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NJORD LAW FIRM
NJORD Law Firm is a leading law firm with a
strong presence in the Nordic and the Baltic
Sea Area. We provide legal services within all
areas of corporate and commercial law with
an emphasis on international transactions. The
firm is placed in the top category of Danish
legal advisers by independent observers and
is acknowledged as a cutting-edge practice
within a number of practice areas. NJORD
Law Firm was granted the International Law
Office’s prestigious prize the Client Choice
Award in 2010 and 2011.
The firm’s offices in Denmark are situated in
central Copenhagen and Aarhus. The firm
also has offices in Tallinn (Estonia), Vilnius
(Lithuania), and Riga (Latvia). NJORD Law
Firm is one of the few Danish law firms
committed to the development of business in
the Nordic and the Baltic region, which is one
of the more dynamic growth areas in Europe.
An increase in international cooperation
and the pace of technical developments
result in new industries. The ever-changing
demands of the business world present
a challenge to businesses. Changes may
create opportunities, but may also increase
uncertainty about the laws and regulations
applicable to that business.
Legal advisers play a crucial part in identifying
issues and assisting their clients in making
efficient use of new opportunities. NJORD
Law Firm takes pride in developing new, more
efficient ways to deliver high quality legal
and commercial advice to its clients within
all practice areas significant to the relevant
business.
Establishing business in Denmark . . . . . . . . . . . . . . . . . . . . 5
Denmark – a Country of Opportunities . . . . . . . . . . . . . . . . . 6
Framework for Business – Corporate. . . . . . . . . . . . . . . . . . . 8
Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Property and Environment . . . . . . . . . . . . . . . . . . . . . . . 18
Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
The Business Environment – Marketing and Competition . . . . . . 27
Business Structure and Tax . . . . . . . . . . . . . . . . . . . . . . . 35
Winding up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
CONTENTS
ESTABLISHING BUSINESS IN DENMARKPAGE 3
ABOUT THIS GUIDEThis guide is a general guide aimed at
overseas companies, to highlight the legal
issues involved when establishing business in
Denmark. However, the guide will not provide
comprehensive legal advice on applicable
laws or other issues in connection with
establishing and doing business in Denmark.
Prior to any steps towards establishing a
business in Denmark, you should seek specific
professional legal advice. This guide has been
prepared by a team of Danish lawyers from
NJORD Law Firm.
HOW THIS GUIDE WORKSThe guide considers the various business
vehicles you may wish to set up in Denmark,
and aims at addressing some of the main
considerations that may be of relevance, such
as hiring of staff, renting of office premises,
and intellectual property rights. The guide
also deals with the regulatory and business
framework, how profits and tax are treated, as
well as with insolvency and litigation matters.
The web links in this guide provide further
information in English regarding the various
topics dealt with below.
We endeavour to answer a number of
frequently asked questions. Inevitably, you
may require further information with regard
to some topics, or you may have specific
concerns and questions, which cannot be
addressed in this guide. Please do not hesitate
to contact us if you require any further
assistance.
ESTABLISHING BUSINESS IN DENMARK
ESTABLISHING BUSINESS IN DENMARKPAGE 5
WHY INVEST IN DENMARK?• Denmark is a country with political stability
and a well-functioning public sector.
• Denmark is an internationally oriented
society with a flexible labour market, e.g.
short terms of notice and high education
standards.
• Denmark has a high industrial productivity
and profitability. Denmark has one of
Europe’s most efficient distribution systems.
• You will find IT and telecom infrastructure,
together with wireless communications and
use of internet and new media in Denmark
to be among the most competitive in the
world.
• Denmark has an ideal geographical location
in relation to Scandinavia, Northern Europe,
and the Baltic Sea Region.
• The workforce is competitive, with good
language skills, and personal and industrial
IT usage is sophisticated.
• The managerial skills are suited to a global
high-tech economy.
• The Danish Government has created
an excellent climate and motivation for
innovative businesses and entrepreneurs.
DENMARK – A COUNTRY OF OPPORTUNITIES
ESTABLISHING BUSINESS IN DENMARKPAGE 6
RELEVANT LINKS
THE OFFICIAL WEBSITE OF DENMARKwww.denmark.dk
INVEST IN DENMARK AGENCYwww.investindk.com
MINISTRY OF FOREIGN AFFAIRS OF DENMARKwww.um.dk
THE DANISH CHAMBER OF COMMERCEwww.danskerhverv.dk
THE CONFEDERATION OF DANISH INDUSTRY (DI)www.di.dk
DANISH EXPORT ASSOCIATIONwww.dk-export.dk
COPENHAGEN CAPACITYwww.copcap.com
ESTABLISHING BUSINESS IN DENMARKPAGE 7
Commercial objectives, the extent of
proposed activities, tax considerations,
and business structures would be
key factors behind any decision to
establish a business in Denmark.
Having decided to establish a business in
Denmark, you would need to determine
whether to:
1. Establish a business on your own
2. Acquire an existing business
3. Enter into business with others
ESTABLISHING A BUSINESS ON YOUR OWNShould you choose to set up a business
on your own, you would have the options
to establish a branch (“filial”) or to form a
separate Danish subsidiary.
BRANCH OR SUBSIDIARY? The branch of
a foreign company, although not a separate
Danish legal person, must keep its own
accounts, and its profits would be taxed in
Denmark. Profits would also be taxable in the
foreign company of which it is part, but in
most OECD countries and many others, tax
paid in Denmark is deductible.
The Danish tax authorities may audit the
branch and the foreign company in order
to assess the taxable profit of the branch.
If, however, you form a subsidiary, the tax
authorities would not be permitted to audit
the parent company.
ESTABLISHING A DANISH SUBSIDIARY A
Danish subsidiary would normally be set up as
a company limited by shares (“limited liability
company”) with one or more shareholders
(who may be individuals or legal persons).
The shareholders’ liability would be limited to
the amount invested in the company.
A limited liability company may be public or
private. A public company may apply for its
shares to be listed on the stock exchange,
or offered to the public at large to issue
or acquire shares or other securities. The
minimum issued share capital (to be paid
in cash or contributed as assets) required
for a private limited liability company
(“anpartsselskab, ApS”) would be DKK
FRAMEWORK FOR BUSINESS – CORPORATE
ESTABLISHING BUSINESS IN DENMARKPAGE 8
50,000 (EUR 6,700) and for a public limited
liability company (“aktieselskab, A/S”) DKK
500,000 (EUR 67,000).
A limited liability company is a legal person,
which means that it can own property, enter
into agreements, and employ staff.
Establishing a limited liability company,
including registration with the Danish
authorities, can be done online and in a few
days.
ARE THERE ANY RESTRICTIONS AS TO THE CHOICE OF NAME? A limited liability
company may be given any name that is
not too similar to that of an already existing
company or trademark, provided that the name
is not offensive. The name has to include ApS
or A/S, depending on which type of limited
liability company is chosen. If a branch office is
chosen, the name must include “filial” (branch
office).
HOW SHOULD THE MANAGEMENT BE ORGANISED? A public limited liability
company can choose to have either a board
and a managing director or a supervisory board
and a managing director. A private limited
liability company can choose either to have just
a managing director or to have a board and a
managing director. In either case, the board
must consist of at least three board members.
The managing director and the board would
be responsible for the management of the
business and organisation of the limited
liability company. There are no mandatory rules
regarding the frequency of board meetings. The
board would be responsible for the following:
• Issuing written instructions on how work
is to be divided within the board and
between the board and the managing
director
• Ensuring that taxes are paid on time
• Ensuring that the annual accounts are
prepared and filed with the authorities on
time
• Reporting any changes to the information
kept in the official registers
• Supervising that the managing director’s
business conduct is in accordance with
the instructions from the board
• Ensuring fraud prevention
• Taking out the relevant insurances
WHO IS AUTHORISED TO REPRESENT THE COMPANY? The joint board of directors will be
authorised to sign on behalf of the company.
