How to establish

a business in
Denmark
A small country with optimum conditions
for companies, which want to expand
their business activities to Denmark,
Scandinavia and the Nordic region.
Table of contents

WELCOME 5 You must have a NemID for your business 15

Denmark: an attractive country for businesses 6 Three types of NemID employee signatures 16
Ten popular reasons to establish a business in Denmark 7 Filing with NemID 16
Digital post: e-Boks 17
YOUR BUSINESS HAS TO BE REGISTERED 10 Bank: NemKonto/Easy Account 17
Permanent establishment 10
When registering a permanent establishment 11 ACCOUNTS: PROCEDURES, DEADLINES AND LAW 18
Representative office 11 Is your company a branch? 18
When registering a representative office 12 Is your business a company? 19
Other registrations without a permanent establishment 12 Changing the financial year and income year 19
When registering a holding company 12 General deadlines 20
Catipal requirements 13
Registration in the Register of Foreign Service Providers CORPORATION TAX - THE RATE HAS BEEN REDUCED 21
(RUT) for temporary activities in Denmark 13
Joint taxation 21
Parent/Subsidiary Directive 22
DIGITALISATION: YOU AND THE BUSINESS REQUIRE A
Thin capitalisation 22
DIGITAL PROFILE 14
Interest rate cap and EBIT rules 22

2
Losses carried forward 23 Pregnancy, maternity and adoption 32
Transfer pricing and documentation 23 Health and illness 33
Investment in testing and research costs 24 The non-discrimination legislation 35
Special provisions 24 Termination of employment 35
Additional deduction 25 120-day rule 36
Tax credit scheme 25 Compensation for unfair dismissal 36

THE DANISH LABOUR MARKET 27 WAGES AND SOCIAL COSTS 37

Collective agreements 28 When you need to pay wages to your employees 37
Employment agreements 28 Fringe benefits 38
Breach 29 Social costs 39
Employee groups 29 Pension 41
Employees’ obligations during employment 29 Health insurance 41
Non-competition and non-solicitation of customer clauses 30
Employees’ rights during employment 30 MOVING TO DENMARK 42
Salary 30 Entry 42
Holiday 31 Residence and work permits for citizens of non-EU countries 43
New Holiday Act on its way 32 Arriving in Denmark: Registration 43

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How do you get a Civil Registration Number? 43
Bank account and NemID 44
Health insurance card 44
Housing 44
Housing expenses 45
Rental contracts and tenant rights 45
Personal tax 45
When do you have full tax liability in Denmark? 46
Residence requirements 46
Residency requirements 46
Financial circumstances 47
About Azets 48

4
WELCOME
Our aim with this booklet is to give people who want to start a business in
Denmark an excellent introduction to this small Nordic country. The booklet will
give you an insight into the opportunities in Denmark and will take you through
important statutory matters and practical information about the establishment and
operation of a business.

You will also get a great introduction to Denmark as a labour market and a review
of the issues that you should be aware of if you or your staff relocate to the
country.

We hope it will be helpful to your decision to start up in Denmark. We will gladly

help and advise you if you should require this during the process.

Our knowledge and experience in the Nordic market will help you create a simple
process for establishing a business in Denmark. There is more information about
Azets at the end of the booklet.

Kind regards,
June Mejlgaard Jensen, MD of Azets in Denmark

5
Denmark: an Denmark is often named as the
European country with the best
attractive country conditions for companies who want
to start a business or expand their
for businesses business activities.

Denmark has repeatedly received a top-ranking in The World Bank’s “Ease of

Doing Business” studies, and Denmark also ranks in the top ten of Forbes’ list of
“Best Countries for Business”.

The reason for Denmark receiving such great compliments about its ability to
welcome foreign companies is the opportunities and conditions that the country
offers. The country has proven that it offers fast, efficient and profitable help to
companies who want to establish themselves here.

Denmark also has an attractive business environment with excellent infrastructure,

low corporation taxes and business costs, a stable socio-economy, a highly
educated workforce and a flexible labour market.

This guide will cover the important factors you need to include in your
considerations when you want to start a business in Denmark.

6
Ten popular reasons to establish a business in Denmark
An efficient public sector
Denmark has an efficient public sector, which is one of the main reasons for its high rankings. The structured processes produce prompt
service and ensure trust and excellent collaboration between businesses and the authorities. This is also a contributing factor to why
Denmark has such a low corruption rate.

Transparency and helpfulness in the public sector is a crucial factor when you, as a foreign company, are analysing the administrative
requirements for establishment.

Major investments in digitisation

The prompt support provided by public authorities is partly due to Denmark’s continued and increased investment in digital tools. According
to the World Bank’s report “Doing Business 2019 - Denmark”, Denmark scores highly on “Starting a business in Denmark”, which measures
the indicators procedure, time and price.

The high degree of digitisation clarifies and streamlines the process of registering business activities, which is to the benefit of foreign companies.

Supports innovation
Denmark strongly supports innovation, and the country is one of the leading digital societies in Europe. The country’s effort to digitise the
public sector also rubs off on private companies and entrepreneurs. Denmark’s efforts and support for companies have been instrumental in
creating growth for major companies such as Skype, Trustpilot and JustEat.

7
One of the strongest economies in Europe
Denmark’s GDP growth is around 2% a year, and growth is expected to continue. Danish socio-economic growth is driven by strong domestic
demand within private consumption, private investment and exports. Low inflation, healthy growth and low unemployment mean that Denmark
has one of the strongest economies in Europe. It also provides a stable environment for you as a foreign company entering the country.

Low corporation tax

Danish corporation tax is 22%, and is paid after costs have been deducted. Denmark has also introduced attractive tax conditions for holding
companies and has no extra local, franchised or net worth taxes. The Danish Customs and Tax Administration (SKAT) caters to foreign
companies which want to establish themselves. This is done by offering tax conditions which are competitive compared to other European
countries.

9 out of 10 Danes speak English

Danes have outstanding language skills and developing global competencies is a priority in the Danish education system. Nearly 9 out of 10
Danes speak English, and Danes generally have excellent skills in oral proficiency. Therefore, language is often not a barrier if you need to
recruit a Danish workforce.

Flexible and highly educated workforce

Compared to the other Nordic countries, Denmark has very flexible rules for hiring and firing, which is an advantage for companies. Denmark
has not introduced restrictions on work in the evenings, at night and at weekends. This means that you, as a business, can operate around
the clock every day of the year. The Danish workforce is highly educated and has a strong work ethic, which results in productive and hard
working employees. Furthermore, Danes actively continue to develop their skills through further education and training so that they can
meet labour market requirements.

8
Low social costs
Health insurance and social welfare in Denmark are financed through tax.
Moreover, most pension funds are financed privately rather than publicly.
Therefore, company contributions to employees’ social costs are lower than in
many other European countries.

Competitive wages
A combination of low social costs, pensions, health insurance, the welfare system
and lower holiday costs compared to other European countries has resulted in a
competitive wage level in Denmark.

Denmark’s infrastructure: reach 100 million customers within 24 hours

The Danish infrastructure is optimal, with transport options by road, air and sea
which provide access to 100 million customers within 24 hours.

