit or has voluntarily opted for one

Accounts must be prepared in accordance with the Danish Financial Statements Act and, where relevant, sector-specific rules. Some larger companies and groups may choose or be required to use IFRS.

Cooperation with a Danish accountant

For foreign entrepreneurs, working with a local accountant or accounting firm is often essential. Danish rules are detailed, and communication with authorities takes place mainly in Danish and digitally.

A Danish accountant can help you with:

• Choosing the right chart of accounts and accounting policies for your business
• Setting up a bookkeeping system that complies with Danish law and integrates with NemKonto, online banking and payroll
• Ongoing bookkeeping, reconciliation of bank accounts and control of documentation
• Preparation of VAT returns, payroll reports and other periodic filings
• Preparation of annual financial statements and corporate tax returns
• Communication with the Danish Business Authority and the Danish Tax Agency in case of questions or audits

When selecting an accountant in Denmark, check their experience with your industry and legal form, language skills (English or your native language) and whether they are familiar with cross-border issues such as permanent establishment, transfer pricing and double taxation treaties.

Internal controls and risk management

Danish authorities expect companies to have basic internal controls that reduce the risk of errors and fraud. Even in small businesses, it is good practice to:

• Separate duties between people who approve payments, record transactions and reconcile bank accounts, where possible
• Use secure digital solutions for invoicing, payroll and banking
• Regularly review outstanding receivables and payables
• Document significant decisions of management and shareholders

Well-organised accounting not only ensures compliance but also provides reliable information for managing the business, planning investments and negotiating with banks and partners in Denmark.

Typical mistakes made by foreign entrepreneurs in Denmark and how to avoid them

Foreign entrepreneurs in Denmark often repeat the same mistakes, usually not because of bad intentions, but because they assume that Danish rules are similar to those in their home country. Understanding these typical pitfalls will help you avoid penalties, unnecessary costs and conflicts with authorities or employees.

1. Choosing the wrong legal form and ignoring permanent establishment risk

Many foreign owners start activity in Denmark as a sole trader or through a foreign company without analysing whether they are creating a Danish permanent establishment (PE). This can lead to unexpected taxation in Denmark and double reporting duties.

Typical mistakes include:

• Running a “temporary” project for several years without registering a Danish company or PE
• Having a fixed office, warehouse or construction site in Denmark and still invoicing only from abroad
• Signing contracts in Denmark through a local manager who effectively binds the foreign company

If the Danish Tax Agency (Skattestyrelsen) considers that a PE exists, the Danish part of the profit must be taxed in Denmark at the corporate income tax rate of 22%, and you may have to submit several years of retrospective accounts and tax returns. Before starting operations, it is worth analysing whether a Danish ApS, branch or registration as a foreign company with PE is the safest structure.

2. Underestimating bookkeeping and documentation requirements

Another frequent mistake is treating Danish bookkeeping rules as a formality. In Denmark, businesses must keep orderly accounting records and store documentation for at least 5 years. This applies to invoices, contracts, bank statements, payroll documentation and any other evidence supporting reported income and costs.

Common issues include:

• Using only foreign-language invoices without clear descriptions of goods or services
• Lack of separation between private and business expenses on bank accounts and payment cards
• No documentation for cash payments or internal settlements with owners

Poor documentation can lead to the tax authority rejecting deductions, estimating income and imposing surcharges and interest. Working with a Danish accountant from the beginning helps set up proper bookkeeping routines and avoid problems during a tax audit.

3. Mistakes in VAT registration and reporting

Foreign entrepreneurs often register for VAT too late or report incorrectly. In Denmark, most businesses must register for VAT (moms) when their taxable turnover in a 12‑month period exceeds DKK 50,000. Some activities are VAT-exempt, but many services provided to Danish private customers require Danish VAT from the first invoice.