The company may decide on the provisions
regulating the power to bind the company. The
managing director can often sign on behalf of
the company – possibly together with a board
member.
WHAT IS THE ROLE OF THE MANAGING DIRECTOR? The board is to appoint a
managing director. The managing director is
responsible for the day-to-day operations of
the company if not otherwise instructed by the
board.
WHEN CAN A SHAREHOLDER, DIRECTOR, OR MANAGING DIRECTOR BE PERSONALLY LIABLE? A director or managing director
would be liable for damages if, intentionally
or negligently, he/she causes damage in
performing his/her duties. The director or
managing director may also be liable for any
loss or damages suffered by a shareholder or
another person due to breach of the provisions
of the Companies Act, the legislation applicable
to annual accounts, or the memorandum and
articles of association of the company.
ESTABLISHING BUSINESS IN DENMARKPAGE 9
Any shareholder, who, intentionally or by
gross negligence, causes damage to the
company, another shareholder or person by
cooperating in breach of the Companies Act,
legislation applicable to annual accounts, or
the memorandum and articles of association
could also be held liable. If two or more
persons were liable for the same damage,
they would be jointly and severally liable.
ESTABLISHING A BRANCH OFFICE (“FILIAL”) A branch office would be a part of
a foreign company with its own independent
administration in Denmark. The foreign
company and the Danish branch share a legal
identity, and the foreign company is liable for
the activities of the branch.
The branch office shall be managed by at
least one branch manager, who would be
responsible for all business activities. The
branch manager would sign on behalf of
the branch office and thereby the foreign
company’s activities in Denmark. A branch
office shall be registered with the Danish
Business Authority (Erhvervsstyrelsen).
The branch office shall keep its own accounts.
The provisions governing bookkeeping and
accounts for Danish limited liability companies
would, with some exceptions, also apply to
foreign branches in Denmark.
MAY THE OWNER OR THE BRANCH MANAGER OF A BRANCH OFFICE BECOME PERSONALLY LIABLE? The owner of a
branch office would be personally liable
for the debts of the branch office. Persons,
including the branch manager, who are in
breach of applicable laws, may become liable
for damages.
BUYING A DANISH BUSINESSWhen acquiring an existing business in
Denmark, you could purchase either its shares
or its business assets. If the existing business
is conducted through a limited partnership
(“kommanditselskab”), or a branch office
(“filial”), you can only acquire the business
assets. This guide will, however, place its
emphasis on share purchases.
HOW ARE SHARES TRANSFERRED TO THE BUYER? The ownership of shares would be
transferred when the parties have entered
into a binding agreement on the transfer of
shares. In order to exercise ownership rights,
the buyer shall receive the original share
certificates and be entered as the registered
owner of the shares in the company books.
ARE THERE ANY RESTRICTIONS ON THE TRANSFER OF SHARES IN LIMITED LIABILITY COMPANIES? As in most other
countries, shares may be freely transferred, and
there are no restrictions on foreign ownership
of shares. The only permitted restriction on
free transfer would be pre-emption rights,
where the articles of association provide
that existing shareholders or other persons
shall be entitled to purchase shares, which
have been transferred to a new owner. This
provision would be common in companies
with few owners. Free transfer of shares may
also be limited by an agreement between
the shareholders, but such agreement would
only be binding on the parties concerned. An
acquisition, which is contrary to a contractual
restriction on the transfer of shares, would
not prevent the buyer from exercising his/her
rights in the company.
MAY AN INSIDER FREELY SELL AND PURCHASE SHARES IN A LIMITED LIABILITY COMPANY? Denmark has
ESTABLISHING BUSINESS IN DENMARKPAGE 10
extensive legislation, based on EU law,
regarding the right for an insider to sell and
purchase shares. Generally, the regulations
would apply to securities normally traded
in an organised market place. The definition
of an insider is wide and would cover, for
example, directors, the managing director,
executive employees, and close advisers to
the company. An insider who is in breach of
the regulations may face a fine, imprisonment,
or the forfeiture of any financial gains.
ESTABLISHING A BUSINESS WITH OTHERSRather than establishing a fully owned
subsidiary, you may want to establish business
in cooperation with a local partner. This can be
done directly by establishing a joint venture,
a limited liability company, a partnership,
or a limited partnership; or indirectly by
the appointment of a commercial agent or
a distributor or by setting up a network of
franchisees.
JOINT VENTURES Many companies, which
lack sufficient capital, skills, or market
knowledge to break into a new market,
would prefer to establish a joint venture or
another strategic alliance. Joint ventures
would have no legal status of their own
but could be organised as limited liability
companies or partnerships. Your choice
of type of organisation would depend on
commercial as well as tax considerations. A
joint venture must address all major issues
by way of a shareholders’ or partnership
agreement, including initial and future funding,
management structure, intellectual property
rights, distribution of profits, and termination.
In the event that the joint venture is established
as a limited liability company, it would be
subject to the applicable company legislation.
CONDUCTING BUSINESS AS A PARTNERSHIP If two or more persons
decide to run a business together, they have
established a partnership. There are two types
of partnerships: partnerships and limited
partnerships. In a limited partnership, the
liability of at least one of the partners would
be limited to the amount invested in the
partnership by the said partner.
The partners may be foreign citizens and are
not required to be resident in Denmark. There
is no obligation to appoint a managing director
or an accountant. If none of the partners in a
trading or limited partnership are residents
in Denmark, a person authorised to accept
service in Denmark must be appointed.
Generally, the partnership agreement would
regulate the shares in income of profits and
losses. Where a partnership agreement is silent
in this respect, profits and losses are divided
equally among the partners. The partners are
taxed on the profits of the partnership.
APPOINTMENT OF A COMMERCIAL AGENT If you only have limited knowledge of the
Danish market, the first step in establishing a
business would normally be the appointment
of an intermediary, be it either a commercial
agent or a distributor.
While the parties to a distribution agreement
enjoy the freedom of contract, the Danish
Commercial Agents Act governs an agency
relationship.
The Danish Commercial Agents Act is partly
mandatory, including provisions protecting the
commercial agent with regard to the period of
notice prior to termination and the possible
payment of indemnity upon termination of the
relationship.
The potential rights of the commercial agent
to claim an indemnity upon termination (if
ESTABLISHING BUSINESS IN DENMARKPAGE 11
and to the extent that certain qualifying
conditions are met) may be considered a
disadvantage for a company that wants
to begin exporting to Denmark. However,
there are certain advantages from operating
through a commercial agent: in particular, the
establishment of close and direct customer
contact and the ability to control resale prices
without having to consider competition law.
There is a grey zone between self-employed
commercial agents and employed sales
people. In case of ordinary employment, the
principal will have to pay national insurance
contributions, withhold and pay tax on the
salary paid, and make holiday payments. To
avoid this, the principal shall make sure that
the commercial agent is truly independent
and self-employed.
APPOINTMENT OF A DISTRIBUTOR As an
option, rather than commercial agents, the
company may want to appoint a distributor
who buys the products in his/her own name
and at his/her own expense for resale to the
market. When appointing a distributor, the
parties enjoy the freedom of contract without
having to consider protective mandatory
legislation.
When appointing a distributor, competition
law shall be applicable, in particular the EU
Commission Regulation 330/2010 on vertical
restraints.
FRANCHISING OR SELECTIVE DIS-TRIBUTION As an option, rather than
appointing an intermediary, be it a commercial
agent or a distributor, you may consider
establishing a franchise system or a selective
distribution system.
The establishment of a network of franchisees
or selected distributors implies a more direct
establishment on the market at the retail level.
Such an establishment should be limited to
business concepts that are well-structured
and highly developed for the local market
conditions.
In relation to these distribution systems,
Danish legislation does not include any
statutory provisions. Only general statutory
provisions and competition law aspects need
to be considered.