Furthermore, Denmark continues to invest in improving the already efficient

infrastructure, for example with the immersed Fehmarn belt tunnel, which creates
a faster train route to Europe through Germany.

Denmark has also introduced regulations on double taxation which make the
country ideal for the establishment of head offices and as a portal to expand the
business to the Nordic market.

9
YOUR BUSINESS HAS TO BE REGISTERED
Once you have decided to start a business in Denmark, one of the first things you need to decide is whether to establish a permanent
establishment or a representative office. In the booklet’s first section, we explain the two types and examine, among other things, the
difference in tax liabilities of the two options. We also go through the registration process for both types. If you want to register a holding
company, we touch upon this at the end of the section.

Permanent establishment
What does it mean to have a permanent establishment in Denmark? This is crucial to know before you register a business. The registration
depends on which types of registration are possible. The definition of a permanent establishment is determined according to the OECD
Model Taxation Convention, also called the Model Taxation Convention, Article 5.

The Model Tax Convention states that three criteria must be met before there is a permanent establishment:

1. It must be a business premises from

which the company is managed.
2. It must be a permanent business
premises.
3. There must be business activities
from the business premises.

This means, in practice, that a permanent establishment is usually an office, a branch, a factory, a workshop or the like. Such a business
premises also meets criteria 2 and 3.

In relation to tax, such a permanent establishment may also be the place from which your business generates revenue to be taxed in Denmark.

10
Registration of a permanent establishment usually involves registering a subsidiary company or a branch. In Denmark, you can register a
private limited company (ApS) or public limited company (A/S), whereas a branch is registered directly on the basis of your company in your
home country.

When registering a permanent establishment

Registration of a branch or a public or private limited company is done digitally with the Danish Business Authority. To get access, you
must have a NemID employee signature (more on that on page 15). Precisely for this reason, it is often not possible for foreign companies
or individuals to register a company in Denmark without the help of a lawyer, accountant or other authorities. When registering, please
complete information about the company and management which will then be submitted to the Danish Business Authority. If the person in
charge of registration does not have a Danish Civil Registration Number (CPR), they must show photo ID when registering. Finally, the new
company’s Memorandum of Association and Articles of Association must be uploaded. It normally takes one day from the registration being
completed correctly for you to receive a Central Business Register No. (CVR), and then your company is registered in Denmark.

Representation office
Unlike a permanent establishment, a representation office is considered a temporary registration whose primary purpose is market research.
A representation office may be the stage before the establishment of a permanent establishment in the form of a branch, etc. If the purpose
of your registration in Denmark is exclusively to carry out preparatory or auxiliary work or to make contacts for the business, it is a case of a
representation office. This also applies if you employ a salesperson to explore market potential in Denmark.

When there is no revenue generated in Denmark which is subject to taxation, there are generally no tax consequences associated with a
representation office. A representation office may well be registered for VAT and as an employer. However, please be aware that in some
cases the Danish Customs and Tax Administration (SKAT) require a Danish representative who is liable for payment of VAT and income tax

11
at source (PAYE) for employees. We recommend that you consult a Danish consultant in this situation.

When registering a representation office

This type of registration can partially be made digitally, but it depends on the duties your company must be registered for. Should your
representation office be registered as an employer or for VAT, this can be done digitally via the Danish Business Authority, as explained for
a permanent establishment.

Because registration as an employer is voluntary, it is a requirement that a Danish representative who is liable is registered so that the
registration can be completed. The Danish representative may be a Danish individual or company who is invited into the registration process
and is declared to be the representative. We recommend that you seek advice on this registration if it is the solution for you.

Other registrations without a permanent establishment

Other types of registration without a permanent establishment which cannot be done digitally are done by sending in two physical forms.
Depending on the individual registration, you must attach additional forms and business documents about the company you wish to register
in Denmark.

When registering a holding company

Denmark is an attractive country for establishing holding companies. In recent years, Danish society has sought to attract foreign
companies, which has resulted in a number of initiatives being implemented, including more lenient tax laws. If you want to set up a holding
company in Denmark which will own an existing company, this is done under the rules on restructuring. The rules on restructuring include
some conditions so that the restructuring is tax-free in accordance with more detailed rules.

12
Catipal requirements
In Denmark the share capital requirement for registering a Private Limited Company
(ApS) is DKK 40,000, while the share capital requirement for registering a Public
Limited Company (A/S) is DKK 400,000

Registration in the Register of Foreign Service Providers (RUT) for temporary

activities in Denmark
Foreign companies or self-employed individuals who perform temporary business
activities in Denmark (and therefore do not require registration of a permanent
establishment or representative office) are obligated to report their work to the
Danish authorities. Notifications must be made to RUT, which is the Danish state’s
official Register of Foreign Service Providers.

There are particularly stringent rules for foreign service providers within the
construction sector, agriculture, forestry, horticulture, gardening and cleaning which
cover both companies and private individuals. As a Danish company or private person,
if you purchase services from a provider within these industries, you risk being fined
up to DKK 10,000 if the foreign service provider is not registered. This also applies if
you do not comply with the obligation to provide proof of registration to RUT.

However, there are a number of exceptions where no notification has to be made

to RUT. This applies, for example, when attending conferences in Denmark, short
business trips, sport and special technician or engineer tasks.

13
DIGITALISATION: YOU AND THE
BUSINESS REQUIRE A DIGITAL
PROFILE
In Denmark, many of the public authorities and processes are
digitised, and therefore, the vast majority of communication with
and filing to the Danish authorities is done digitally.

Denmark came in first place in the UN’s 2018 benchmarking

of eGovernment. The reason for this distinguished ranking was
partly the balance and relationship that exists between efficient
public digitisation and the ability to help citizens and businesses.

The Danish government continues to support the development of

digitisation with ongoing initiatives and projects.

In this section, we will review how you, as a business, should relate to digitised
processes in Denmark.

14
You must have a NemID for your business payment cards and information services, and the provision of
NemID is a solution for both private individuals and companies NemID is done through Nets.
in Denmark which allows you to log into various self-service
solutions from the public and private sector, including the It is a requirement that your company has a NemID administrator,
company’s online banking in Denmark. so the first ordered employee signature is automatically assigned
this role. The administrator role can later be transferred or
Also see page 44 of the section on NemID for private individuals possibly shared with another employee signature.
if you have employees who are moving to Denmark in connection
with the establishment of your business activities. Having multiple administrators requires an additional purchase. It
is the administrator who must approve the ordering of subsequent
For businesses, there is a special type of NemID called NemID NemID employee signatures and be responsible for the rest of the
employee signature. This NemID gives your company’s owners, administration of your company’s employee signatures.
managers, board members and employees the ability to identify
themselves on behalf of the company.

NemID is not in itself mandatory, but in many cases, it is the

only solution that provides access to public solutions that are
mandatory or statutory. This concerns, for example, the digital
postbox, which will be elaborated on on page 17.

