Denmark is a business-friendly country. It is one of the happiest countries globally and is flexible for all employees working across companies.
The country’s GDP is $406.011 billion, making it the 53rd highest GDP contributor globally. Trade, services, and manufacturing industries are the primary contributors to the GDP. Denmark is ranked 4th among 190 countries in the ease of business index. Hence, the country is one of the most lucrative destinations for expanding your business, as you can set up a subsidiary easily.
The country has a modern mixed economy where it heavily invests in agriculture and modern services. Denmark is close to some of the most affluent European nations like Norway, Germany, Sweden, etc. Hence, when you incorporate a subsidiary in Denmark, you will also have access to these markets.
The nation is home to a sizable population of employable young people. As a result, you can hire nationals to manage the business. Learn about the incorporation of foreign subsidiaries in Denmark and get a direction for the entire process.
What are the Types of Subsidiaries in Denmark?
The different types of subsidiaries that can be incorporated in Denmark are as follows:
Private Liability Company
A private liability company is a type of LLC which is one of the most common forms that a subsidiary takes in Denmark. Here, the liability of the shareholders is limited to the share capital they bring to the company.
- The company must have at least one shareholder irrespective of their residential country.
- The minimum share capital requirement for a limited liability company is DKK 40,000. The entire amount must be divided into small units called shares.
- A private limited company’s shares cannot be transferred or traded publicly on a stock exchange.
Public Limited Company
Another type of LLC is a public limited company, a popular form of a subsidiary in Denmark. However, here the shares of the subsidiary are listed on a stock exchange.
- Incorporating a public limited company requires at least one shareholder.
- The shareholders must bring a minimum share capital of DKK 400,000 if they want to start a public limited company.
- The shareholders are not liable for the company’s liabilities and debts.
- Members can offer the shares of a public limited company to the general public via a stock exchange.
Two kinds of partnership firms can be incorporated as a subsidiary. These two types include general partnerships and limited partnerships.
- There must be at least two partners, either natural beings or legal entities such as limited liability firms.
- No minimum capital is required to establish a general partnership in Denmark.
- Created by a partnership agreement
- Each partner is subject to individual taxation on their share of profits.
- The partners are responsible for the company’s debt and any other liabilities the company might have.
A limited partnership is a more popular partnership found in Denmark. The elements of a limited partnership are as follows:
- There must be a minimum of two partners, either natural beings or legal entities such as limited liability firms.
- One or more participants in the limited partnership must take up the role of a general partner (Komplementar) and a limited partner (Kommanditist).
- The general partner has unlimited liability, i.e., they might use their assets to pay off the company’s debts. However, the limited partner is only liable for the capital they bring into the company.
- All partners must bring in a minimum of DKK 1 as the minimum share capital for the partnership.
Before you start the incorporation of a foreign subsidiary in Denmark, you must weigh all the options listed above and then decide the type of subsidiary you want to open.
How to Set Up Subsidiaries in Denmark?
There are a few steps involved in setting up a subsidiary in Denmark. These steps include:
Step 1: Select a name for the company
- Before registering your subsidiary business in Denmark, you must decide on its name.
- The name may or may not be the same as the parent company.
Step 2: Submit the necessary documents
- You must register the business with the Danish Business Authority. Depending on your convenience, you can register the company online and offline.
- If you are registering the business online, you must submit a digital signature.
- After registering with the Danish Business Authority, you must also register the company with the tax and customs authorities.
- A subsidiary company must submit the parent company’s financial statements to the Danish Business Authority.
Step 3: Fill in the incorporation form
- After filling in all the essential details, you must complete the incorporation form to create a subsidiary in Denmark.
- Along with the incorporation form, submit the necessary documentation.
- You must also include a document with the names and signatures of all shareholders and directors.
Step 4: Certificate of Incorporation and company formation
- Once all the formalities are completed, the company will receive a registration number called CVR, and the subsidiary will be incorporated.
- You must create a register to add the details for all the shareholders after the company’s incorporation.
- Typically, the newly formed Danish limited company must select an auditor, but under specific circumstances, the firm may opt out of auditing.
- The successful registration generates a unique number for the company.
Step 5: Tax registration
- Companies are required to register for VAT if they sell goods and services and generate revenue above DKK 50,000.
The company must also open a bank account in Denmark to process all the transactions on the company’s behalf. A subsidiary business in Denmark must also collect the certificate of incorporation from the concerned authorities.
Benefits of Setting Up a Denmark Subsidiary
There are several perks of setting up a subsidiary company in Denmark. Some of these benefits include:
- There are no residency requirements. Hence, even foreign nationals can easily register a subsidiary in Denmark.