A franchise is a right granted by a franchiser
to use certain intellectual property rights in
exchange for direct or indirect fees, for the
purpose of marketing particular goods or
services.
WEB
THE DANISH BUSINESS AUTHORITY
www.erhvervsstyrelsen.dk
THE DANISH FINANCIAL SUPERVISORY AUTHORITY
www.finanstilsynet.dk
ESTABLISHING BUSINESS IN DENMARKPAGE 12
LARS LOKDAMAttorney, Managing Partner
Tel.: +45 77 40 11 [email protected]
RENÉ LYKKE WETHELUNDAttorney, Partner
Tel.: +45 77 40 11 [email protected]
LARS MERRILD HARESKOVAttorney, Partner
Tel.: +45 77 40 11 [email protected]
JAN ØSTERGAARDAttorney, Partner
Tel.: +45 77 40 11 [email protected]
CONTACTFRAMEWORK FOR BUSINESS – CORPORATE
When hiring employees in Denmark,
the terms of an employment contract
in Denmark shall comply with Danish
legislation, collective bargaining
agreements, and individually ne-
gotiated agreements such as
personnel policies.
Some mandatory provisions are made to
protect employees and to regulate e.g.
working hours, holidays, dismissals, unfair
dismissals, and dispute resolution.
In comparison with other countries, Denmark
is considered to have a flexible labour market
where redundancies are easily carried out,
and the Danish state will support financially
and assist the people made redundant.
You may consider the appointment of
an agent, distributor, or franchisee as an
alternative to establishing business on your
own and employing your own staff.
IN GENERALHOW ARE EXECUTIVE EMPLOYEES AFFECTED? The mandatory rules will
normally not apply to executives, i.e.
managing directors. Employees holding
these positions would usually represent the
company in employment matters and are
therefore treated separately. The contracts
of the executives may be freely negotiated,
and many of the statutory provisions and
collective agreements mentioned below
would not apply, unless the parties have
agreed otherwise when negotiating the
employment terms.
MAY FOREIGNERS BE EMPLOYED TO DO WORK IN DENMARK? Any citizen of an EU
member state may work in Denmark without
a work permit. An employee from outside the
EU shall have a work and residence permit in
order to work in Denmark.
THE PROTECTION OF EMPLOYEESIt is mandatory to issue an employment
contract outlining all essential terms and
conditions.
EMPLOYMENT
ESTABLISHING BUSINESS IN DENMARKPAGE 14
The provisions of the Danish Salaried
Employees Act are mandatory in respect
of all salaried employees and contain rules
regarding the terms and termination of
employment. An employment contract would
normally continue for an indefinite period
(indefinite term contract) until terminated.
The statutory minimum notice period for
the employer or the employee (as the case
may be) is one month. The employee may,
however, be entitled to a longer period of
notice when the employment is terminated
by the employer, depending on the length
of service. The maximum notice period is six
months. The employee would be entitled to
wages and other employment benefits during
the notice period.
An employee may only be dismissed on
reasonable grounds. If that is not the case,
the employer will risk being met with a legal
claim. Notice of dismissal shall be given in
writing and shall in general contain certain
information regarding the reason for dismissal.
If the dismissal relates to the conduct of the
employee, the notice shall be given within a
certain time limit.
Summary dismissal (immediate termination of
employment) may take place only in the event
that the conduct of the employee constitutes
gross misconduct.
THE WORKING ENVIRONMENTIt is in general recognised in Denmark that a
healthy work environment is best achieved
by the cooperation between employers and
employees. Employers are under a duty to
create a safe working environment, ensuring
that the employees are protected from injuries
or health damages and that the work place
complies with health and safety regulations.
EQUAL OPPORTUNITIESEmployers shall comply with anti-
discrimination legislation, based on EU law,
which makes it unlawful for an employer to
discriminate on the grounds of sex, ethnic
origin, disability, age, or sexual orientation
in connection with recruitment, promotion,
salary, and dismissal. Employers may be liable
to pay compensation if they are in breach of
these rules.
COLLECTIVE AGREEMENTSTrade unions play an important role in the
Danish labour market. A collective agreement
can be entered into by a trade union – on
behalf of the employees – and an employer
or employers’ association. Through collective
agreements, it is possible to dispense with the
rules in Danish legislation.
Collective agreements usually regulate the
contents of the employment contracts for
blue-collar workers.
Trade unions shall be consulted regarding
all major issues and changes, including
expansion, reorganisation, closing of or
cutbacks in operations, transfer of a business,
recruitment policy, and working hours.
If the employer fails to consult the trade union,
the trade union is entitled to demand that
such consultations take place. Trade unions
will have no veto, but could substantially delay
important business decisions.
ARE THE EMPLOYEES ENTITLED TO BOARD REPRESENTATION?The employees have the right to appoint at
least two representatives for the board of
directors if the company has 35 employees
or more and this has been the case for the
last three consecutive years. The position of
ESTABLISHING BUSINESS IN DENMARKPAGE 15
the employee directors of the board would
essentially be the same as that of other
directors and they would hold the same
responsibilities.
HOLIDAYSMinimum holiday entitlements and holiday
pay are regulated by the Danish Holiday Act.
The minimum holiday entitlement is five weeks
per year, but often the employee is entitled to
an additional five days’ paid holiday.
The employee earns 2.08 days’ paid holiday
for each month he/she is employed.
MATERNITY AND PATERNITY LEAVEEmployees have a statutory right to take
maternity and paternity leave. The maternal
leave starts in general 4 weeks before birth
and ends 14 weeks after birth.
A father is entitled to 2 weeks of leave. Apart
from these minimal rules, additional grants are
offered in accordance with law and collective
bargaining agreements.
Whether or not the employee is entitled to
half or full pay during the leave of absence
depends on whether or not the employee
is a salaried employee, or employed under
collective bargaining agreements, or on
individually agreed conditions.
Furthermore, the mother and father are
entitled to 32 weeks of parental leave.
PENSIONSEmployees will receive retirement pensions
(state pension and state supplementary
pension) from the Danish authority
“Udbetaling Danmark”. However, it is
common practice for the employers to pay a
supplementary pension for their employees.
In some cases, this is regulated in a collective
agreement.
Regarding expat tax, see “Special tax regime
for expatriates”, page 38.
WEB
THE DANISH IMMIGRATION SERVICEwww.nyidanmark.dk
CONFEDERATION OF DANISH INDUSTRYwww.di.dk
ESTABLISHING BUSINESS IN DENMARKPAGE 16
MIRIAM MICHAELSENAttorney
Tel.: +45 77 40 11 [email protected]
LARS LOKDAMAttorney, Managing Partner
Tel.: +45 77 40 11 [email protected]
CONTACTEMPLOYMENT
Land and property can be either
leased or owned according to Danish
law. The choice between buying and
leasing property should be made
after careful considerations and after
obtaining legal advice regarding the
specific business in hand.
LEASE OF PREMISESThe statute applicable to business leases is
the Danish Business Lease Act, and it is in
general made to protect the tenant. However,
the parties are to a large extent free to agree
on the terms of the lease. A lease agreement
may be entered into for either a specified or
an unspecified term. The majority of business
leases in Denmark run for an indefinite
period of time. Furthermore, the landlord
is only entitled to terminate the lease if the
termination is based on one of the specific
reasons listed in the Business Lease Act.
BUYING AND SELLING REAL ESTATEPlease find below a brief description of the
typical process involved when buying and
selling a real estate situated in Denmark,
including the costs and tax issues involved
and the most common types of precautionary
measures normally taken in connection
therewith.
THE TRANSACTION INVESTIGATIONS Usually, a transaction
commences by the purchaser conducting
a due diligence on all relevant information
regarding the real estate in question. The key
types of legal information are information from
the Danish land registry, lease agreements
and rent levels, searches conducted by local
authorities, and information on the insurance
policies taken out on the real estate.