Typical VAT mistakes:

• Starting to invoice Danish clients with foreign VAT instead of Danish VAT
• Missing the DKK 50,000 threshold and registering only after a tax control
• Incorrectly applying the standard VAT rate of 25% to exempt activities (for example certain financial or health services), or treating taxable services as exempt
• Deducting input VAT on costs that are not deductible, such as certain representation expenses

Depending on the size of the turnover, VAT returns are usually filed quarterly or monthly. Late registration or late filing can result in interest and surcharges. It is important to check whether you must also register for special schemes, such as distance sales to consumers in other EU countries via the One Stop Shop (OSS).

4. Misunderstanding Danish employment rules and “flexicurity”

Denmark combines flexible hiring rules with strong employee protection through collective agreements and social security. Foreign employers sometimes assume that simple “civil contracts” or freelance agreements are enough to avoid employment law. Danish authorities, however, focus on the actual conditions, not the contract name.

Common employment-related mistakes:

• Using “self-employed” contracts where the person works under the employer’s direction, with fixed hours and only one client – which in practice is employment
• Not providing written employment contracts for employees working more than a short minimum period
• Ignoring rules on working time, rest periods and holiday entitlement
• Failing to comply with notice periods and procedures for termination, especially for long-serving employees

Misclassification of employees as self-employed can lead to retroactive social contributions, tax corrections and potential fines. Before hiring, it is worth checking whether collective agreements apply in your sector and what minimum conditions they set for wages, overtime and allowances.

5. Incorrect payroll, A-tax and AM-contribution handling

Payroll in Denmark is more complex than in many other countries. Employers must withhold A-tax (income tax at source) and AM-contribution (labour market contribution) from employees’ salaries and report them electronically via eIncome (eIndkomst). Foreign entrepreneurs often underestimate this obligation or try to run payroll manually in spreadsheets.

Typical payroll mistakes:

• Not registering as an employer with the Danish Tax Agency before the first salary payment
• Withholding incorrect A-tax because the employee’s tax card (skattekort) was not obtained or updated
• Not deducting the 8% AM-contribution from gross salary before calculating A-tax
• Missing monthly eIncome reporting deadlines, which can trigger automatic fines

Using Danish payroll software or cooperating with a local payroll provider significantly reduces the risk of errors. It is also important to remember about mandatory holiday pay reporting and, where applicable, contributions to pension schemes agreed in collective agreements.

6. Ignoring RUT registration and posting rules

Companies from other countries that temporarily provide services in Denmark often must register in the Register of Foreign Service Providers (RUT). Many entrepreneurs are not aware of this obligation or assume that a short project does not require registration.

Typical RUT-related mistakes:

• Entering Denmark with posted workers without RUT registration for each assignment
• Not updating RUT data when project dates, locations or number of workers change
• Not keeping documentation proving that workers remain insured and covered by social security in their home country, where applicable

Lack of RUT registration can result in significant fines per worker and per assignment. Danish authorities actively control sectors such as construction, cleaning, transport and industrial services.

7. Underestimating the role of collective agreements and trade unions

Denmark does not have a statutory national minimum wage. Instead, wages and many working conditions are determined by collective agreements (overenskomster) negotiated between employers’ organisations and trade unions. Foreign companies often assume that paying “market wages” is enough and ignore these agreements.

Common problems include:

• Paying wages below the level typically required by collective agreements in the sector
• Not paying allowances for overtime, work at night or on weekends where such supplements are standard
• Refusing to negotiate with trade unions that contact the company on behalf of employees

This can lead to conflicts, strikes, blockades and reputational damage. Even if your company is not formally bound by a collective agreement, it is wise to check typical wage levels and conditions in your industry and be prepared for dialogue with unions.

8. Lack of proper insurance coverage

Some foreign entrepreneurs rely only on insurance policies from their home country, which may not meet Danish legal requirements or may not cover activities in Denmark. This is particularly risky in sectors with higher accident risk or where professional liability is crucial.

Typical insurance gaps:

• No workers’ compensation insurance for employees, despite legal obligations in many situations
• Lack of adequate liability insurance for damage caused to clients or third parties
• No coverage for tools, machinery and equipment used on Danish sites

Before starting operations, it is important to analyse which insurances are mandatory and which are strongly recommended in your sector, and to ensure that policies explicitly cover activities in Denmark.

