Setting up Business in Denmark - Company Formation, Taxation & Regulatory Framework

Why Denmark Is the Right Choice for Your Business

Denmark may be small, but the country has a stable and transparent governance structure along with structured institutions and flexible markets. For companies eyeing Northern Europe, the Nordics, or the EU, Denmark offers a launch pad.

Stable, Transparent, and Predictable Business Environment

Denmark’s corruption levels are among the lowest in the world. Business law is clear and aligned with EU standards, helping companies operating here benefit from predictable regulations and simple compliance frameworks.

Digital Efficiency and World-Class Infrastructure

Almost all administrative processes in Denmark can be completed online through their secure national portals, making the country one of the most digitalized economies. Situated between continental Europe and the Nordic region, Denmark offers strategic access to a market of over 100 million consumers.

Competitive and Transparent Tax System

Denmark’s corporate income tax rate is 22%. The government do offer special incentives schemes for research and innovation encouraging international investors to set up operations efficiently.

Process of Setting Up a Company in Denmark

Setting up a business in Denmark is easy and not too complicated. While exact procedures can vary, the overall structure follows a defined path administered by the Danish Business Authority (Erhvervsstyrelsen).

1. Choose the Legal Form and Business Name

• Entity structure determines liability, capital needs, governance, and credibility of a business. Denmark offers nine recognised business entities.
• Check name availability on the Central Business Register (CVR) to ensure compliance with naming conventions.

Timeline: 1–2 working days

2. Draft the Memorandum and Articles of Association

• Every limited company (ApS, A/S, or P/S) must prepare founding documents that specify its purpose, capital, share classes, and management rules.
• Major documents should be drafted such as Memorandum of Association and Articles of Association, specifying share capital, shareholders, voting rights, and registered office address.

Timeline: Around 3–5 working days

3. Open a Bank Account and Deposit Share Capital

• Before registration, capital must be deposited into a Danish corporate bank account.
• Open an account in the company’s name and deposit share capital.
• Obtain a bank confirmation letter verifying capital contribution.

Timeline: 1–2 weeks (including bank due diligence)

4. Register the Company with the Danish Business Authority

• Registration is fully digital through the government’s online business portal.
• Upload founding documents and proof of capital.
• Provide details of directors, beneficial owners, and registered office.
• Once approved, receive a CVR Number which is the unique business ID for all government dealings.

Timeline: 1–3 days

5. Register for Tax, VAT, and Employer Obligations

After incorporation, the business must register for taxation and employer responsibilities.

• Register for VAT if turnover exceeds DKK 50,000 annually.
• Enrol for Corporate Income Tax (22%).
• As an employer, register with the Danish Tax Agency if applicable
• Register for social insurance (ATP, occupational accident, and pension contributions).

Timeline: 1–2 weeks

6. Management and Residency Requirements

• Appoint a Board of Directors (required for A/S, optional for ApS).
• At least one executive director must be registered as the company’s legal representative.
• There is no residency requirement for directors or shareholders, but at least one person must hold a valid Danish or EU eID.

The complete business setup process in Denmark typically takes 4–8 weeks, depending on the company type, banking timelines, and regulatory approvals.

Business Structures in Denmark — Finding the Right Fit

Selection of legal form for a company determines its liability, governance model, taxation, and reputation. Denmark’s flexible legal environment assists investors to choose an entity that aligns with their operational scale and risk appetite. This helps every business, from sole proprietors to multinational corporations find the right fit.

1. Private Limited Company (Anpartsselskab – ApS)

• Minimum Capital: DKK 40,000 (fully paid in).
• Liability: Limited to the company’s share capital.
• Governance: Managed by one or more executive directors. A board is optional but common in larger ApS entities. At least one member of management must reside within the European Economic Area (EEA)
• Taxation: 22% corporate income tax.

2. Public Limited Company (Aktieselskab – A/S)

• Minimum Capital: DKK 400,000 (at least 25% before registration).
• Liability: Only Limited to subscribed capital.
• Governance:

• Taxation: Corporate income tax at 22%.

3. General Partnership (Interessentskab – I/S)

• Minimum Capital: None
• Liability: Unlimited liability for partners
• Governance: Managed according to a partnership agreement
• Taxation: Partners are taxed individually.

4. Limited Partnership (Kommanditselskab – K/S)

• Minimum Capital: None mandated
• Liability: General partner(s) have unlimited liability, limited partners’ liability is restricted to their capital contribution.
• Governance: Managed by general partner
• Taxation: Partners are taxed individually.

5. Partnership Limited by Shares (Partnerselskab – P/S)

• Minimum Capital: DKK 400,000 (same as A/S).
• Liability: At least one partner has unlimited liability, but shareholders’ liability is limited.
• Governance: Combines A/S’s governance features with partnership’s flexibility.
• Taxation: Can be either transparent or corporate taxed, depending on the structure.

6. Sole Proprietorship (Enkeltmandsvirksomhed)

• Minimum Capital: None
• Liability: Unlimited personal liability
• Governance: Managed by owner
• Taxation: Income is taxed as personal income. 

7. Branch of a Foreign Company (Filial)

• Minimum Capital: None
• Liability: Parent company bears full liability
• Governance: At least one branch manager residing in EEA
• Taxation: Danish corporate tax (22%) on income generated in Denmark.

Few Important Points to Consider

Residency, Work Permits, and Director Requirements

Danish company law requires that at least one member of management must be resident within the European Economic Area (EEA). Many foreign founders meet the EEA-residency requirement by appointing a local or EEA-resident director through a professional fiduciary or corporate-services firm.

Non-EU entrepreneurs establishing themselves in Denmark can apply for residency through the Start-up Denmark programme, which grants a two-year renewable residence and work permit for approved high-growth ventures. 

Shelf Companies

To accelerate entry, investors can acquire a shelf company. Ownership can be transferred within one to three days helping eventually save time but also demands due diligence to ensure the shelf company has no prior liabilities.

Data Protection and Digital Obligations

Operating in Denmark means complying with the EU General Data Protection Regulation (GDPR) and national data-protection rules. Any business processing personal data must register as a data controller or processor with the Danish Data Protection Agency.

How Our Firm Can Help You

With extensive experience in helping international businesses establish a presence in Europe, our firm is well-equipped to support your expansion plans in Denmark. Our expertise includes:

• Market Study & Feasibility: Assess opportunities and viability for your business in Denmark and build a tailored market entry roadmap.
• Partner & Investor Search: Identify local partners, distributors, or collaborators to accelerate growth.
• Incorporation & Compliance: Assistance with setting up a subsidiary or branch, opening bank accounts, providing registered office and resident director services, VAT registration, bookkeeping, and statutory filings.
• Tax & Regulatory Strategy: Choose the best canton, plan cross-border taxes efficiently, and obtain sector-specific regulatory approvals.
• Ongoing Legal Support: From corporate governance, contracts, and dispute resolution to intellectual property protection, employment law, and immigration support, we ensure your business operates smoothly.

Denmark offers a strategic location, favourable tax framework, and strong business ecosystem for international companies. Let’s explore how your company can succeed in Denmark!