Denmark's population boasts a worldwide reputation as the ‘happiest in the world,’ with high standards of living underpinned by well-developed social services and free healthcare. And these factors go hand-in-hand with attracting foreign companies entering the Danish market.
However, incoming companies will find these attractions balanced by a confusing employment market, with some employee benefits covered by laws, some by collective agreements and others a matter of individual contracts.
There are speedier and more cost-effective alternatives to launching a subsidiary, with Bradford Jacobs opening the door to a hassle-free route into Denmark. Work alongside our Professional Employer Organization (PEO) recruitment specialists, then utilize our Employer of Record (EOR) in-country experts to handle every aspect of compliance.
Employers can depend on our in-depth knowledge of Denmark and how to navigate its challenging legislative issues that revolve around statutes, collective agreements, and European Union directives.
Here we have set out some basic summaries of what you need to make the transition into the Danish market, whichever sector you operate in.
Starting a Business in Denmark
Foreign companies starting a business in Denmark usually prefer the option of a private limited liability company, known as an Anpartsselskab (ApS). All companies, foreign-owned or local, come under the Danish Companies Act and must register with the Danish Business Authority, the Danish Commercial and Companies Agency and be enrolled in the Commercial Registry.
The necessary stages for starting the business include:
- Confirmation of parent company’s intention to open a subsidiary, Articles of Association, details of shareholders and their initial capital investment
- Registering with the Danish Business Authority (DBA) to obtain the Central Business Registration (CVR) number and the ‘NemID’ electronic signature to access public sector internet services
- Log on with the Customs and Tax Administration (SKAT) for withholding taxes and for VAT if revenue is above DKK 50,000 ($6,720, US$8,000)
- Open an account with a Danish bank to deposit share capital of at least DKK 40,000 (€5,400, US$6,440) and have a registered Danish office, although this need not be either owned or leased by the subsidiary
Expanding Business into Denmark
Located on the northwestern corner of Europe, Denmark is a gateway to 26 fellow members of the European Union (EU) and its Nordic neighbors Sweden, Norway, and Finland. Denmark’s Gross Domestic Product (GDP) is predicted to pass 392 billion US dollars in 2021, which ranks this comparatively small nation an impressive 36th largest globally.
Denmark’s well-educated workforce combine a laid-back, relaxed attitude with a sense of innovation and independence. The Danes are world leaders in several sectors, including pharmaceutics, medicine and healthcare, renewable energy, electronics, and maritime shipping.
Opening a business in any overseas territory brings issues. Moving staff across the world means lengthy processes to obtain visas and work permits. When employees are in place, who will handle payroll? How will your company deal with regulations on taxation, entitlements and benefits, termination, and severance?
Drawing up an expansion blueprint is not enough. Your business plan will have to answer all these questions.
Denmark welcomes foreign investment, but the employment market is complicated by its mix of laws, collective and trade union agreements affecting employee benefits and entitlements. There are other questions too: where will you find distributors, manufacturers, and offices?
There is a simple alternative. By partnering a Professional Employer Organization (PEO) and Employer of Record (EOR) such as Bradford Jacobs, companies can plot a time-efficient and cost-effective path to locating and employing staff in Denmark.
Denmark Business Facts
- Capital – Copenhagen
- Population – 5.8 million
- Regions – There are five regions: Capital region, region Zealand, Southern, Central and Northern regions
- Official language – Danish
- Economy and world ranking – US$392 billion, ranked 36th
- Leading sectors by GDP – service 64.9%, industry 20.9%, and agriculture 1.4%. Banking, tourism, shipping, trade, and transport are strong or growing sectors
- Main exports include – medications, electrical generator sets, pig meat, refined petroleum, blood, toxins, and vaccines
- Main imports include – cars, refined petroleum, packaged medications, crude petroleum, broadcasting equipment
- Main trading partners – Germany, USA, Sweden, UK, Netherlands, and China
- Government – constitutional monarchy, parliamentary system, representative democracy
- Currency – Danish Krone DKK
Advantages and Challenges of Denmark Market
Advantages of expanding into the Danish market include:
- Workforce: Well-educated, highly skilled, and motivated workforce
- Communicating: Wide use of English language
- Sectors: In the front rank globally for life sciences, renewable energy, and IT
- Logistics: Highly developed Road, rail, air, and sea links with Europe and worldwide; ranked No. 1 by the World Bank for ease of trading across borders
- Links: Freedom of movement for personnel throughout the European Union’s 27 member nations with access to 450 million consumers
- Global Position: Impressive stable of multinational Danish companies such as Carlsberg and Lego and international giants Microsoft and Dell
- Taxation: Corporation tax rate of 22% among the lowest in the European Union, with tax incentives for foreign companies and highly qualified expatriates
Challenges of expanding into the Danish Market include:
- Expenditure: High wage and labor costs
- Bureaucracy: Foreign companies face unfamiliar complex tax and regulatory issues
- Start-ups: Ranked only 45th internationally by the World Bank for ease of starting a business
- Trade: Comparatively small, open economy susceptible to demand for its exports
Limited Company / Subsidiary or Branch in Denmark?