9. Weak communication with Danish authorities and ignoring digital obligations

Denmark is highly digitalised. Most communication with authorities takes place via NemID/MitID and e-Boks. Foreign entrepreneurs sometimes ignore official messages or do not set up digital access correctly, which leads to missed deadlines and automatic penalties.

Typical digital mistakes:

• Not activating e-Boks for the company and therefore not receiving letters from the Tax Agency or the Business Authority
• Ignoring messages in Danish and not arranging for translation or local support
• Missing deadlines for filing annual reports, VAT returns or tax returns because reminders were only sent digitally

It is crucial to ensure that someone in the company regularly checks e-Boks and understands the content of messages, or that you work with an advisor who monitors communication with authorities on your behalf.

10. Poor planning of owner taxation and profit distribution

Foreign owners often focus only on Danish corporate tax and forget about how profits will be taxed when paid out to them personally. This can lead to higher overall taxation than necessary.

Common planning mistakes:

• Paying out all profits as salary, which may be taxed at progressive personal income tax rates that can exceed 40%, instead of combining salary and dividends
• Ignoring withholding tax on dividends paid to foreign shareholders and the impact of double taxation treaties
• Not analysing whether the owner becomes tax resident in Denmark due to time spent in the country or having a home available there

Proper planning of salary, bonuses and dividends, taking into account Danish rules and applicable tax treaties, can significantly reduce the total tax burden and avoid double taxation.

How to avoid these mistakes in practice

Most problems can be avoided with a few simple principles:

• Analyse your business model in Denmark before starting operations, including PE risk, VAT obligations and choice of legal form
• Set up professional bookkeeping and payroll from day one, using Danish systems or local specialists
• Clarify the status of each person working for you in Denmark – employee or genuine self-employed – and document the relationship
• Check whether RUT registration, sector permits or specific insurances are required in your line of business
• Monitor deadlines for VAT, tax returns and annual reports, and regularly check your e-Boks

Cooperating with an accountant or advisor experienced in Danish rules for foreign entrepreneurs is often a small cost compared to potential fines, back taxes and lost business opportunities. With proper preparation, Denmark can be a very predictable and business-friendly environment for your company.

Useful public institutions, online tools and sources of information for businesses in Denmark

Running a business in Denmark is much easier when you know where to find reliable, up‑to‑date information. Below you will find the most important public institutions, official portals and practical online tools that entrepreneurs – both Danish and foreign – should know and use on a daily basis.

Danish Business Authority (Erhvervsstyrelsen) and Virk.dk

The Danish Business Authority is the key institution for company registration and ongoing corporate obligations. Most services are delivered via the portal Virk.dk, which is the central online entry point for businesses in Denmark.

Through Virk.dk you can, among others:

• register a new company (ApS, A/S, sole proprietorship, branch) and obtain a CVR number
• update company details, management, registered address and beneficial owners
• file annual reports for companies that are required to submit them digitally
• register for VAT, payroll taxes and other schemes in cooperation with the Danish Tax Agency

Virk.dk is available in Danish and partly in English. Foreign entrepreneurs should create a user profile and, where required, log in with MitID or a foreign eID recognised under the EU eIDAS framework.

Danish Tax Agency (Skattestyrelsen) and skat.dk

The Danish Tax Agency is responsible for VAT, corporate income tax, personal income tax, payroll taxes and duties. The main portal is skat.dk, which offers extensive guidance in Danish and selected content in English.

Via the online self‑service solutions on skat.dk you can:

• register and manage VAT (moms) obligations and filing frequencies
• report payroll information to eIncome (eIndkomst) and withhold A‑tax and AM‑contribution
• file corporate income tax returns and preliminary tax assessments
• check tax account balances, payment deadlines and interest on late payments

Access to most services requires MitID and a registered digital mailbox (e‑Boks). For foreign companies with a permanent establishment in Denmark, a Danish representative or accountant often assists with tax registrations and filings.

Central Business Register (CVR)

The Central Business Register (CVR) is the official database of all registered businesses in Denmark. It is maintained by the Danish Business Authority and accessible free of charge.