As a company, you must enter into an agreement with Nets to

use the NemID employee signature. Nets is a Nordic provider of

15
Three types 3. NemID employee signature on hardware. With this
solution, your employee signature is on a piece of USB
of NemID employee signatures hardware which is used with a static code. This solution
is similar to the code file solution. It is more flexible, but
There are three types of NemID employee signatures. NemID is requires the purchase of hardware and can be associated
produced as a code card, and the three different types determine with increased running costs to Nets.
how you will receive the code card.
The first three access attempts created with a NemID employee

1. NemID employee signature with a code card. With this

solution, you have a username/number, a static code and
signature are free. Nets will then invoice your company for
subsequent access. This is the case even if one of the previous
a physical code card of one-time codes. This solution access attempts was deleted or blocked. We especially
is advantageous if you will need to use your employee recommend that foreign companies/individuals who are not
signature from multiple devices and if you will only use your familiar with NemID and the employee signature obtain assistance
employee signature a few times a week. in having them created. One reason for this is that the contract
with Nets and a lot of the further setup is in Danish.

2. NemID employee signature as a code file. With this

solution, you have a file on your computer. This must be
Filing with NemID
As a business in Denmark, you can do all your filing to bodies
used with a static code when you need to use the NemID
such as the Danish Working Environment Authority (WEA) via
employee signature. It is a good solution if you will use your
your NemID employee signature. This may require that you
employee signature several times a day from the same
register for the applicable filing, and in special cases a NemID
computer.
employee signature is associated with a person who is authorised

16
to sign at your company. If your company has several employee section on e-Boks for private individuals if you have employees
signatures, the NemID administrator must assign the required who are moving to Denmark in connection with the establishment
rights to the other signatures. One of the few places where your of your business activities.
business can file without using a NemID employee signature is on
skat.dk. Here you can order a self-service (TastSelv) code which Bank: NemKonto/Easy Account
provides access to the self-service feature on skat.dk. It is mandatory for all Danish citizens and businesses, including
foreign branches and representative offices in Denmark, to have a
Digital post: e-Boks NemKonto/Easy Account. If the public sector has to make a payment
Public authorities in Denmark send post to businesses digitally, to a company, this can only be paid to the company’s NemKonto/
and checking your digital postbox is therefore required by law. Easy Account. The Danish Agency of Digitisation is responsible for
There are two possible access solutions for your company’s digital the NemKonto/Easy Account. A NemKonto/Easy Account is just an
post. It can be accessed via virk.dk or via e-boks.dk. Access to the ordinary bank account that has a special registration.
digital postbox requires that you use a NemID employee signature
which is associated with the company. If your company has a Danish bank account and you want to use
this account as the company’s NemKonto/Easy Account, the bank
is generally responsible for setting this up. If your company wants
to use a foreign bank account as a NemKonto/Easy Account, for
The digital postbox will be created upon founding the company/ example an account in your company’s home country, you must apply
undertaking. The authorities can send messages to this postbox to NemKonto/the Danish Agency of Digitisation for this using a form.
even if you, as a company, do not have access to it yet due to not
having a NemID employee signature. Therefore, it is essential If your company has employees, their salary can be paid to the
that you sort out your NemID quickly. It is also possible for you, employees’ NemKonto/Easy Account. This means that you, as
as a company, to receive post from other companies digitally. a company, do not have to obtain and update your employees’
This requires that you sign up for e-Boks. Also see page 44 of the account numbers.

17
ACCOUNTS: All commercial companies in
Denmark must comply with the
PROCEDURES, Danish Bookkeeping Act, which
also applies to business activities in
DEADLINES Denmark by foreign companies. In
this section we will review all relevant
AND LAW accounting issues for companies.

Is your company a branch?

If your company is a branch in Denmark, you must annually assess its taxable
income and file a tax return to the Danish Customs and Tax Administration (SKAT).
The tax return requirements for your branch depend on, among other things, the
revenue of the branch, the extent of the branch’s controlled transactions and any
of your company’s joint taxation with other companies.

You must also submit the accounts of the branch’s parent company to the Danish
Business Authority. The accounts will be published regardless of whether the
accounts will also be published in your home country.

If you do not want the accounts to published, your only option is for the parent
company to establish a subsidiary company in Denmark instead of a branch.

18
Is your business a company? two of the three limits are exceeded. The exceeded limits need
All companies in Denmark must prepare annual accounts and not be the same two limits both years. If your company is subject
submit them to the Danish Business Authority. The Danish to an audit, you can opt out of an audit of the annual report for
Business Authority publishes accounts on behalf of your the second year that the company does not exceed two of the
company. three limits.

If two out of the three limits are met for two consecutive years, Like branches, companies must calculate their taxable income
your company is subject to an audit. The limits need not be the and file a tax return for the income year.
same two limits both years.
Changing the financial year and income year
• Net revenue of DKK 8 million A financial year is a fixed period of 12 months, but the cut-off
• Total assets of DKK 4 million dates vary. The only requirement is that there is continuity in your
• Average number of 12 full-time staff during the year company accounts. A purchase year is the calendar year, but it
can be moved either forwards or backwards within the calendar
The limits will not be adjusted annually, but only by legislative year.
intervention.
If it is appropriate for your business, it is possible to apply to the
As a company with a Danish Central Business Register No. Danish Customs and Tax Administration to alter the financial
(CVR), at foundation you can opt out of an audit in the articles of and income year. If you wish to do this, you should be aware that
association if you do not expect to exceed the limits which make there are various requirements and deadlines for an application to
an audit mandatory. If your company has opted out of an audit, alter the income year and financial year. Therefore, we generally
the annual report must be audited for the second year in which recommend that you apply to alter the income year first.

19
General deadlines

Annual report Tax return

A parent company’s annual report for branches and the annual Your company’s tax return must generally be filed within six
report for Danish companies must be submitted to the Danish months after the end of the income year. There is an exception
Business Authority within five months after the end of the to this if the tax return applies to the financial year ending in the
financial year. However, for state-owned public limited companies period from 1 February to 31 March. In these cases, the deadline
and listed companies, the deadline is four months after the end of for the tax return is 1 August. Therefore, you must be aware of
the financial year. whether your company’s financial and income year ends in March,
as if it does, the tax return must be filed before the annual report.
If you do not submit an annual report on time, the Danish Business
Authority will send a reminder to your digital postbox with a new If a company does not file its tax return on time, a tax surcharge
deadline. If the new deadline is exceeded, each member of your of DKK 200 must be paid for each day of delay, up to a maximum
company’s senior management will have a levy imposed on them. of DKK 5,000. If your company is subject to joint taxation, the tax
For branches, the levy is imposed on branch managers. This levy surcharge is calculated for each company which has not filed a
is personal and is considered personal income. The levy must be tax return. The additional tax will be charged to the management
taxed if the company pays it. company, which is why this company can easily receive a tax
surcharge of over DKK 5000.

20
CORPORATION TAX - THE RATE HAS BEEN REDUCED
The corporation tax rate in Denmark is 22%, and in recent years there has been major focus on
corporation tax in terms of policy. It was decided to gradually reduce the tax rate to 22% from 2013, which
is the rate currently in force. The current Danish tax rate is lower than it is in Norway, but is at the same
level as corporation tax in Sweden.