The seller normally prepares a “sales package”,
containing the usual documents required by
the purchaser. Depending on the real estate
in question, an environmental report and a
building survey may be essential in order for
the purchaser to establish whether there are
any specific problems which should be taken
into consideration when drafting the sales and
purchase agreement or which could otherwise
affect the decision to go through with the
transaction.
PROPERTY AND ENVIRONMENT
ESTABLISHING BUSINESS IN DENMARKPAGE 18
COMPLETION OF THE REAL ESTATE TRANSACTION When the parties have
agreed on a transaction of the real estate, the
terms are laid down in a sales and purchase
agreement and a digital deed of conveyance
is prepared, usually by the purchaser’s legal
counsel. The digital deed of conveyance will
be in Danish and make reference to certain
of the main terms of the sales and purchase
agreement, including, among others, the date
of completion and the purchase price.
In order to secure the title to the real estate
against creditors and bona fide contracting
parties, the deed of conveyance is required
to be registered with the Danish land registry.
When the deed of conveyance has been
digitally signed by all parties, the deed of
conveyance will therefore be submitted to the
land registry for registration, accompanied by
the registration fee. This is usually handled by
the purchaser’s legal counsel.
In addition to the above documentation, a
completion statement is prepared. This is
a statement of all expenses to be refunded
between the parties in connection with the
sale of the real estate. Real estate tax is for
example usually paid in January, covering
the first six months of a calendar year. If the
date of completion is 1 March, the purchaser
will need to refund the seller an amount
corresponding to the period 1 March to 30
June. Furthermore, the completion statement
will handle any deposit and lease income paid
by tenants, etc. The completion statement
is usually drafted by the purchaser’s legal
counsel based on information received from
among others the Seller.
Depending on the agreement between the
parties, the purchase price of the real estate will
normally be deposited on an escrow account
and will only be released from this account,
with possible reductions in accordance
with the completion statement, when the
purchaser has obtained unconditional title to
the real estate according to the land registry.
The release of the purchase price will usually
take place between one and three months
after the actual entering into possession of
the real estate by the purchaser.
COSTS AND TAXCAPITAL GAIN TAX Any gain from the sale
of land and buildings in Denmark is taxable
as income for the seller (for companies
at a rate of 23.5% (2015 level)), subject to
certain deductions. Sale of tax depreciable
buildings will lead to taxation of recaptured
depreciations.
REGISTRATION FEES The registration fee for
registration of the deed of conveyance with
the land registry is a base fee of DKK 1,660
plus 0.6% of the highest value of the purchase
price or the public value of the real estate.
In some geographical parts of Denmark
(Sealand) this stamp duty is usually divided
equally between the parties, while it in other
parts of Denmark (Jutland) is borne by each
of the parties by half. Basically, this is subject
to negotiations between the parties.
Depending on the corporate structure of
the seller of the real estate, the possibility
of carrying out the transaction as a sale of
the corporate body owning the real estate -
Special Purpose Vehicle - instead of an asset
sale should be considered. No registration fee
is payable if the object of the transaction is a
limited company already being the owner of
the real estate. Such structure of a transaction
is therefore often considered in order to
minimise the registration fee and capital gain
tax. In these transactions, security in the real
estate itself may, however, not be possible due
to Danish financial assistance law.
ESTABLISHING BUSINESS IN DENMARKPAGE 19
VAT Sale and purchase of real estate is as a main
rule not subject to Danish VAT. However, some
exemptions are applicable to commercial
transfer of real estate.
Commercial transfers of new buildings are
subject to VAT in Denmark. The transactions
subject to the new rules include:
• transfer of new buildings with or
without land;
• transfer of building sites, irrespective of
whether they are developed or not; and
• separate transfers of built-up sites.
It is possible to register a building for VAT
purposes in order to obtain VAT deduction
on construction and repair of buildings.
Building for private housing can, however
not be registered for VAT. If the building is
registered for VAT purposes, the buyer will
need to assume the obligation to adjust the
VAT that has already been deducted. If the
future use of the real estate is subject to VAT,
the obligation to adjust is usually assumed
by the purchaser. A transaction of a real
estate will only trigger the VAT adjustment
obligation if a real estate registered for VAT
prior to the transaction will not be used for a
purpose liable to VAT after the transaction.
Furthermore, an enforcement notice may be
held in force in respect of subsequent owners
of a polluted property subject to the following
conditions:
if the property is a company in
operation, i.e. it has not closed down,
if prior to the takeover of the company,
notice had been given that an
enforcement notice would be served
- or an enforcement notice had been
served and the enforcement notice
had not been complied with,
if the seller had not complied with
enforcement not ices issued,
irrespective of an injunction or a
restraining order,
if at the time of the takeover of the
company, the buyer knew or should
have known that notice had been
given of the issue of an enforcement
notice or that an enforcement notice
had been issued, and
if the buyer has taken over the company
from someone who was or might
become obliged to comply with an
enforcement notice.
ESTABLISHING BUSINESS IN DENMARKPAGE 20
WEB
THE DANISH ENVIRONMENTAL PROTECTION AGENCYwww.mst.dk
THE DANISH GEODATA AGENCYwww.gst.dk
ANETTE KUSKAttorney, Partner
Tel.: +45 87 48 03 [email protected]
HANS ERIK STEFFENSENAttorney, Partner
Tel.: +45 87 48 03 [email protected]
ERIK LARSSON
Attorney, PartnerTel.: + 45 77 40 11 48
CONTACTPROPERTY AND ENVIRONMENT
The system for the protection of
intellectual property rights is well-
developed in Denmark. Business
names, trademarks, inventions, and
designs can be protected against
competitors by registration. The
intellectual property rights mentioned
above may often be licensed, but
there are no specific laws governing
licensing. However, Denmark is a
signatory to most international
conventions regarding intellectual
property rights.
WHAT HAPPENS IF INTELLECTUAL PROPERTY RIGHTS ARE INFRINGED?Sanctions for the infringement of intellectual
property rights would vary between different
types of intellectual property. In most cases,
infringements would give rise to both criminal
and civil liability. The means of preventing
infringements in Denmark were improved a
few years ago by the introduction of an act
which confers upon the holder of intellectual
property rights the power to carry out civil
law searches of premises (infringement
investigation), including searches for
counterfeit goods, in order to secure evidence.
If there are reasonable grounds for suspecting
that someone has committed an infringement,
the court may order a search for objects or
documents deemed to be of importance to
the proceedings. This enforcement tool is
valuable and unique to the rightful holder
when enforcing his/her rights in Denmark.
PATENTS A patent would protect technical
inventions and provide its owner with the
exclusive right to exploit the invention for
a certain time. Patents would be protected
against competitors by registration.
The right to a patent would belong to the
inventor or his/her successor(s) in title. The
Danish Patent and Trademark Office may
only grant patents upon application and
registration. An application shall contain a
full description of the invention, including
any drawings, a claim of the invention that the
applicant wants to protect, and an abstract,
etc. The Danish Patent and Trademark Office
would conduct an initial formal examination of
the application. The applicant would receive
INTELLECTUAL PROPERTY
ESTABLISHING BUSINESS IN DENMARKPAGE 23
a preliminary finding from the Danish Patent
and Trademark Office, stating whether the
invention may be patentable.
A patent may only be granted in respect of a
new invention. The requirements in Denmark
are the same as for European patents, i.e. they
are based on the principle of absolute novelty.
In general, the patent shall be granted for any
invention that could be applied in industrial
use, is new, and would involve an inventive
step. The maximum duration of a patent
would be 20 years from the application date.
TRADEMARKS Trademarks would be
protected against competitors by registration
or use.
