Expanding your business to Denmark

Expanding your business internationally can be challenging, but Denmark makes it easier with its streamlined processes and clear regulations. Known for its business-friendly environment, Denmark is a great place to grow your company. Here’s what you need to know.

Denmark is a top business destination thanks to its efficient and transparent regulatory system. The country offers a competitive tax system and many incentives for research and development, making it ideal for international expansion.

Understanding Permanent Establishment (PE)

Before diving into the Danish market, it's crucial to understand the concept of Permanent Establishment (PE). Consulting a Danish legal advisor is highly recommended to determine if your company will be subject to PE rules. Activities like employees negotiating deals or invoicing from Denmark can create a PE, affecting the type of registrations required for your business.

Expanding into Denmark offers numerous benefits, from a favourable business environment to supportive tax incentives. However, understanding the regulatory landscape, from PE rules to payroll structures, is vital for a smooth transition.

Company structures and filing requirements

Denmark offers several types of company structures:

• Private Limited Company (APS)
• Public Limited Company (AS)
• Branch Office
• Representative Office

Each structure has its own filing requirements. Limited liability companies and branch offices typically have obligations such as corporate tax filing and VAT, with branch offices also needing to file the mother company's annual report.

Operational activities to consider

Denmark is a highly digitalised country, so understanding and using digital tools is essential for smooth operations.

Mid ID (Digital Signature):

-Used for signing documents and accessing government services.

-Make sure your key staff are registered to use it.

E-box (Digital Mailbox):

-Used to receive official communications from Danish authorities.

-Set up an E-box to ensure you don’t miss important messages.

Statutory filings

You must file reports and taxes digitally:

-Annual reports: Submit to the Danish Business Authority.

-Corporate tax returns and VAT: File through the Danish tax authority’s platform.

-VAT Registration: Required if your turnover exceeds DKK 50,000, with filings due monthly, quarterly, or semi-annually.

Social costs and payroll

Also known as ‘Some of It Alling’:

-Quarterly payments covering employee welfare contributions.

-Use a payroll system that integrates with Danish platforms to manage taxes and social costs.

Payroll structures in Denmark

When it comes to payroll, Denmark offers various employment types:

• PAYE: Pay As You Earn system for full-time employees.
• Hourly contracts: For part-time or casual work.
• Project work: For temporary projects.

Independent contractors must meet specific criteria to avoid being classified as employees by tax authorities.

Key payroll considerations

For full-time employees, Denmark's labour laws specify a 37-hour work week and five weeks of vacation per year. Compliance with the Danish Holiday Act is essential, as it governs vacation accrual and usage periods, which are unique compared to other countries.

Recent legislative changes

A significant legislative change taking effect on July 1, 2024, requires Danish employers to implement a time registration system. This system ensures employees do not work more than 48 hours per week, promoting proper rest and work-life balance.

Expanding into Denmark offers numerous benefits, from a favourable business environment to supportive tax incentives. However, understanding the regulatory landscape, from PE rules to payroll structures, is vital for a smooth transition. With the right tools and guidance, your business can successfully navigate the Danish market and thrive internationally.

Stay tuned for more insights from our "Going Global with Giant Group" series, as we continue to explore business opportunities around the world.