In Denmark, we pay corporation tax according to a territorial principle. This means that if your
company has a permanent establishment as described on page 10, it must be taxed on its profits.
Your company’s taxable result is calculated according to the net principle.

You can write off all the expenses your company has spent on securing and maintaining income,
including depreciation in the company’s or branch’s income.

In this section, we will review a number of issues concerning corporation tax which are relevant to
you as a company if you want to establish yourself in Denmark.

Joint taxation
If your company or branch has consolidated company relations with other Danish entities, you are
covered by the mandatory rules on national joint taxation. You can also select international joint
taxation with affiliated foreign companies, permanent establishments and properties.

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Parent/Subsidiary Directive
As a member of the EU, Denmark has joined the Parent/Subsidiary Directive. The provisions of the Directive have been incorporated into
Danish tax legislation. This results in, for example, the ability to make dividends which are distributed from a subsidiary company tax-free for
the parent company. However, the parent company must own more than 10% of the shares in the subsidiary company. Later disposal of the
equity holding in the subsidiary company can also be tax-free under certain circumstances.

Thin capitalisation
In Denmark, we have thin capitalisation rules. This means that a subsidiary company, through a controlling group of owners or from
consolidated companies, must be financed using foreign capital to a certain extent relative to equity. The ratio between debt and equity
must be 4:1. This rule helps to ensure that foreign capital does not exceed the equity more than would have been possible in a free market
where independent parties deal with each other.

If the ratio of foreign financing and equity exceeds 4:1, the company or branch will be subject to the rule on thin capitalisation. This
means, practically, that your company’s equity must not be less than 20%, and its controlled debt must not exceed DKK 10 million. A thinly
capitalised company cannot deduct interest and exchange losses on foreign capital. It is only the part of the controlled debt, which is
scheduled to be reclassified as equity, that will have its interest and exchange losses deducted.

Interest rate cap and EBIT rules

Regarding interest deductions, it is possible for companies and branches in Denmark to hit the interest rate cap, which constitutes a default
interest rate of 2.9% (2018) of assets for tax purposes. As a company or branch, you will not receive a deduction for the portion of interest
payments that exceed the interest rate cap. However, you can always have deductions up to DKK 21.3 million (2018). This interest rate cap is
adjusted each year, and includes the value of net assets held from sales as well as work in progress.

22
Your company’s taxable income before deduction of interest (EBIT) can deduct net interest charges of 80% of profits at the maximum. In
some cases, it may be limited by the interest rate cap of 2.9% (2018). This means that if your company’s profits before interest are 100, the
maximum that will be deducted from net financing expenses is 80. However, this requires that the deduction of 80 does not exceed the
interest rate cap of 2.9% (2018) of your company’s assets when calculated to the taxable value. Net financing costs which exceed the 80%
but which are within the interest rate cap of 2.9% (2018) may be carried forward. The amounts shall be measured at the level of joint taxation.

Losses carried forward

If your company has losses from the previous financial year, the losses are deducted
in full from the part of the year’s taxable income which does not exceed DKK 8.205
million. If there are any remaining losses, they may be deducted at 60% of the
portion of taxable income exceeding DKK 8.205 million. Losses can also be carried
forward into future profits. The basic amount applies to the level of joint taxation.

Transfer pricing and documentation

According to Danish and international rules, pricing on transactions between
companies/branches that are controlled by the same group of owners are
conducted on arm’s length terms. This means that the pricing between
two affiliated companies should correspond to the agreement that the two
independent parties would have concluded. These rules are to prevent
international groups allocating profits where taxes are lowest. For example, if
your company has created a “cost centre” in Denmark to, for instance, carry out
marketing or other auxiliary functions, then this cost centre MUST receive a share

23
of the profits from your company. It would be most natural to pay the entity a fee for its service, which is typically a mark-up of 6-8%. As a
foreign company or branch, or as part of a larger group, your company must prepare documentation for the transfer pricing of controlled
transactions if the company:

• Has more than 250 employees at a consolidated level

• Has an annual balance of more than DKK 125 million
• Has an annual revenue of more than DKK 250 million

The documentation must show all transactions that your company or branch has with controlled parties. Each year, documentation of the
transfer pricing must be prepared and submitted to the Danish Customs and Tax Administration (SKAT) together with the tax return for
your business.

Investment in testing and research costs

If your business activity in Denmark will involve investments in testing and research costs, there are some special circumstances you need
to know. We will go through these in this section.
In general tax law works on the basis that operating expenses can be deducted from the taxable income. This applies if the operating
expenses are devoted to acquiring, securing and maintaining income.

Testing and research costs, however, are often such that they should be treated as establishment costs. This means that these costs
typically do not have the requisite connection with the acquisition of income for them to be deducted as an operating cost.

Special provisions
Some special provisions mean that you, as a company, can choose to deduct the costs in full in the income year in which they are incurred

24
(or acquired, in the case of operating equipment). It is also possible to activate and write off in equal annual amounts from the income year
in which the costs are incurred and the following four income years. Alternatively, your company can activate and depreciate from the year
of acquisition of the operating equipment and with up to 25% diminishing balance depreciation annually.

The method your company wishes to use from year to year is entirely optional. Your company can, for example, choose a combination of
the above two deduction options each year. After this, some of the annual expenditure will be deducted in full, and the remainder will be
depreciated over five years. For operating equipment that your company uses for testing and research costs, you must choose a deduction
method for each individual asset.

Additional deduction
In 2017, an additional deduction was introduced. This means that your business can deduct a larger amount of taxable income than it actually
invests. It is possible to achieve the additional deduction regardless of whether your company chooses to write off immediately or take
depreciation over several years. The deduction will be increased gradually to 110% in 2026, and to 101.5% in the current financial year (2019).

Tax credit scheme

Companies with expenses for testing and research costs that have losses can receive a payment for the taxable value. For joint taxation
companies, the amount is calculated on the basis of the total joint taxation income.

The possibility of payment exists for companies that have invested in testing and research with a negative income. An amount is paid
equivalent to the taxable value of the costs, 22% in 2019. The amount payable is calculated on the loss to a maximum of DKK 25 million,
corresponding to DKK 5.5 million in taxable value. The payments are tax-free, but there should be a loss limit. The reason for this is that
the payment is based on a negative income, which cannot be carried forward to be offset against future income in subsequent years. Your
company must file an application for payment together with the tax return for that year.