International companies targeting Denmark for expansion will generally choose a private limited liability subsidiary, known as an Anpartsselskab (ApS). However, there are also some key characteristics of a branch office that one might want to look into before making a decision on your company type to expand with into Denmark. The key points for both company types are as follows:
Main characteristics of a subsidiary:
- Subsidiaries are independent legal entities from the owning foreign parent company
- Generally, the parent company has no responsibility for the debts or liabilities of the subsidiary
- The subsidiary can follow independent business activities from the parent company, under a different name
- The subsidiary must be registered with the Danish Business Authority (DBA) with a minimum nominal share capital of DKK 40,000 (€5,375, US$6,256)
- Minimum of one shareholder with no upper limit
- Pays Corporation Tax at 22%
- Required corporation documents include Articles and Memorandum of Association, register of shareholders and shareholders’ operating agreement
- Must file annual accounts with the DBA
Main characteristics of a Branch:
- A branch is not a separate legal entity from the parent company, but an extension
- The branch must follow the same business activities as the parent company and have the same name with the suffix ‘Filial’ added to the title
- The parent company is responsible for any debts or liabilities of the branch
- Branches are subject to 22% Danish Corporation Tax
- The branch must file the annual reports of the parent company with the DBA
Expert guidance is vital when weighing the options between a subsidiary and branch in Denmark. There is an alternative route – one that is quicker, stress free, cost effective and will have you up-and-running in days rather than weeks or even months. Bradford Jacobs will locate top talent for your company. Once you select your new employee our Employer of Record (EOR) specialists will handle every aspect of employment law, including payroll and tax.
Legal Structures for Denmark Market Entry
All companies in Denmark operate under the Danish Companies Act, which is largely based on European Union corporate law, and must register with the Danish Business Authority, the Danish Commercial and Companies Agency and be enrolled in the Commercial Registry.
There are four types of limited liability companies (Kapitalselskab). They are:
- Public Limited (Aktieselskaber or A/S)
- Private Limited (Anpartsselskaber or ApS)
- Partnership Company (Partnerselskaber or P/S)
- Entrepreneurial Company (Iværksætterselskaber or IVS)
NB: Changes to the Danish Companies Act ruled out new Entrepreneurial Companies (IVS) being established after April 2019, stipulating that existing IVS companies had to convert to private limited companies by April 2021 with minimum nominal share capital of DKK 40,000 (€5,375, US$6,256).
The legal structure for a private limited liability company:
The legal structure for a subsidiary allows it to operate independently from the parent company, under its own name and able to follow its own commercial and business activities. The subsidiary can have an unlimited number of shareholders who have no liability beyond their share contributions. The shareholders elect directors, who can then appoint managers to manage day-to-day operations.
The legal structure for a branch:
A branch is not a separate legal entity from the owning foreign parent company and carries on the same business under the same name as the parent company as its permanent representative in Denmark. The parent company has total responsibility for any debts or liabilities of the branch. The branch must provide Articles of Association of the parent company, and lodge the parent company’s annual accounts with the Danish Business Authority. A designated branch manager oversees the business activity and supervises financial reporting.
Opening a Business Bank Account in Denmark
Business bank accounts are not required for incorporation but are for depositing share capital, if applicable. In choosing the right one, consider general services, minimum deposit, fees, ATM facilities, although the process for opening the account is usually free.
Denmark has one of the world’s safest banking systems with low fees for personal and corporate banking.
A business needs a NemKonto account and NemID (translated as an Easy Account/ID) as Demark is a digitalized country with many systems and services online, such as public sector authorities. The Easy Account and ID make transactions easier and allow the company to receive payments, income tax and VAT rebates.
When setting up the company business account, the bank can designate it as the NemKonto account and help with this and the NemID.
Opening a company account is not an effortless process and it will need the owner of the company or a director to initiate it with a face-to-face meeting due to Know Your Customer policies and money laundering concerns. The bank will require many documents and it is best to be prepared, for instance with:
- End of year profit and loss, budget for 12 months, cash flow for previous year to show good financial standing
- A website, up and running
- Copies of Articles of Association / Memorandum and Incorporation documents
- Confirmation of signatories on the account e.g., the owner, director or administrator who gives permission to open the account
- Proof of registered office
- Information on who owns the business. Owners who have 25% or more of company shares will need to provide ID or passport and proof of personal address
…and maybe more, depending on your application. This could also include information on users for internet banking.
Company Formation in Denmark
Foreign companies establishing a legal entity for their expansion into Denmark must comply with the Danish Companies Act, the Danish Business Authority, the Danish Commercial and Companies Agency and be enrolled in the Commercial Registry.
