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Company Formation in Denmark

Overview :

This thoroughly modern market economy features a high-tech agricultural sector, state-of-the-art industry with world-leading firms in pharmaceuticals, maritime shipping and renewable energy, and a high dependence on foreign trade. Denmark is a member of the European Union (EU); Danish legislation and regulations conform to EU standards on almost all issues. Danes enjoy among the highest standards of living in the world and the Danish economy is characterized by extensive government welfare measures and an equitable distribution of income. Denmark is a net exporter of food and energy and enjoys a comfortable balance of payments surplus but depends on imports of raw materials for the manufacturing sector. Within the EU, Denmark is among the strongest supporters of trade liberalization.

After a long consumption-driven upswing, Denmark’s economy began slowing in 2007 with the end of a housing boom. Housing prices dropped markedly in 2008-09 and, following a short respite in 2010, continued to decline in 2011 though at a slower pace. The global financial crisis has exacerbated this cyclical slowdown through increased borrowing costs and lower export demand, consumer confidence, and investment. The global financial crises cut Danish real GDP by 0.8% in 2008 and 5.8% in 2009. Denmark made a modest recovery in 2010 with real GDP growth of 1.3%, in part because of increased government spending; however, the country experienced a technical recession in late 2010-early 2011. Historically low levels of unemployment rose sharply with the recession and have remained at about 6% in 2010-11, based on the national measure, about two-thirds average EU unemployment.

An impending decline in the ratio of workers to retirees will be a major long-term issue. Denmark maintained a healthy budget surplus for many years up to 2008, but the budget balance swung into deficit in 2009. In spite of the deficits, the new coalition government plans to deliver a modest stimulus to the economy in 2012. Nonetheless, Denmark’s fiscal position remains among the strongest in the EU at 46.5% of GDP in 2011. Despite previously meeting the criteria to join the European Economic and Monetary Union (EMU), so far Denmark has decided not to join, although the Danish Krone remains pegged to the euro. Denmark held the EU presidency during the first half of 2012; priorities included promoting a responsible, dynamic, green, and safe Europe, while working to steer Europe out of its euro zone economic crisis.


Advantages of incorporating business in Denmark
  • Quick, informal and cost-efficient establishment procedures.
  • Online registration of new companies means you’re ready to do business within a few hours.
  • No resident requirements for management, including members of the Executive Board (CEO), Board of Directors or Supervisory Board Shareholders and board meetings can be held electronically.
  • No notaries’ deeds.
  • Flexible language requirements; registration of corporate documents of limited liability companies, “A/S” (Ltd.) and “ApS” (LLC), in Swedish or Norwegian language is possible as an alternative to Danish, and some documents may be registered in English.
  • Danish company law is in conformity with current EU legislation.
  • Dividends can be distributed on an interim basis.
  • It is tax efficient to establish your business in Denmark compared to other Nordic countries.

Tax Regime

Taxable income in Denmark is taxed at progressive rates up to 51.5% in Denmark, down from 59% in 2009. The Danish individual tax system is progressive, and the tax payment is divided into the payment of county municipal, church and national income taxes. The corporate company tax rate in Denmark is a flat 25%.

According to the current regime, qualifying foreign employees in Denmark, under certain conditions, are entitled to elect to be taxed at a 25-percent rate for 36 months or a 33-percent rate for 60 months. (The effective rates – including the AM-contribution – under existing rules are respectively 31 percent and 38.36 percent.) Under the terms of the bill, such employees may be taxed under one system: a 26-percent rate over a 60-month period (plus AM-contribution, so that the new effective rate will be 31.92 percent) for income year 2011.

Further, the current condition that the individual must not have been taxable in Denmark as a resident or non resident (on certain types of income) for the three years prior to joining the expatriate tax regime in Denmark will be changed to 10 years (in order to keep repatriating individuals (not just Danes, though this rule will primarily affect repatriating Danes) from using this tax rule – since the ‘political’ aim of the regime is, and always has been, to attract foreign experts to Denmark).

Moreover, the bill includes a measure that would abolish the claw-back tax rules that under the current regime apply to certain individuals who were subject to tax in Denmark during a certain period before commencement of their job in Denmark.


Types of Entities

Private Limited Company :

One or more members may found a Private Limited Company in Denmark, without a defined maximum limit and there is no restriction concerning the founders’ residence. Also the director does not have to be Danish. A private limited company must provide a minimum capital fund of 80,000 DKK. The partners of the company contribute to the capital with shares that are issued a nominal value. The shares are not negotiable, and cannot be transferred. The private limited company must hold full accounting and its members are held liable to the company’s debts, only to the extent of their contribution.


Public Limited Company or Stock Corporation :

A Public Limited Liability Company in Denmark can be established by one or more founders that may, or may not be Danish. The members of this company are not liable for the company’s debts. Unlike the private limited company, the public limited company must provide a minimum capital of DKK 500.000, and its shares can be offered to the general public. The company has a legal status and must be registeredto the Danish Commerce and Companies agency.


General Partnership :

The general partnership is set by at least two members, individuals, or companies, who are the general partners. They are fully liable to the company’s obligations to the extent of their own personal assets. The partnership functions on the basis of an agreement which regulates the structure, roles, and rights of the partners. A Danish general partnership must be registered with the Danish Commerce and Companies Agency.


Limited Partnership :

The limited partnership functions also on the basis of a partnership agreement, and can be founded by two or more members who can be individuals or legal entities. The main difference between the two types of partnerships is that in a limited partnership at least one member has to be a general partner, who has full liability, and at least one member has to be a limited partner, having a liability limited to the extent of his or her contribution to the partnership’s capital. As well as the general partnership, a limited partnership must be registered with the Danish Commerce and Companies Agency.


Sole Proprietor :

Every person can engage in business activity in Denmark, and a sole proprietor is an individual who performs business on his own account. In this case the single member of the business entity is fully liable to the company’s debts and has to register with tax authorities if he, or she, has employees, or is involved in trade activities.


Time Period:

It usually takes two weeks to incorporate a company in Denmark.