25
Example:

Year 1
• Your company invests DKK 50 million in testing and research activities
• Your company has a loss of DKK 100 million
• Under the tax credit scheme, your company receives 22% of DKK 25 million (which is the maximum amount), equivalent to DKK 5.5 million

Year 2
• Your company invests DKK 10 million in testing and research activities
• Your company has a loss of DKK 75 million
• Under the tax credit scheme, your company receives 22% of DKK 10 million, equivalent to DKK 2.2 million

Year 3
• Your company now has a profit of DKK 10 million that is taxable
• You carry forward your company’s losses from previous years:
• Year 1: DKK 100-25 million = DKK 75 million (you cannot offset the DKK 25 million against your profits when you have already
received a taxable value)
• Year 2: DKK 75-10 million = DKK 65 million (you cannot offset the 10 million against your profits when you have already
received a taxable value)
• So you can carry forward a loss of DKK 140 million, which is offset against your profits

26
THE DANISH LABOUR MARKET
In this chapter we will give you a brief and general description between employer and employee, e.g. rules governing termination
of the main legal requirements and principles applicable to of employment, paid holiday and illness.
employees and employers in Denmark.
Collective agreements contain rules governing more specific
Danish employment law is governed by legislation and areas of the labour market. In some cases, legislation provides the
collective agreements. The legislation concerns opportunity to deviate from the principles laid down in the act if
various general issues such as the legal relationship this is agreed in a collective agreement.

27
Collective agreements same effect, and it is subject to the principles governing contract
In Denmark, trade unions play an important role in negotiating law in general. However, employers must provide employees
collective agreements, laying down some important requirements with a written statement containing the terms and conditions
for the terms and conditions within the labour market. Collective which apply to the specific employment within one month
agreements are legally binding on the signatory parties as well of commencement of the employment, according to Danish
as members of these organisations. Furthermore, collective employment law. This rule applies only to employments which
agreements take priority over individual employment contracts. are set to last for at least one month, and in which an employee’s
This means that an employer or an employee who does not working hours exceed eight hours per week on an average scale.
comply with the principles set out in an agreement will be liable to
pay damages, including punitive damages. The statement should at least contain information concerning:

In cases where an employer, either actively or by membership • Name and address of the employer and the employee, place of
of a union, has entered into a collective agreement with a trade work and the commencement date
union, the regulations of the terms and conditions laid down in the • The employee’s position and work duties
agreement apply to all employees who are carrying out the work • The duration of the employment in case the employment is not
which the collective agreement in question regulates, regardless of permanent
whether the employees are members of the relevant trade union. • Wages and other benefits, including payment intervals
• Normal working hours
Employment agreements • The employee’s rights concerning paid holiday
If you, as a company, have employees in Denmark, you must have • The rules which apply to the termination of the employment,
an official employment agreement. An employment contract including information on notice period
can, like any other contract, be made orally or in writing to the • The collective agreement which governs the employment, if any

28
Breach Employees’ obligations during employment
Employers who provide incorrect information or fail to comply Firstly and most importantly, employees are obligated to carry
with this obligation will be liable to pay employees compensation. out different tasks and assignments according to the instructions
The amount of the compensation will be determined with given by their employer. This means that employers are entitled
due regard to the circumstances of the case. Case law shows to schedule different assignments and give instructions regarding
compensation from the level of DKK 5,000 up to DKK 25,000, and the way certain assignments should be handled.
in one specific case, an employee was entitled to compensation
corresponding to 20 weeks’ pay. However, if the error made by
the employer is minor or is excusable, the compensation cannot
exceed an amount of DKK 1,000.

Employee groups
Different categories of employees exist to whom different rules
apply. The main category of employees in Denmark is salaried
employees. A salaried employee is defined by the nature of their
work duties and the length of their average working hours. An
employee who works as a shop assistant or an office worker,
whose work takes the form of technical or clinical services, is
to be regarded as a salaried employee if the person concerned
is employed for more than eight hours a week on average. This
material will mainly focus on the rules which apply to salaried
employees.

29
If employees fail to comply with instructions given by their Employees’ rights during employment
employer, this could be regarded as a breach of the employment Employees have several rights during their employment. Most
contract, and employers could be entitled to dismiss employees importantly, employees are entitled to receive payment for the
on this basis. Whether employees’ non-compliance with an work they have carried out. Furthermore, these rights include the
instruction given by their employer will have this effect depends right to paid holiday, paid absence in case of illness and so on. This
on the instruction and the breach in question. section gives a brief outline of the rules governing these rights.

Non-competition and non-solicitation of customer clauses Salary

Apart from the obligation of loyalty, employers and employees In Denmark, there is no legislation on the minimum wage. The
might also agree a clause stating that an employee, for reasons of salary that employees are entitled to receive is subject to the
competition, is not allowed to carry out trade or other business of principles set out in any collective agreements governing the
a specified type, nor to accept employment in any such trade or employment and the individual employment contract. In the
business for a specified period of time after the termination of the absence of a collective agreement, salary is subject only to the
employment. The parties might also agree a clause stating that an individual employment contract and to negotiation between
employee is obligated to not be employed by or have any direct employers and employees. The employer and employee may
or indirect contact with the customers of the employer after their agree that part of the salary is to be paid as fringe benefits,
resignation. bonuses or in another form. This, however, must be stated in the
contract between employer and employee, and it must not deviate
Such clauses are only valid if the employee receives from the principles in any applicable collective agreement.
compensation for the period during which the obligation is in
force, and only if a written contract has been made concerning See page 37 for more information on the payment of wages and
the obligation and the right to compensation. fringe benefits.

30
Holiday employer of this prior to the beginning of the qualifying year.
Employees are entitled to holiday, holiday allowance or holiday Employees may want to choose this form of paid holiday if they
pay under the provisions set out in the Holiday Act. The Holiday are paid on a commission basis.
Act applies to most types of employee and not just salaried
employees. According to the Holiday Act, employees are entitled Other employees are entitled to holiday allowance at the rate of
to 2.08 days of paid holiday for each month of employment during 12.5 percent of their wage during the qualifying year.
a calendar year (the qualification year).

On an annual basis, this gives employees the right to 25 days

of paid holiday, which is equivalent to 5 weeks. Regarding
employments of a shorter duration than one month, holiday will
be calculated in proportion to the duration of the employment
period. Employees do not accrue paid holiday during periods
of absence where the employer does not pay wages in full or in
part. Employees are, however, entitled to 25 days or five weeks of
holiday each year, irrespective of whether they have earned the
right to paid holiday according to the rules set out above.

Instead of receiving the regular wage during holidays and the

1 percent of holiday supplement, employees may choose to
receive a holiday allowance of 12 percent of their wage during
the qualifying year, provided that employees have informed the

31
New Holiday Act on its way New legislation always brings with it new administrative tasks,
A new Danish Holiday Act will come into force on 1st September and the new Holiday Act is no exception. We recommend that
2020. The transition period between the old and new Holiday Acts you, as an employer in Denmark, obtain professional guidance on
commenced in early 2019, so companies in Denmark have started how you can most easily implement the new Danish Holiday Act
to prepare for the new act. We are receiving many enquiries from in your company’s routines and systems. You can also download our
companies seeking advice regarding the new Holiday Act and booklet on the new Danish Holiday Act, which goes into more detail.
how it will affect the processes in their business. But what is
actually changing? Pregnancy, maternity and adoption
Employees are entitled to leave in the event of pregnancy,
• Everyone gets paid holiday: Under the current act, you must maternity or adoption under the provisions set out in the Act on
have worked for a year to receive paid holiday. Under the new the Right to Leave and Benefits in the Event of Childbirth. This act
Holiday Act, everyone will be eligible for paid holiday from their applies to all categories of employment and not just to salaried
first day. employees.
• New holiday year: Under the new Holiday Act, holiday will be
accrued from 1st September to 31st August (12 months) and According to the act, female employees are entitled to absence
can be taken between 1st September and 31st December (16 from work due to pregnancy and maternity from the date
months). estimated to be four weeks prior to the birth.
• Concurrent holiday: This new term means that you accrue and
can take your holiday at the same time over a 12-month period. After giving birth, female employees are entitled to absence from
Employees can therefore take their holiday the month after it work for a period of 14 weeks. Fathers are entitled to absence for
has been accrued. Employees will accrue 2.08 days of holiday up to two weeks within the first 14 weeks after the birth or the
every month, which can be used whenever they want. reception of the child in the home.