Exclusive protection of trademarks may be
obtained either by registration with the Danish
Patent and Trademark Office or by proprietary
use. It normally takes up to half a year to
register a trademark. The requirements for
making an application for the registration of a
trademark would be as follows: a combination
of words, letters or numerals, drawings,
symbols, etc, a declaration of the goods or
services, and a list of the classes for which
protection is requested.
The Danish Patent and Trademark Office
would examine whether the application
complies with formal requirements, such
as classification, the distinctiveness of the
trademark, and any potential conflict with
prior trademarks, names, trade names, etc.
Third parties could object to the application
within two months from the day when the
application was published. The duration of
the protection would be indefinite but subject
to renewal every 10 years. A trademark
registration may be cancelled if the trademark
has not been used for the last five years and
the registrant is unable to show any valid
reason for not having used the trademark.
COPYRIGHT The types of works that
copyright would protect are literary works,
e.g. novels, newspapers, and computer
programs, and artistic works, e.g. paintings,
drawings, photographs, sculptures, and works
of architecture as well as industrial design,
etc. Copyright is an unregistered right which
is established once the requirements of
copyright are fulfilled.
The protection of copyright would not
depend upon formal procedures. The work
would be protected by copyright as soon as
it is created and is sufficiently original. The
author’s work would be protected when it is
created. The author may assign the financial
rights to his/her work but not the moral
rights, which would always remain with the
author. Copyright protection would normally
last throughout the author’s lifetime plus 70
years. In respect of neighbouring rights, such
as rights of performers, producers of sound
recordings, and broadcasting organisations,
the protection would last for 50 years from
the day of creation.
DESIGNS Protection could be available for a
product resulting from its aesthetic aspects
or its ornamentation. A design refers to
the appearance of the whole or a part of a
product resulting from the features of the
lines, contours, colours, shape, texture, and/
or materials of the product itself and/or its
ornamentation. The registration of designs
would normally serve as protection against
competitors’ abuse.
Designs meeting certain requirements may
also benefit from protection even without
prior registration (unregistered Community
designs). A design would be protected by
law to the extent that it is new and has an
individual character.
ESTABLISHING BUSINESS IN DENMARKPAGE 24
An application for registration with the Danish
Patent and Trademark Office should contain,
inter alia, personal details about the applicant,
an indication of the products in which the
design is intended to be incorporated or
to which it is intended to be applied, and
illustrations of the design. Applicants would
be permitted to combine multiple variations
of the same design in a single application.
The Patent and Trademark Office would
assess whether the application complies
with formal requirements. Apart from that,
the Danish Patent and Trademark Office
would only examine whether the design for
which protection is applied for falls within the
definition of design and that it is not contrary
to public policy or accepted principles of
morality. If the application is accepted, it
would be open to objection for two months.
Registered designs would be protected for
five years and renewable for another two five-
year periods. Denmark is a signatory to the
Paris Convention and the Locarno Agreement.
CONFIDENTIAL INFORMATION AND TRADE SECRETS Confidential information
and trade secrets are governed by the
protection of the Danish Marketing Practices
Act, which prohibits abuse and disclosure
of trade secrets and associated activities,
e.g. corporate espionage and unauthorised
commercial use. Corporate espionage
would be punishable by imprisonment,
but unauthorised commercial use would
only give rise to civil liability in the form of
damages. However, the law does not reduce
the necessity of confidentiality agreements
between business parties.
WEB
THE DANISH PATENT AND TRADEMARK OFFICEwww.dkpto.dk
ESTABLISHING BUSINESS IN DENMARKPAGE 25
JEPPE BROGAARD CLAUSENAttorney, Partner
Tel.: +45 77 40 11 [email protected]
HANNE WEYWARDTAttorney, Partner
Tel.: +45 77 40 11 [email protected]
PETER GUSTAV OLSONAttorney, Partner
Tel.: +45 77 40 11 [email protected]
CONTACTINTELLECTUAL PROPERTY
When doing business in Denmark,
you would be subject to general
business regulations, such as the
Sale of Goods Act, the Contracts
Act, the Competition Act, and the
Data Protection Act. This chapter
summarises the general principles of
these statutes.
PRINCIPLES OF CONTRACT LAWDanish law would not impose any formal
requirements for the formation of contracts.
Almost any contract could be oral. The courts
would interpret contracts subjectively and
see through the strict wording in order to
determine the intention of the contracting
parties at the time of entering into the
agreement.
The general principles of contract law are set
out in the Contracts Act, including provisions
governing the formation of contracts, powers
of attorney, and the invalidity of contracts.
HOW IS A CONTRACT FORMED? There are
no formal requirements for the formation of
a contract. Offers, acceptance, and contracts
may be made orally in most cases, but a
written contract would be recommendable.
Unless otherwise stated or agreed, an offer in
writing would be binding during a reasonable
length of time. Terms of acceptance, which
differ from the offer, or late acceptance, would
generally be treated as new offers, which may
be accepted or rejected.
WHEN IS A CONTRACT VOID? A contract
may be void by reason of duress, fraud, or
unreasonableness. A contract may also be
held unenforceable if its enforcement would
be deemed unfair or unreasonable.
HOW IS A CONTRACT INTERPRETED IN DENMARK? When interpreting contracts,
Danish courts would take a subjective
approach seeing through the strict wording
of the contract in order to determine the
intention of the parties. It is a fundamental
principle of Danish contract law that the
intentions and beliefs of the parties determine
the contents of the contract. If an agreement
does not expressly regulate a certain matter,
statutory provisions may be included in the
contract in order to fill the gap.
THE BUSINESS ENVIRONMENT – MARKETING AND COMPETITION
ESTABLISHING BUSINESS IN DENMARKPAGE 27
WHAT HAPPENS IF A CONTRACT IS INCOMPATIBLE WITH STATUTES? Contract
provisions, which are incompatible with
mandatory statutory provisions, would be
void. The whole agreement may be void if the
relevant provisions constitute the essence of
the agreement.
SALE OF GOODS AND SUPPLY OF SERVICESCommercial parties are free to determine the
terms and conditions of sale of goods and
supply of services in Denmark. If an agreement
for the sale of goods does not expressly
regulate a specific issue, the provisions of
the Sale of Goods Act would be applicable.
There are no specific provisions regarding the
supply of services, except to consumers, and
it would therefore be important to ensure that
an agreement covers all the key issues.
In case of sale of goods, the parties are free
to determine the terms and conditions of the
agreement. Where an agreement does not
govern a particular issue, the following general
principles would apply:
● The seller shall be under an obligation
to deliver goods in accordance with
the agreement as to the type, quantity,
quality, and other properties of the
product. The goods shall meet the
normal standard, which the buyer would
reasonably regard as satisfactory, and
shall be delivered on time.
● The buyer shall pay for the goods upon
delivery. If the price is not specified
in the agreement, the buyer shall pay
what would be reasonable, taking into
account the nature and condition of the
goods, the prevailing market price upon
conclusion of the agreement, and other
relevant circumstances.
● If a delivery date has not been specified,
the goods shall be delivered within a
reasonable period after the purchase. The
risk of loss of the goods would pass from
the seller to the buyer when the buyer
has collected the goods. If someone
other than the seller would transport the
goods to the buyer, the risk shall pass
when the goods are handed over to the
carrier.
● If the seller does not deliver the goods
on time, the buyer could demand
performance in accordance with the
agreement. If the delay would constitute
a material breach of the agreement, which
the seller anticipated or ought to have
foreseen, the buyer would be entitled to
terminate the agreement. The buyer may
also be entitled to damages. Unless the
seller has been negligent, the damages
would be limited to direct damages.
● If the seller delivers defective goods,
the buyer could demand remedy at the
expense of the seller. The seller has a
right to remedy the defective goods
in order to avoid sanctions other than
damages. If the seller fails to remedy
the defective goods, the buyer would be
entitled to a reduction of the purchase
price in proportion to the defect. The
buyer could cancel the delivery if the
defect is material to him and the seller
ought to have foreseen this. The seller
may also be liable for damages. Unless
the seller has been negligent, damages
would be limited to direct damages.