- Select unique company name and type of entity, typically an Anpartsselskab (ApS) limited liability company
- Register for a Central Business Register (CVR) number via the Danish Business Authority (DBA) website
- Obtain a ‘NemID’ digital signature to access internet services; this needs Danish residency and a work permit
- Transfer share capital of DKK 40,000 (€5,380, US$6,390) for operational costs
- Provide full details, passports, ID of all board members, who need not reside in Denmark
- Register with Customs and Tax Administration (SKAT) for tax
- Company must further be registered for VAT, if revenue is above DKK 50,000 ($6,720, US$8,000)
- Take out mandatory industrial injury insurance
Finding an Office in Denmark
Denmark is recognized as one of the best globally for doing business. It boasts an excellent welfare system and a flexible workforce and as a member of the European Union has free market access to 450 million consumers.
Now you are expanding into Denmark, consider the options and the following points when choosing an office:
- Utilize special economic zones or free-trade zones
- Ease of travel and good transport links for staff and clients
- Work, communication, and storage – is the office fit for purpose?
- Is it part of a business cluster or hub?
- Is it light, airy, and modern to keep the workforce happy?
- Is it within the budget … but still has room for expansion?
- Is the locality clean and good for mental health, provide services and accommodation to attract the top talent and keep them?
- What local government funding or tax breaks are available?
Denmark is a comparatively small country with a cheap and efficient public transport system, one of the best Metro systems in the world with international ports and airports - the Gateway to Europe. People even live in Sweden and commute to Denmark to work, so this gives endless possibilities to locate your office. Other options include:
Southern Denmark - The Regional Growth forum which promotes ‘the Good Life’ philosophy, invests around €13 million a year in business development in sustainable energy, robotics and automation, tourism, and creative business – where ‘cluster’ development drives internationalism.
Danish Business Hubs (erhvervshuse) - These are developed and come under the Ministry of Business, Industry and Financial Affairs with cooperation between private and public sector service providers and alongside business guidance (virksomhedsgui) from the Danish Business Authority – delivering:
- Free support helping them to grow on the international stage, utilizing joint potential
- Provides coaching and networking opportunities creating trust and synergy
- Maximize ideas, knowledge, research, and development opportunities more efficiently, generating new partnerships
- Innovative ideas which can transform into marketable solutions and services
You can find out more about business hubs in Denmark here.
Copenhagen: The capital boasts an award-winning airport and is a lively, dynamic city. It provides interconnectivity between Scandinavia, the Baltic and Northern Europe with access to 100 million consumers within 24 hours, with many Danes speaking English and German. Greater Copenhagen has Scandinavia’s talent hub for recruitment and groundbreaking research with numerous science parks and 14 universities in a highly dense business population.
Finding a Danish Manufacturer
Companies needing to partner manufacturers must examine the options as making the right decision is critical to success. Internationally aspiring companies and entrepreneurs must ask important questions when negotiating with top-line manufacturers. Some important questions to ask include:
- Do they hold relevant quality certificates?
- What experience do they have and current clients?
- Can they deliver direct to customers?
- Can they keep up with demand? Or do they outsource? Can they source materials?
- Are they financially sound?
- How will language impact on communication?
- What is their minimum order quantity?
- Discuss possible penalties for inadequate quality or late deliveries
- Payment options
You may also want to consider:
- Market Research to avoid manufacturing a product in a saturated market
- Licensing to a company that can handle manufacturing, marketing, and distribution
- Can the manufacturer build and test a prototype?
- Protecting your intellectual property
Business groups, LinkedIn, magazines, and directories can also provide help for finding a manufacturer, such as:
- Buying and Selling
- Industrial B2B Gateway
- Trade Markets
- Denmark for Manufacturing
- Ministry of Foreign Affairs
Finding a Danish Distributor
You have your product, a manufacturing partner… now you need to distribute the goods around Denmark, into the rest of Europe, the Baltic, Scandinavia, and the UK and to do this you will need a first-rate distributor.
Finding the best match who understand your industry’s distribution channels and markets is vital to accomplishing your objectives. Treat distributors as long-term partners and work with them to formulate goals and business plans. Experienced distributors can also help with language, local customers, and cultural differences.
Why not join a trade mission from your home country? They should have good contacts for targeting pertinent companies to arrange for face-to-face meetings as well as knowing the best events or conferences to attend. Joining B2B organizations, accessing local directories and magazines or exploring social media are all good options for networking to become familiar with the region.
Contact Bradford Jacobs
Treat Bradford Jacobs as your business consultant when planning your move into Denmark. Our in-country specialists will steer you towards the frontline manufacturers and distributors and help you locate your offices in prime locations for your specific business activities. We find the staff and we get them working … your company will be up and running.
We are ready - contact us today!