- As the ease of doing business index rank of the country is 4 out of 190 countries, incorporation of a subsidiary in Denmark is hassle-free and relatively easy.
- You need minimum documents to set up a business in Denmark. Also, you can conduct all your annual general and shareholder meetings online.
- In addition to the generally favorable tax structure compared to other Nordic nations, you may pay out dividends on an interim basis following the first financial year.
- A subsidiary company formation in Denmark is treated on par with other businesses. Therefore, the employees who work for a subsidiary are granted the same rights as any other regular employee working in Denmark.
- In Denmark, there is no minimum capital requirement for subsidiary companies in most cases.
Documents to Prepare When Forming a Subsidiary in Denmark
Before starting the subsidiary company formation in Denmark, you must collate all the essential documents. Some of the necessary documents include the following:
- A duly notarized Memorandum of Association
- The Articles of Association of the company
- List of tasks and procedures that have to be carried out by the board of directors
- Minutes of all the general meetings
- Agreement among all the shareholders
- A register of shareholders that contains the names of all the shareholders in the newly formed subsidiary.
You must submit these documents to the Danish Business Authority to complete the process smoothly. You must also register with the tax and VAT authorities to ensure they receive timely tax payments.
What Business Forms can Denmark Subsidiaries Take?
A subsidiary in Denmark may adopt or incorporate a range of corporate structures. You can set up wholly-owned or joint venture subsidiaries in Denmark. If there is a partially owned overseas subsidiary, there must be multiple foreign founders.
Limited liability companies are one of Denmark’s most popular business structures since they are adaptable and simple to set up. However, you can also consider several possibilities based on your needs and financial situation.
Denmark Subsidiary Laws
When starting a company in Denmark, it is crucial to abide by the subsidiary legislation imposed by the Danish government. These regulations aid in protecting the rights of the employees working for the corporation.
Before registering with the country’s tax authorities, companies must obtain the Incorporation Certificate. After the incorporation process, you must collect all the additional necessary certificates. Subsidiaries in Denmark fall under the jurisdiction of Danish law. Hence, the rules followed in the country where your parent company is located are irrelevant.
You must also create a bank account to conduct all business and payroll-related transactions. You must pay your employees in local currency as per the law. You must also adhere to the minimum share capital and number of shareholders requirements.
Post Incorporation Compliance
Once you have established a subsidiary business in Denmark, you must meet the compliance for a foreign subsidiary in Denmark. Some of these requirements include the following:
- You must pay the taxes and the VAT annually on behalf of all the employees
- You must appoint an auditor
- If the company has a few boards of directors, you need to lay down their duties in the rules of procedures.
- You must also create a non-public register for all your shareholders.
- The company must submit all financial statements annually to the Danish Business Authority.
Taxes on Subsidiaries in Denmark
All companies that have their offices in Denmark must pay a tax on the revenue generated from their regular business activities. Denmark’s corporate tax rate is 22%. The subsidiaries incorporated in Denmark will have to pay taxes on their worldwide income, just like all the resident companies of Denmark. However, the subsidiaries might receive some relaxation if the nation where the parent company is located has a tax treaty with Denmark.
Tax Incentives for Businesses Opening a Subsidiary in Denmark
While there is a corporate income tax rate on the companies, Denmark has double tax treaties with more than 90 countries. Hence, the companies that operate from Denmark and have a span of business in other countries might have to pay very low or no taxes on the income from other countries.
Under Danish tax legislation, capital expenditures for R&D are eligible for an instant write-off. The taxpayer also has the option to deduct assets from income on a straight-line basis throughout the same year and the next four years. Additionally, you may entirely write off expenses related to the search for raw materials in the same year.
Other Important Considerations
Establishing a subsidiary company in Denmark takes time. Take a few weeks off of work to concentrate on the business’s growth. You must also travel to and from Denmark to comply with all legal duties. You can assign the task to another business leader or, if you like, work alongside them if your parent firm keeps you busy.
Also, you must complete all the steps of setting up a subsidiary business in Denmark with a definite budget. Therefore, decide on a budget before you start with the incorporation of a foreign subsidiary in Denmark, as it will keep you in check.
How Can Multiplier’s Employer of Record Help You Hire and Expand in Denmark?
Planning a business, whether it be domestic or global, involves time and money. When establishing a subsidiary abroad, it may be challenging to comply with regional business practices and labor legislation.
Why not utilize a service provider like Multiplier to help your business surpass this growth obstacle?
You don’t need to worry because Multiplier handles all the formalities in entering a new market. It would be best if you got in touch with Multiplier, who has domestic and foreign experts and will ensure that all Denmark labor laws and norms are carefully followed. With a PEO like Multiplier, you may swiftly build overseas teams and explore new business markets.