32
During this period from the beginning of the leave until 14 weeks received does not exceed the amount of the 32 weeks of daily
after the birth, salaried employees are entitled to half of their cash benefits.
regular salary. A collective agreement might entitle the salaried
employee to as much as full salary for the entire maternity leave. Health and illness
According to the principles set out in the Salaried Employees’
Employees who are not categorised as salaried employees are Act, employees’ absence from work is to be regarded as
entitled to wages during leave according to the principles laid lawful if it is due to illness. Employees are therefore entitled
down in any applicable collective agreement. If no collective to receive their regular wage during the period of illness.
agreement applies, employees are entitled to receive daily cash However, this is not the case if the illness has been caused by
benefits from the government. employees themselves, intentionally or by gross negligence.
Furthermore, absence due to illness will not be regarded as
After the 14th week, each parent is entitled to 32 weeks of lawful if an employee, at the time of the commencement of their
absence. Employees can choose to take either 40 or 46 weeks of employment, fraudulently failed to disclose the fact that they
absence, but this will have an influence on the daily cash benefits were suffering from the disease in question.
from the government that employees are entitled to receive
during this part of the leave. In general, employees are entitled to Employers are entitled, from the first day of absence, to request
32 weeks of daily cash benefits. written documentation for employees’ illness. Either from the
employee, or from the medical practitioner who has attended the
If employees choose one of the two alternatives, thereby employee.
prolonging their leave, they will not be entitled to more than 32
weeks of daily cash benefits. The amount that such an employee In case of illness lasting for more than 14 days, employers are
will receive each month will be reduced so the total amount entitled, without expense to the employee, to request further

33
information as to the duration of the employee’s illness from the employment. If an employee fails to do so, the consequence is,
attending medical practitioner or from a specialist chosen by the as described above, that absence due to this disease will not
employee. be regarded as lawful, and the employer will therefore not be
obligated to pay wages during the time of absence.
If employees fail to comply with this requirement without good
cause, employers are entitled to dismiss these employees
without notice.

In relation to this issue, it is important to note that according

to the Act on the Use of Health Information within the Labour
Market, employers are not allowed to ask for information
concerning employees’ health conditions unless the information
is of vital importance to employees’ capabilities to carry out that
particular job.

This principle applies both to the situation of the interview before

the commencement of the employment and to the relationship
between the employer and the employee during the employment.

Employees are, on the other hand, obligated to inform their

employer of any disease that will influence their ability to
carry out the job in question before the commencement of the

34
The non-discrimination legislation The amount of compensation varies from act to act. However,
Danish employment law contains various non-discrimination acts the highest compensation has in practice been ordered for
which protect groups of employees. discrimination against pregnant employees.
The most important of these are the following:
Termination of employment
The Act on Part-time Employment and the Act on Fixed Term Employment contracts between employers and salaried
Employment protect part-time and fixed term employees from employees may only be terminated with prior notice which has
being dismissed or discriminated against in any way because they been given in accordance with the principles set out in the
are employed on a part-time or fixed term basis. Salaried Employees’ Act or in any applicable collective agreement.

The Act on Prohibition Against Discrimination in Respect of The length of the notice period which applies to employers
Employment provides that no discrimination may take place on depends on the duration of the employment. During the first six
grounds of race, skin colour, religion, political orientation, sexual months of employment, termination of contracts on the part of
preferences, age, disability, or nationality of social or ethnic origin. employers may take place with at least one month’s notice to the
end of the month. After six months’ employment, the notice that
The principles of equal treatment of men and women within the needs to be given is three months to the end of a month. The
labour market are set out in the Act on Equal Treatment of Men period of notice will be increased by one month for every three
and Women with regard to Access to Employment, etc. and the years of service, subject to a maximum of six months.
Act on Equal Wages for Men and Women.
A probationary period can be agreed upon for a period of three
If an employee to whom one of these acts applies is discriminated months in which termination by each party may take place by
against, the employer must pay compensation to the employee. giving 14 days’ notice.

35
In the event of gross negligence by employees, employers are possibility of terminating the employment, the notice should be
entitled to terminate employment immediately and without given immediately on the expiry of the 120 days of illness and
notice. while the employee is still ill. Otherwise, the regular notice will
apply according to the principles set out in the above.
Termination of employment on the part of employees is subject
to one months’ notice to the end of a month. This, however, does Compensation for unfair dismissal
not apply if the parties have agreed that the employment contract If the termination of a salaried employee is not considered to
is purely temporary and does not exceed a period of one month be reasonably justified by the conduct of the employee or the
or that the employment is probationary and does not exceed a circumstances of the company, the employee will be entitled to
period of three months. receive compensation.

The parties may agree that a longer period of notice shall be The amount of the compensation will be determined with due
given by the employee if the period of notice to be given by the regard to the period of service of the employee and any other
employer is extended correspondingly. circumstances of the case. However, the amount may not exceed
the salary of the employee for a period corresponding to half the
120-day rule period of notice to which the employee is entitled.
The parties may agree upon a shorter period of notice (one
month) in the event of an employee having received their salary The compensation may amount to up to three months’ salary
during periods of illness for a total period of 120 days during any if the employee is over 30 years of age at the time of notice of
period of twelve consecutive months. In order to be valid, such an termination.
agreement must be made in writing and prior to the illness that
causes the termination. If an employer wishes to make use of the

36
 WAGES AND SOCIAL COSTS
When you as a company have employees in Denmark, you must
ensure you pay your employees their wages. There may also be
some fringe benefits that you must report. As an employer in
Denmark, you are also required to pay contributions to various
social security schemes.

In this section, we will review the practical and tax aspects

surrounding payroll, fringe benefits and social costs.

When you need to pay wages to your employees

When you as an employer pay wages or fees, you must report
this to the Danish Customs and Tax Administration (SKAT). You
can do this by logging on to Self-Service Business (TastSelv
Erhverv) and under the ‘Staff’ (Ansatte) tab select ‘eIncome’
(eIndkomst).

It is important that, when creating your business, you have

considered what has to be filed about your business (e.g.
reporting on wages, VAT, etc.).

37
You have to be registered as an employer on virk.dk and registered as a user of eIncome in Self-Service Business before you can get started.