In the CVR register you can:

• search companies by name, CVR number or address
• verify legal form, status, industry code (NACE), and registered address
• check information about management and beneficial owners
• download basic data for due diligence and compliance purposes

Using CVR is essential when verifying Danish customers, suppliers and subcontractors, especially in sectors exposed to chain liability or joint VAT responsibility.

RUT – Register of Foreign Service Providers

Foreign companies that temporarily provide services in Denmark often have to register in the RUT – Register of Foreign Service Providers. The register is administered by the Danish Business Authority and is accessible via Virk.dk.

Through RUT you can:

• notify cross‑border service provision before work starts in Denmark
• update information about employees, workplace and duration of the assignment
• correct or cancel previous notifications if plans change

RUT data is used by the Danish Working Environment Authority and other control bodies. Failure to register or incorrect data can lead to fines, so it is important to use the official online forms and keep confirmations for documentation.

Danish Working Environment Authority (Arbejdstilsynet)

The Danish Working Environment Authority supervises compliance with health and safety rules at workplaces. Its website provides detailed guidance on occupational safety, risk assessments and sector‑specific requirements.

On the authority’s website you will find:

• rules on working environment, protective equipment and workplace inspections
• guidelines for construction sites, manufacturing, transport and other high‑risk sectors
• information on mandatory training and certifications for certain tasks

Foreign employers posting workers to Denmark should regularly consult the Working Environment Authority’s materials to ensure that Danish standards are met in addition to home‑country rules.

Danish Agency for International Recruitment and Integration (SIRI)

If your business needs to hire non‑EU or non‑EEA employees, you will work with the Danish Agency for International Recruitment and Integration (SIRI). SIRI administers work and residence permits for highly qualified staff, key employees and other categories.

On SIRI’s website you can:

• check schemes such as the Positive List for Skilled Work, Fast‑track Scheme and Start‑up Denmark
• download application forms and checklists for employers and employees
• follow processing times and documentation requirements

Using the official guidelines helps avoid delays and refusals, which can be costly for businesses relying on international talent.

Digital tools: MitID, e‑Boks and Digital Post

Digital communication with Danish authorities is mandatory for almost all businesses. Three tools are particularly important:

• MitID – the national digital ID used to log in to public and many private services
• e‑Boks / Digital Post – the secure digital mailbox where authorities send official letters, decisions and reminders
• business self‑service portals – for example Virk.dk and skat.dk, which require MitID to access company data

Foreign owners and directors should obtain MitID as soon as possible or appoint a local representative with access rights. Regularly checking e‑Boks is crucial, as deadlines for tax, reporting and appeals often run from the date a message is delivered digitally, not when it is read.

Statistics Denmark (Danmarks Statistik)

Statistics Denmark provides official statistics on the Danish economy, labour market, demographics and sectors. This data is valuable for business planning, market analysis and preparing applications for financing.

Entrepreneurs can use the online databases to:

• analyse demand and competition in specific regions or industries
• monitor wage levels and employment trends
• support business plans and investment decisions with reliable figures

Most data is available free of charge and can be exported for further analysis.

Business promotion, export and investment support

Several public organisations support companies that want to grow, innovate or expand abroad:

• Business hubs and local business centres – offer guidance on starting and developing a business, often free of charge
• Export and investment agencies – provide information on foreign markets, export rules and international partnerships
• Innovation and research programmes – support companies working with new technologies, green solutions and digitalisation

Using these services can help Danish and foreign‑owned companies navigate funding opportunities, EU programmes and cross‑border projects more effectively.

Labour market institutions and trade unions

Denmark has a strong tradition of collective agreements and social dialogue. For employers, it is important to understand the role of labour market institutions and trade unions.

Relevant sources of information include:

• employers’ organisations, which provide guidance on collective agreements, wages and working conditions
• sector‑specific trade unions, which publish information on minimum standards and typical employment terms
• public labour market portals with job posting tools and recruitment support

Before hiring staff or entering a new sector, it is advisable to check whether collective agreements apply and what obligations they create for your company.