In case of supply of services, the agreement
would determine the rights and obligations of
the parties. If there is no agreement, or if the
agreement does not regulate a specific matter,
the provisions of the Sale of Goods Act would
be implied in order to determine the rights and
obligations of the parties.
ESTABLISHING BUSINESS IN DENMARKPAGE 28
DEALING WITH CONSUMERSSeveral statutes shall be considered when
dealing with consumers. All those statutes
are drafted in order to protect the consumer
to a reasonable extent and are therefore
consumer-friendly.
The EU directive on distance contracts was
recently implemented in Denmark. A distance
contract would mean any contract concerning
goods or services concluded by means of
distance communication or during a visit by
the seller, e.g. to the home of the consumer.
The seller, shall give the consumer the
following information: the name and address
of the seller; the main characteristics of the
product or the service; the price including
all taxes; the cost of delivery; the means of
payment and delivery; and the right of the
consumer to withdraw from the agreement.
The information shall be provided prior to the
entering into of the agreement and also at
the time when the seller confirms the order of
the consumer. The consumer would have the
right to withdraw from a purchase agreement
for goods within two weeks from receipt
of the goods and may cancel a purchase
agreement for services within two weeks from
the conclusion of the agreement. Where the
right of withdrawal has been exercised, the
seller shall reimburse any payment made by
the consumer.
WEB
THE DANISH COMPETITION AND CONSUMER AUTHORITYwww.kfst.dk
ESTABLISHING BUSINESS IN DENMARKPAGE 29
MARKETINGMarketing shall be fair and proper. The
business shall be obliged to document that
its advertisements are not misleading or unfair
in any respect.
The Danish Marketing Practices Act is
generally applicable to businesses and
is supplemented by special regulations
regarding the marketing of specific products,
e.g. drugs, tobacco, and alcohol. The Act
prohibits all unfair or improper marketing.
Unfair marketing shall include marketing
which is unethical, e.g. intrusive, aggressive,
or which exploits fear. Misleading information
regarding the price or the characteristics of
the product shall also be prohibited. The
business may be fined if it is in breach of the
provisions of the Marketing Practices Act.
The Danish Marketing Practices Act is
somewhat more restrictive than EU law and
is therefore currently being reassessed.
PRODUCT LIABILITYThe Danish Products Liability Act provides
that a manufacturer, importer or supplier
would be liable for damages suffered by a
consumer caused by defects in a product.
The provisions of the law implement the EU
directive and are directory.
A person shall be entitled to damages if
he/she suffers personal injuries caused
by a defective product. If the product is
intended and used for consumer purposes,
compensation shall also be paid where the
product causes damage to property. There
shall be no compensation available for
damages caused to the product itself. The
manufacturer, importer or supplier shall not
be liable to pay damages if either:
1. the defect did not exist in the product
when the product was sold,
2. the state of scientific and technical
knowledge when the product was sold
was not such that the defect could have
been discovered, or
3. the defect is attributable to compliance
with any mandatory requirements
imposed by a public authority.
COMPETITIONThe Danish Competition Act contains two
prohibitions; against anti-competitive
agreements, and against arrangements
and conduct which amount to an abuse of
a dominant position. There may also be an
obligation to notify acquisitions and mergers
to the Danish Competition and Consumer
Authority. The Act is based on the equivalent
provisions of EU competition law. Case
law from the Commission and the Court of
Justice of the European Union shall be taken
into account when applying the Danish
Competition Act.
Anti-competitive agreements or arrange-
ments may be exempted from the application
of the Act if the undertaking can show
that the benefits of the agreement or
arrangement outweigh the negative effects
from competition.
Certain types of agreements benefit from
block exemptions. A business may, at its own
risk, assess whether an agreement falls within
the terms of a block exemption.
In the event of an infringement, an undertaking
may be ordered to terminate the infringement
and be liable to pay a fine. Very serious
offences may lead to imprisonment.
ESTABLISHING BUSINESS IN DENMARKPAGE 30
In addition, agreements or clauses in
agreements, which infringe the prohibition
against anti-competitive agreements or
arrangements, are void. In rare cases, a
business may be found liable to pay damages
to third parties.
The Competition Act also contains rules
governing concentrations of undertakings,
which would include mergers and the
acquisition of control by the purchase of
assets or shares in another business. A joint
venture, which performs all the functions of an
autonomous economic entity on a long-term
basis, could also constitute a concentration
for the purposes of the Competition Act.
A concentration shall be notified to the
Competition and Consumer Authority where
a) the combined aggregate annual turnover in
Denmark of the undertakings concerned is
at least DKK 900 million, and at least two
of the undertakings concerned each has a
turnover in Denmark of DKK 100 million or
more, or
b) at least one of the undertakings concerned
has a combined aggregate annual turnover
in Denmark of DKK 3.8 billion or more,
and the combined aggregate worldwide
annual turnover of at least one of the other
undertakings concerned is more than DKK
3.8 billion.
The undertakings concerned are generally
the merging undertakings or the business
acquiring control and the business of which
control is being acquired. A concentration
shall be notified by the merging parties or the
party or parties acquiring control.
The Competition and Consumer Authority
may prevent a concentration if it finds that
the merger is likely to have long-term, adverse
effects on competition, or suggest remedies,
which eliminate such adverse effects.
WEB
THE DANISH COMPETITION AND CONSUMER AUTHORITYwww.kfst.dk
ESTABLISHING BUSINESS IN DENMARKPAGE 31
DATA PROTECTIONDanish law on data protection is based on
EU law and therefore equivalent to the laws
in other EU member states. The provisions
are mandatory and intended to protect the
person to whom the data relates.
WHAT IS DATA? Data shall be defined as any
kind of information which directly or indirectly
relates to a living individual and which is being
processed and includes an expression of fact
or opinion about the individual. Sensitive
personal data may include information
about the individual’s racial or ethnic origin,
political opinions, health, sex life, and criminal
convictions. Stricter rules shall apply to the
processing of sensitive personal data.
WHAT IS PROCESSING OF DATA? Processing is defined as any operation carried
out on personal data.
HOW SHOULD DATA BE DEALT WITH? Anyone processing data shall comply with
certain principles. The data shall be lawfully
processed, treated in accordance with good
practice, and processed for a limited purpose.
Furthermore, it shall be adequate and relevant,
correct, not excessive, and not kept for any
longer than necessary.
HOW CAN DATA BE PROCESSED LAW-FULLY? The main rule is that data can only be
processed lawfully if the individual has given
his or her consent.
WHAT HAPPENS IF DATA ARE NOT PROCESSED LAWFULLY? If data are
processed unlawfully, the persons responsible
may be fined or imprisoned. They may also be
liable to pay damages to the individual.
WEB
THE DANISH DATA PROTECTION AGENCYwww.datatilsynet.dk
ESTABLISHING BUSINESS IN DENMARKPAGE 32
THOMAS RYHLAttorney, Partner
Tel.: +45 77 40 11 [email protected]
PETER GUSTAV OLSONAttorney, Partner
Tel.: +45 77 40 11 [email protected]
CONTACTBUSINESS ENVIRONMENT
For tax reasons, when establishing
a business or investing in Denmark,
it is important that the structure
of the business or the acquisition is
compliant with Danish law and does
not imply adverse tax consequences.
Tax incentives for foreign experts are
among the favourable parts of the
Danish tax regime.
CORPORATE TAXATIONUNLIMITED TAX LIABILITY A corporation
is resident in Denmark for tax purposes if it
is incorporated in Denmark and registered
in the Danish Business Authority as having
a Danish place of business. Furthermore,
foreign companies having their actual place of
management in Denmark are also tax resident
in Denmark. The actual place of management
is typically the place where the management
decisions concerning the company’s day-to-
day operations are made.