There are more guides to eIncome under ’Staff’ in Self-Service Business (the Danish Customs and Tax Administration’s website). These
guides are, however, in Danish, and therefore, it may be a good idea to get assistance from a professional partner in Denmark.

Every month you must report, among other things, the return. This means that you report DKK 0 for the month.
following for each employee: • If you register as an employer in the middle of a month and do
not pay wages for that month, you must also make a zero return.
• Income taxed at source • If the Danish Customs and Tax Administration (SKAT) has
• Holiday pay changed your company from small to large, be sure to insert
• Wage hours the new filing deadlines and payment deadlines in your payroll
• Withholding tax (A-tax) system. You can see from your registration certificate whether
• Labour market contribution your company is registered as small or large.
• Danish labour market supplementary pension (ATP) • If your business files via a payroll agency (e.g. Azets), you must
inform the payroll agency of the new deadlines.

Matters you should be aware of:

Fringe benefits
• You must include withholding tax, labour market contributions
In Denmark, it is common for an employer to offer its employees
and Danish labour market supplementary pension (ATP) at the
certain fringe benefits. A fringe benefit is a benefit that you, as an
time the income is paid to the employee. This also applies to
employer, pay for and your employees can use privately.
on-account fees, advances and the like.
• If you do not pay wages for a month, you must make a zero

38
For example, this could be: Social costs
As an employer in Denmark, you are subject to seven types of
• Free housing employer taxes. However, this is a modest contribution amount
• Company car seen from an international perspective, with an average expense
• Free telephone and computer of DKK 8-10,000 per year per full-time employee.
• Free board
• Free travel The following describes each scheme:

The value of the fringe benefit is equated with wages and must be The Danish labour market supplementary pension (ATP). This
included in personal income. It is therefore important that you, as is pension insurance that both the employer and employee must
an employer, report these benefits properly include withholding contribute to. For a monthly paid full-time employee, the employer
tax and labour market contributions when doing so. must pay an annual contribution of around DKK 2,300.

If you offer your employees in Denmark a free home, the tax rules Employers’ Reimbursement System (AUB) is an education fund.
depend, among other things, on any residence and/or moving This fund is used to provide work placements for young people
requirement. Moreover, tax paid on free housing is not withholding studying in vocational training. Employers must annually pay DKK
tax (A-tax), but tax on income not taxed at source (B-tax). 2,700 to the system, but the company can, in turn, be reimbursed
for part of the cost of employing trainees.
We recommend that you obtain professional advice if you are
unsure about how to report fringe benefits properly or, for Labour Market Insurance (AES). Is a fund that pays
instance, you have doubts about how free housing is handled for compensation if an employee contracts a recognised occupational
tax purposes. disease. The employer’s contribution depends on the company’s
business, but it is between DKK 300-6000 per year per employee.

39
The Danish Labour Market Fund for Posted Workers (AFU) is company already has “umbrella” insurance covering these issues
a fund which ensures that employees posted to Denmark receive in all countries where the company is active.
wages for working in Denmark. Employers must annually pay
about DKK 8 to the fund. Payment deadlines
Employers’ contributions are collected quarterly in an electronic
Financing contributions are, among other things, to finance letter sent to your company’s e-Boks. The fees are calculated
a portion of the state’s spending on pension contributions for based on the amounts reported for Danish labour market
individuals who are unemployed, sick or on maternity leave. An supplementary pensions.
annual contribution of about DKK 550 per full-time employee has
to be paid.

The maternity fund is a maternity scheme that all employers

are required to contribute to. There are many maternity schemes,
both public and private. The right maternity fund for your
business depends on the industry. The annual contribution is DKK
950 per full-time employee.

Industrial injury insurance is to be taken out with an insurance

company, and all employers in Denmark are required to do this.
The premium covers compensation for employees who suffer
an accident during the performance of their work. The annual
premium varies according to the number of employees and the
industry in which the company operates. It may be that your

40
The premium for industrial injury insurance that is taken out with If, as an employer, you choose to offer your employees an
an insurance company is usually paid once a year or as agreed occupational pension scheme, make sure that a certain
with the insurance company. percentage of the salary is paid to the pension company.

Pension Normally, the company pays 8–10% of the basic salary, and the
In Denmark, a pension can be divided into three different employee pays 4–5% of their basic salary. There are many pension
categories: companies in Denmark, but if your company has an agreement
with a pension company, it is this company that is used.
Statutory pensions are, for example, state pension, disability
pension and Danish labour market supplementary pension Health insurance
(mentioned above), which almost all employees are included Many companies in Denmark offer their employees health
in. The statutory pensions are administered by the Danish insurance. However, as an employer, this is optional unless a
authorities. collective agreement makes it mandatory.

Occupational pension schemes are pension contributions The insurance might be part of the pension scheme, or it
that employers pay and manage. This pension is part of the might be with a third company which will provide employees
employment contract between the employer and employee. with emergency help in the form of a treatment guarantee
for treatment by, for example, a chiropractor, physiotherapist
Private pensions are self-created pension contributions or psychologist, as well as surgery, medicine and care during
that are administered through a chosen pension company or hospitalisation. If the company pays the entire insurance, the
financial institution. The state pension is paid when you retire, employee is taxed on the value.
and employees can receive payments from all three schemes
simultaneously. Also see the section on Fringe Benefits on page 38.

41
MOVING TO DENMARK
If your company is about to launch business activities in Denmark, it is quite likely
that one or more people will move to the country. In this section, we will review
matters that are relevant if you have employees who need to move to Denmark
or if you move permanently or temporarily in connection with the company’s
activities.

Entry
Citizens of the Nordic countries (Finland, Iceland, Norway and Sweden) are free to
reside in Denmark, and they do not need to apply for a residence or work permit.
Citizens of the EU and Switzerland are free to reside in Denmark for up to three
months without an EU residence permit. For stays longer than three months,
you must apply for a residence permit from the Danish Immigration Service. The
Danish Immigration Service issues a permanent residence permit. This has no
specific period, but it is valid as long as the conditions of the agreement are met.

42
Residence and work permits for citizens of non-EU countries
In this situation, concerning citizens of non-EU countries, you can use one of the following arrangements for residence and work permits:

• Positive list is a list that is published by the Danish authorities. This is a list of work areas and occupations where there are workforce
shortages in Denmark.
• Minimum wage scheme that requires an annual gross salary of min. DKK 375,000.
• Postings apply to employees who will be made available by employers in a Danish subsidiary, sister or parent company for a period of time.
• Green card schemes are for highly skilled professionals who are looking for work in Denmark and thereby get employment and a work permit.
• Trainee applies for educational purposes for a limited period.

Arriving in Denmark: Registration

After arriving in Denmark, it is important that employees are registered as soon as possible. To do so, contact the International House in
Denmark, where you can obtain a Danish ID. You will also be given a Civil Registration Number (CPR-nummer in Danish). A Civil Registration
Number is personal and unique and can be used to open a Danish bank account, for the payment of wages, to contact the Danish
authorities, as well as for enquiries and questions concerning tax and social security. Therefore, it is imperative that employees obtain a Civil
Registration Number quickly so that they can begin to establish themselves in Denmark.