Official guidance in English for foreign entrepreneurs

Many Danish authorities provide dedicated pages and brochures in English for foreign entrepreneurs. These resources explain, in a concise way, how to:

• choose a legal form and register a company
• comply with Danish tax, VAT and accounting rules
• employ staff and meet labour law and social security requirements

When in doubt, always rely on official websites with “.dk” domains and cross‑check information with a Danish accountant or legal adviser. This combination of public resources and professional support significantly reduces the risk of errors and penalties when doing business in Denmark.

Common doubts about running a company in Denmark

1. ​What is a Denmark Holding Company?
   It is a company from Denmark, operating as a holding company, which must be registered with the Trade and Companies Authority. Below you will find key information about Denmark Holding Company:
   • A private Danish holding company is the so-called Anpartselskab (ApS).
   • The holding company from Denmark holds shares in other foreign subsidiaries.
   • It has the right to control 100% of the shares of foreign companies.
   • The profits of such a company are exempt from taxation.
   • The minimum required share capital is DKK 125,000.
   • No more than one shareholder is required.
   • No restrictions on the activities of subsidiaries.
   • It is possible to register it within one day.
   • Company accounts are publicly registered and audited annually.
   • These companies hold only foreign shares.
   • Dividends are exempt from taxation.
   • According to the 2009 Tax Reform Law, different types of investors are distinguished according to the level of shareholding: affiliated investors - exempt from capital gains tax and holding shares at 50% of the share capital; portfolio investors - obligated to pay capital gains tax and holding shares with less than 10% of the share capital; subsidiary investors - not obligated to pay profit tax and holding shares between 10% and 50% of the share capital.
     
     
2. Definition of Denmark Private Limited Company - PLC
   Denmark Private Limited Company is a limited liability company, also known as Anpartsselskab - ApS. Shareholders of such a company are liable only to the extent of the value of their contributions for the company's obligations. Denmark is a member country of the European Union, which allows this type of company to expand its operations into the markets of EU member states. The share capital of a PLC cannot be less than DKK 50,000, and any company (even with a name in English) must end with the abbreviation Danish ApS. Registration of a Denmark Private Limited Company requires contact with two government agencies: The Articles of Incorporation and Memorandum of Association are registered with the Registrar of Companies, as well as the Danish Trade and Companies Agency. Templates for the Articles of Association are available from the Danish Business Authority, which describes the rules regarding, among other things, the personal information of promoters, the allocation of shares, the cost of setting up the company, the personal information of the auditor of business in Denmark and the managers. A PLC must have at least one Danish director and at least one shareholder.
   
   
3. Restrictions on business activities
   PLCs in Denmark are prohibited from engaging in seven business activities, including:
   • banking,
   • trust fund management,
   • fund management,
   • trust management,
   • insurance,
   • collective investment schemes,
   • reinsurance.
     
     
4. Definition of PMV
   The term PMV (Personligt ejet mindre virksomhed) refers to a small business where the owner does not have to register it with the Central Business Register (CVR). The owner is fully responsible for the company's liabilities with his or her assets. PMV does not require start-up capital, but once an employee is hired or annual turnover exceeds DKK 50,000, the owner is required to convert the business into a full-fledged company.
   
   
5. General concept of NemID (EasyID) in Denmark
   In Denmark, NemID is an identification tool that functions much like a digital signature, available to all Danish companies.
   
   
6. Supervision of companies in Denmark by the Labor Inspectorate
   The Labour Inspectorate in Denmark is concerned about the safety of workers and regularly inspects companies for working conditions and hygiene. Arbejdstilsynet, or the Danish Labor Authority, oversees companies operating in Denmark, including foreign companies offering temporary services, and checks that companies have registered with the RUT, or Register of Foreign Providers. The inspections are unannounced and cover all companies in Denmark. The Labor Inspectorate cooperates with the police, checking the legality of foreigners residing in Denmark with work permits, and with the Tax Office, which checks fees and taxes, including VAT. The Labor Inspectorate can conduct inspections without a court order, including offshore installations, and can also conduct various forms of surveillance.
   