LIMITED TAX LIABILITY Foreign companies
can be subject to limited tax liability
either through a branch or a permanent
establishment or through withholding taxes
on certain types of Danish source income.
Danish branches and permanent
establishments of foreign companies are
taxed under the same rules and rates as
Danish resident companies:
● Company tax rate Taxable income –
including capital gains – is normally subject
to a corporate tax of 23.5% (2015) lowered
to 22% in 2016. The tax rate is identical for
public limited companies, private limited
companies, and permanent establishments.
● Danish income subject to withholding tax Certain types of payments to non-
residents are subject to Danish withholding
tax, which may be reduced according to a
double taxation treaty.
● Dividends Dividends paid to a parent
company in another EU member state or
a state with which Denmark has a double
tax treaty are exempt from withholding
tax provided that the shares qualify as
subsidiary shares. The same applies to
dividends paid on group shares (that are
not also subsidiary shares, i.e. holdings
below 10%) provided that the recipient
company is resident within the EU/EEA.
BUSINESS STRUCTURE AND TAX
ESTABLISHING BUSINESS IN DENMARKPAGE 35
ESTABLISHING BUSINESS IN DENMARKPAGE 36
Dividends paid on portfolio shares to a
foreign shareholder are normally levied a
withholding of 27%.
● Interest Interest is generally not subject
to withholding tax unless paid to a foreign
group member company that is tax resident
outside the EU and outside any of the
states with which Denmark has concluded
a tax treaty. In this situation, interest
withholding tax is levied at 22%. Certain
other exemptions apply, mainly relating to
CFC taxation.
● Royalties Royalties are subject to a 22%
withholding tax, while arts are subject to
a VAT exemption. In most cases, the payer
may reduce its withholding in accordance
with the tax treaty applicable to the
payee. Also, the EU Interest and Royalty
Directive may provide an exemption
from withholding tax if the payee is an
immediate parent, sister or subsidiary
company resident in the EU.
TAX BASE Taxable income is generally
calculated as the turnover of the business
activities minus depreciations, interest, and
other business expenses.
CAPITAL GAINS Gains and losses realised
on the sale of tangible and intangible assets,
including goodwill, are generally included in
taxable income. However, gains realised on
the sale of shares are tax-exempt if the shares
qualify as either “subsidiary shares” or “group
shares”.
“Subsidiary shares” are shares held by a
corporate shareholder that holds a minimum
of 10% of the share capital in a subsidiary
located in the EU, the EEA, or a country with
which Denmark has a double taxation treaty.
“Group shares” are defined as shares in
companies with which the shareholder is
jointly taxed or might be jointly taxed.
If the shares do not constitute group shares,
subsidiary shares or treasury shares, they
constitute portfolio shares. Gains on portfolio
shares are fully taxable regardless of the
holding period. Losses on the sale of portfolio
shares are generally tax deductible.
TAX LOSSES Tax losses may be carried
forward indefinitely, but future legislation will
limit this access.
Certain restrictions on the right to carry tax
losses forward apply when more than 50% of
the share capital or 50% of the voting rights
at the end of the financial year are owned by
shareholders different from those that held
control at the beginning of the income year
in which the tax loss was incurred.
Similarly, under certain circumstances, tax
losses are cancelled if a Danish company
receives a debt forgiveness or is the subject
of a comparable transaction. However, there
are numerous exceptions (e.g. intercompany
transactions).
CFC TAXATION According to the Danish
CFC (taxation of controlled financial
companies) rules, a Danish company has to
include in its taxable income the total income
of a subsidiary, foreign or Danish, if such
subsidiary qualifies as a CFC.
The consequence of CFC taxation is that the
Danish holding company is taxable of a pro
rata share of the Danish/foreign company’s
income, irrespective of the rules in a double
taxation treaty, if any.
MANDATORY DANISH JOINT TAXATION A mandatory joint taxation regime obliges
all Danish resident companies and Danish
branches that are members of the same
domestic or international group to file a joint
group tax return. The definition of a group
generally corresponds to the definition of
a group for accounting purposes. The tax
consolidated income is equal to the sum of
the taxable income of each individual Danish
company or branch which is a member of the
consolidated group.
VOLUNTARY INTERNATIONAL JOINT TAXATION A non-Danish subsidiary may
be included as a member of a Danish tax
grouping provided that the group includes
all of its foreign companies and branches in
the Danish tax grouping. In effect, this all-or-
nothing provision rules out the possibility for
major international groups to have their Danish
subgroup file a Danish group tax return that
includes only certain “cherry-picked” (typically
loss-making) foreign group members.
● Tax returns Tax returns are completed
based on audited financial accounts with
adjustments for tax. Tax returns should be
filed no later than six months following the
end of the accounting year. Corporations
with an accounting year-end that falls
within the period from 1 January to 31 March
shall file a tax return no later than 1 August
in the same calendar year.
● Payment of tax Corporate income tax
shall be paid on a current year basis in
two equal instalments due on 20 March
and 20 November. The authorities request
payments of 50% of the average of the
final income tax of the last three years. In
addition, voluntary additional payments
may be made on the same dates; such
voluntary payments are adjusted interest
rate when set against the final tax bill.
The final tax bill is settled by 20 November
in the following year. Underpaid tax is
then payable by 20 November with a
surtax of 5.1% of the tax amount (rate for
2010 tax year). Overpaid tax is refunded
by November of the following year with
interest of 1.6% (rate for 2010 tax year).
TAXATION OF INDIVIDUALSTERRITORIALITY AND RESIDENCE Individuals are subject to full tax liability
when they (1) take up residence or (2) stay in
Denmark without taking up residence when
the stay exceeds six consecutive months
interrupted only by short stays abroad (and
then as from the day of arrival). An individual
subject to full tax liability in Denmark is taxed
on his/her worldwide income and gains
received or accrued.
Individuals are subject to limited tax liability
on Danish source income.
EMPLOYEE GROSS INCOME All remuner-
ation from employment, whether in cash or
in kind, is subject to tax when the employee
has obtained a legal right to the remuneration,
regardless of where payment is made and
regardless of whether remitted. The liability
extends to any living or housing allowance and
any reimbursement of tax or other personal
liability, whether paid directly to an employee
or borne by the employer on the employee’s
behalf.
CAPITAL GAINS AND INVESTMENT INCOME Taxable gains and investment income are
added to taxable income. Certain allowances
are available.
DEDUCTIONS As opposed to corporations,
individuals may deduct certain non-business
expenses.
● Business deductions An employee may
be entitled to deduct travelling expenses,
subscriptions to professional associations,
necessary business literature, tools of
ESTABLISHING BUSINESS IN DENMARKPAGE 37
trade, etc. (if exceeding DKK 5,600 per
calendar year). As opposed to corporations,
individuals may deduct certain non-business
expenses:
● Non-business expenses An individual
subject to full tax liability can deduct all
interest paid and contributions or premiums
paid under certain pension schemes with a
Danish pension fund or insurance company.
● Personal allowances A personal allowance
of DKK 43,400 (in 2015) is granted with the
effect of reducing income tax payable at
ordinary rates. The allowance is granted to
each individual, but where a spouse cannot
utilize the entire personal allowance, the
balance is transferred to the other spouse.
SPECIAL TAX REGIME FOR EXPATRIATESA special legislation relates to foreign
employees working temporarily in Denmark.
Assuming that certain conditions are met,
these expatriates can be covered by a 26%
tax rate for a period of up to 60 months. The
26% rate is after a deduction of labour market
contribution of 8%.
TAX RATES: STATE AND LOCAL INCOME TAX Personal income after deduction of 8%
labour market contributions, i.e. the effective
marginal tax rate is (100-8) x 51.5% or (8 +
47.38) = 55.38%.