How do you get a Civil Registration Number?

You must present the following documents to get a Civil Registration Number:

• Work and residence permit • Housing rental agreement Accompanying family members must
• Work or employment contract • Marriage/divorce certificate, if applicable appear in person for registration.
• Passport • Birth certificates for children, if applicable

43
Bank account and NemID
In order to receive wages, it is necessary to have a Danish bank account and to be able to access bank accounts, online banking, tax
information, medical and other authorities, you need to have a private NemID. Also see page 15 for the section about NemID for companies

NemID is a vital part of being a citizen in Denmark’s digitised society, and serves as a secure log-in to public and private authorities, as well
as online banking. The bank can you help create a NemID. For example, if bills are to be paid by online banking, this requires a NemID. It is
also used by public authorities for money transfers such as wages, tax refunds and child support.

NemID is also used for a personal e-Boks which is assigned by the public authorities, where important documents such as hospital
appointments are sent. Also see page 17 for the section on e-Boks for companies. Many other websites and services also require NemID.

Logging in with NemID is done with a username, password and a code card, and the login procedure is always the same.

Health insurance card

Following registration, employees are enrolled in the Danish healthcare service. Within two weeks, the yellow health insurance card is issued
indicating the assigned doctor’s name and contact information. The card must be signed and must be presented at all medical and dental
visits, as well as at the chemist when collecting prescription drugs.

Housing
It can be difficult to find a rental home in Denmark. The Danish Rent Act and especially the negotiations and requirements can be complex.
It is often necessary to work with an agency that works with leases to ensure you receive the best possible terms and conditions.

44
Housing expenses
Consumption of heat, electricity and water is usually not included in the rent. Consumption is paid for based on actual consumption, but
some rental companies require a monthly advance payment. For example, central heating might be read once a year, when the provider will
know the exact consumption.

Rental contracts and tenant rights

Rental contracts cannot be terminated by the landlord before the end of the rental period agreed.
However, the tenant can terminate the rental contract after the contract’s first nine months. The
exception is if the tenant has to leave Denmark. The notice period is three months to the first of the
month, which means that the tenant may be tied into the rental contract for at least a year.

It is most common to pay a deposit of three months’ rent to the landlord before the rental period starts
on top of first month’s rent for the first month of the rental period. The total amount must be paid at the
time the rental period begins. The deposit is refunded if there is no damage to the property, which must
be repaired.

Personal tax
When working in Denmark, you must pay Danish taxes. A tax card will be issued by the authorities
based on an employee’s information. Details can change during the year if there are changes to income
or wealth. The Danish Customs and Tax Administration (SKAT) sets the tax rate for the employee’s
information, including church tax, municipal tax, health contributions and state taxes.

45
Researchers and key employees recruited from abroad can sometimes qualify for the 27% tax scheme, also known as 48E or the Researcher
and Highly Paid Employee Scheme. You must apply specifically for this scheme, and special requirements must be met. You have to apply
within one month of arriving in Denmark.

Here we review the conditions and requirements that determine when a person is liable to pay tax on their income in Denmark.

When do you have full tax liability in Denmark?

If you live in Denmark and stay in Denmark, you have full tax liability. However, to terminate full tax liability, the “only” requirement is that
residence is terminated. When you have full tax liability in Denmark, it means that Denmark has taxation rights for all worldwide income,
regardless of where it originates.

Residence requirements
The residence requirement is met if you have an all-year residence or a dwelling that can be equated with an all-year residence.

If you have a holiday home, this will generally not count as a residence. However, a holiday home will meet the residence requirement if it has
all-year status, or if you actually use it as an all-year residence. In some cases, a holiday home with all-year status will be equated with an all-
year residence because of the building’s condition and other factors which mean that the residence requirement is fulfilled.

Residency requirements
When you acquire a residence in Denmark, tax liability only comes into effect once you are resident in Denmark. Short stays in Denmark are not
considered to be “residency”. This applies, for example, to holidays and short business trips. Short stays are stays of less than three consecutive
months, or 180 days over a period of 12 months. So in practice, tax liability is not triggered for individuals unless the stay is not due to holiday or
the like. This might, for example, concern business activities besides sporadic responses to e-mails, text messages and phone calls.

46
Financial circumstances
When you move to Denmark from abroad, it is mandatory to assess all tax-relevant
assets abroad. Typical categories are:

• Shares that you have invested in which are in the custody of a bank
• Properties which you fully or partially own, but do not live in yourself
• Land you have invested in
• Any self-employed business which you operate/own

You are responsible for reporting such assets each year in connection with the tax
return, because such information does not automatically find its way to the Danish
Customs and Tax Administration (SKAT). This is especially true of listed shares, as
any loss will lapse if it is not reported later than 01/07 of the following year.

47
ABOUT AZETS
Azets is the leading provider of technology and services within accounting,
payroll, HR, recruitment and advisory in the Nordic countries.

Our more than 3,000 dedicated employees serve more than 20,000 businesses Finland
within a wide range of industries. Our 300+ employees in Denmark can assist in all Norway

parts of Denmark from our four offices.

Sweden Estonia

Azets is a part of CogitalGroup, which is a group consisting of Azets in the Nordic

Denmark
countries and Blick Rothenberg and Baldwins in the UK. As a group, we provide
outsourcing, accounting, payroll, taxation, financial and other services to a broad
range of business in Europe.

Our knowledge and experience in the Nordic market helps companies create a
simple process for establishing a business in Denmark. Our consultants can assist
in and advise on all matters regarding accounting, payroll and HR, regardless of Romania
whether you need full outsourcing or interim assistance and management. We can
administer compliance, debt collection, VAT, invoicing, expense management and
much more.

48
Tonni Nielsen Tonni is the senior manager of a team which
Senior manager of Azets’ is specialised in the fields of accounting, the
accounting department establishment of companies and corporate law.

In a professional and experienced manner, the team advises new clients on how to
start a business and operate in Denmark.

The consultants advise and support companies with their presence in Denmark,
covering everything from company and employer registration and reporting to the
Danish authorities to ad hoc accounting and legal support.

Tonni’s team can, for example, assist you with:

• Registering an establishment or subsidiary

• Registering a holding company
• Your digital presence in Denmark (NemID, digital mailbox, bank account etc.)
• VAT, tax and company duties
• Accounting, reporting and related filing requirements
• Research and development tax incentives

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Charlotte Petersen Charlotte is the senior manager of a
Senior manager of Azets’ payroll team of consultants who specialise
and HR department in payroll administration, Danish
employment law and the Danish
labour market.

The team advises and assists new clients in Denmark who want to get established
as employers and to get a hold on challenges within payroll, employment,
recruitment, relocation etc.

Charlotte’s team can, for example, assist you with:

• Danish payroll and payroll administration

• Danish employment law, such as the Holiday Act and other mandatory
legislation
• Relocation — the moving of furniture, applications for A1 and O1,
residence and work permits, home finding, creation of CPR numbers, bank
accounts, registration in RUT
• Recruitment

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T:
+45 44 51 81 80

E:
[email protected]

W:
azets.dk/eng