   
7. The role of the Danish RUT
   Those planning to do business in Denmark must report their company to the Registry of Foreign Service Providers, or RUT. It is also necessary to report any changes to the RUT on their effective date. Failure to notify or improperly notify the RUT may result in a financial penalty. The registry has a contact number for business owners to obtain information regarding registration with the RUT and labor regulations. The registration requirement applies to employees and employers. The RUT number is necessary for contact with Danish authorities.
   
   
8. Summary of Denmark Holding Company
   This is a holding company from Denmark that must be registered with the Trade and Companies Authority. Below you will find key information about Dania Holding Company:
   
   • The private company acting as a holding company is Anpartselskab (ApS).The Danish holding company owns shares in other foreign subsidiaries.
   • It has the right to control 100% of the shares of foreign companies.
   • The profits of such a company are exempt from taxation.
   • The minimum required share capital is DKK 125,000.
   • No more than one shareholder is required.
   • No restrictions on the activities of subsidiaries.
   • It is possible to register it within one day.
   • Company accounts are publicly registered and audited annually.
   • The companies hold only foreign shares.
     
     According to the 2009 Tax Reform Law, different types of investors are
     distinguished according to their level of shareholding: affiliated investors -
     exempt from capital gains tax and holding shares at 50% of the share capital;
     portfolio investors - obliged to pay capital gains tax and holding shares with
     less than 10% of the share capital; subsidiary investors - not obliged to pay
     profit tax and holding shares between 10% and 50% of the share capital.
     
     
9. Responsibility for compliance with regulations
   Companies operating in Denmark are under the supervision of the police, the Tax Office and the Labor Inspectorate. They inspect registration with the RUT, payment of taxes, compliance with health and safety rules and the legality of employment. Violations of these rules can result in warnings, fines or prosecution.
   
   
10. Establishing a branch vs. a new company
    Establishing a branch of a foreign company in Denmark is a good idea for foreign companies. An entrepreneur can establish a branch if the business in another country is similar in nature to a Danish A/S or ApS. Establishing a branch does not require start-up capital, as with a new company.
    
    
11. Danish krone exchange rate
    Online exchange offices offer more favorable rates than traditional outlets. You can also negotiate margins. Sample site: www.rkantor.com.
    
    Important sites and phone numbers in Denmark are:
    
    • erhvervsstyrelsen.dk,
    • skat.dk,
    • virk.dk,
    • statsforvaltning.dk,
    • customstax.dk,
    • Urząd ds. Rejestracji: Danish Commerce and Companies Agency, Kampmannsgade 1, DK-1780 Copenhagen V; Tel.: +45 33 30 77 00; Fax: +45 33 30 77 99; E-mail: ckk@erhvervsstyrelsen.dk.
      
      
12. Company registration procedure
    Registering a company in Denmark is easy and includes no restrictions, freedom of competition and low income tax. You can establish a business through the website of the Danish Commerce and Companies Agency (DCCA): www.erhvervsstyrelsen.dk. The new company is assigned a special Central Company Register number - CVR: www.cvr.dk. Registration with Customs and Taxation can be done at www.toldskat.dk.
    
    
13. Residence certificate
    Foreign individuals planning a longer stay in Denmark or starting their own business must obtain an EU/EEA citizen's residence certificate from the Danish Regional Office (www.statsforvaltning.dk).
    
    
14. Invest in Denmark
    Invest in Denmark is an organization in Denmark serving as an investment resource for entrepreneurs.
    
    
15. LetLøn System
    The LetLøn system is a free tool available on the website of the Danish Customs and Taxation Service (SKAT) for keeping payroll records of small business employees. The system calculates taxes and costs automatically.
    
    
16. Afstaelse
    Afstaelse is a fee for renting premises for an activity that tenants must pay.
    
    
17. VAT payer
    Entrepreneurs in Denmark must pay CIT and 25% VAT if their annual turnover exceeds DKK 20,000.
    
    
18. Translation of documents
    Translation of documents from Danish by a certified translator costs about 400 Danish kroner per page.