Income and allowances are divided into three
categories:
1. Personal income – e.g. cash salary,
director’s fee, free company car, and free
telephone – less pension contributions
2. Capital income, e.g. net interest income and
net capital gains
3. Other allowances deductible from the total
taxable income
Church tax (members only) will be imposed
at a flat rate dependent on the municipality in
question. The country average is 0.7%
TAX CREDITS An individual resident in
Denmark is entitled to deduct foreign income
taxes paid or accrued on foreign source income
from the Danish tax payable up to a maximum
of Danish tax paid on the part of the taxable
income, which is foreign source income.
TAX RETURNS Husbands and wives file
separate returns for the income year. Taxpayers
receive a pre-printed tax return in March,
containing information that the tax authorities
have already obtained from employers,
financial institutions, etc. If the tax return is
not correct, it shall be corrected, signed, and
filed no later than 1 May.
Taxpayers with more complicated tax returns
(most expatriates) shall file tax returns no later
than 1 July.
The tax year for individuals is the calendar year.
PAYMENT OF TAX It is required that
employers withhold income tax from salaries
paid out (“A-tax”). For other types of income,
an advance tax (“B-tax”) has to be paid in ten
equal instalments during the income year.
VATDenmark applies the VAT system established
by the European Union.
Denmark imposes VAT on imports and taxable
deliveries of goods and services at a rate of
25%.
A number of business activities are exempted
from paying VAT. The most important ones
are within hospitals, medical and dental care,
insurance, banking, and certain financial
activities.
ESTABLISHING BUSINESS IN DENMARKPAGE 38
ROBERT MIKELSONSAttorney, Partner
Tel.: +45 77 40 10 [email protected]
NIELS GADE-JACOBSENAttorney, HD-R
Tel.: +45 77 40 11 [email protected]
CONTACTPROFITS AND TAX
WEB
THE DANISH CENTRAL CUSTOMS AND TAX ADMINISTRATION
www.skat.dk
A limited company and other legal
entities may be winded up by going
into solvent liquidation or being
declared bankrupt. Upon completion
of the bankruptcy proceedings or
liquidation, the legal entity ceases to
exist.
LIQUIDATIONThe owners of a company can decide for the
company to enter into solvent liquidation. The
owners will choose a liquidator to be in charge
of the company. Furthermore, the court can
decide for a company to be put into solvent
liquidation upon request from the Danish
Business Authority. In this case, a liquidator
will be appointed by the court.
The liquidator shall make sure that all
outstanding creditors are paid, and distribute
the remaining assets to the owners, upon
which the company will be dissolved.
BANKRUPTCYHOW IS A COMPANY DECLARED BANK-RUPT? A petition for bankruptcy can be filed
by a creditor or by the company itself - or by
any other legal entity.
The bankruptcy decree is declared by the
court upon a hearing if the court is satisfied
that the company is insolvent. A company is
insolvent when it cannot pay its debts by their
due dates and when this inability to do so is
not just temporary.
WHO TAKES RESPONSIBILITY FOR THE COMPANY SUBSEQUENT TO THE BANKRUPTCY? When issuing a bankruptcy
decree, the court will appoint a receiver
of the bankruptcy estate. The receiver is
the only person entitled to represent the
bankruptcy estate and is obliged to realise
all the company’s assets. In cooperation with
the major creditors, the receiver may decide
to carry on the business of the company for
a limited period.
The receiver investigates the causes of the
bankruptcy, examines whether the company
has violated the law, and audits the company’s
books.
When all assets are realised, all outstanding
issues solved, and the claims have been
WINDING UP
ESTABLISHING BUSINESS IN DENMARKPAGE 41
ESTABLISHING BUSINESS IN DENMARKPAGE 42
approved, the receiver will prepare the
accounts of the bankruptcy estate. Upon the
approval of the court (and the creditors), the
receiver will pay out dividend payments in
the order of priority of the creditors, and the
company ceases to exist.
WHAT ARE THE RESPONSIBILITIES OF THE PARTNER, BOARD DIRECTOR, AND MANAGING DIRECTOR? The partners or the
board members and managing director shall
assist the receiver and inform him of all the
company’s assets and debts.
RESTRUCTURINGA limited company or any other legal
entity with financial problems can seek an
arrangement with its creditors to avoid
bankruptcy.
In order to have time to investigate the
possibilities of an arrangement, a creditor
or the company – or any other legal entity
- can file a petition for reconstruction to the
court. The court appoints a supervisor and a
person skilled in accounting to watch over the
interests of the creditors.
A reconstruction leads to either a scheme
of arrangement or a transfer of assets. If the
reconstruction fails or is not approved, the
company is declared bankrupt.
The petition for reconstruction is approved,
unless a majority of the creditors disapprove,
thereby enforcing the reconstruction on the
minority of the creditors.
WEB
THE DANISH CENTRAL CUSTOMS AND VAT ADMINISTRATION
www.skat.dk
JØRGEN ERIK FRANDSENAttorney, Partner
Tel.: +45 77 40 11 [email protected]
MALENE EIGTVEDAttorney, Partner
Tel.: +45 77 40 11 [email protected]
CONTACTWINDING-UP
A dispute may be settled in court or by
arbitration. Arbitration clauses would
be common in business-to-business
agreements. Undisputed claims may
be quickly settled by a summary
procedure.
LITIGATION AND ARBITRATIONArbitration would be widely used in the
commercial market in Denmark. Many
business-to-business agreements would
include an arbitration clause and would also
be common in standard form contracts.
Most of the arbitration proceedings shall be
conducted in accordance with the Danish
Arbitration Act and the Danish Institute on
Arbitration (Copenhagen Arbitration).
In the event that the parties in dispute have
not agreed to settle the matter by way of
arbitration, the dispute shall be resolved in
court. The court may assist the parties in
reaching a settlement of the dispute and may
also appoint a mediator. If the parties cannot
reach a settlement, the court will resolve the
matter.
Arbitration and court proceedings are
normally instituted by written submissions
from both parties followed by a preliminary
hearing. Written preparation of the case may,
if necessary, continue after the preliminary
hearing. Once the case is prepared, the
arbitrators, or the court, will hear the case at
a final hearing. The arbitrators, or the court,
shall then pass their judgement.
If the case has been tried by the court, the
party who is dissatisfied may appeal the
judgement. One of the major differences
between arbitration and court proceedings
is that court proceedings are normally
conducted in public, whereas arbitration
shall be private. In addition, arbitration will
usually provide a quicker and more expedient
way of dealing with a dispute than court
proceedings, because the parties cannot
appeal the decision of the arbitration tribunal.
However, arbitration will be more expensive
than a court action, because the parties
would be responsible also for the fees of the
arbitrators.
DISPUTE RESOLUTION
ESTABLISHING BUSINESS IN DENMARKPAGE 44
THOMAS RYHLAttorney, Partner
Tel.: +45 77 40 11 [email protected]
KARSTEN GUDMAND-HØYERAttorney, Partner
Tel.: +45 33 12 45 [email protected]
CONTACTDISPUTE RESOLUTION
LARS MERRILD HARESKOVAttorney, Partner
Tel.: +45 77 40 11 [email protected]
HANNE WEYWARDTAttorney, Partner
Tel.: +45 77 40 11 [email protected]
ESTABLISHING BUSINESS IN DENMARKPAGE 47
FOR MORE INFORMATIONWe hope that the information in this guide has proved
useful in providing a brief overview on how to establish a
business in Denmark, the options available to companies,
and their rights and obligations when conducting
business in Denmark.
Should you require further information with regard to
any of the matters dealt with in this guide, or if you have
specific concerns or questions, please do not hesitate
to contact us.
www.njordlaw.com
NJORD Copenhagen
Pilestræde 58
DK-1112 Copenhagen
Tel.: +45 33 12 45 22
NJORD Aarhus
Åboulevarden 17
DK-8000 Aarhus
Tel.: +45 33 12 45 22