Denmark is considered one of the best countries in Europe for starting a business due to its stable economy, transparent regulations, and supportive entrepreneurial environment. Whether you are a local resident or a foreign entrepreneur, setting up a company in Denmark requires an understanding of the legal and financial aspects. This guide will walk you through the essential steps of company registration, tax obligations, and financial compliance, ensuring that your business is legally structured and financially prepared for success.
Choosing the Right Business Structure
The first step in setting up a company in Denmark is selecting the appropriate legal structure. The most common types of business entities include:
- Enkeltmandsvirksomhed (Sole Proprietorship) – A simple business structure where the owner is personally liable for all debts. Suitable for freelancers and small businesses.
- ApS (Anpartsselskab, Private Limited Company) – Requires a minimum capital of 40,000 DKK and offers limited liability protection for its owners.
- A/S (Aktieselskab, Public Limited Company) – Designed for larger businesses, requiring a minimum share capital of 400,000 DKK, with more extensive financial and reporting obligations.
- PMV (Personligt ejet mindre virksomhed, Small Sole Proprietorship) – A micro-business structure for small-scale entrepreneurs, which does not require VAT registration if the annual turnover is below 50,000 DKK.
Choosing the right structure depends on factors such as liability, taxation, and administrative requirements.
Registering Your Company in Denmark
Once you have chosen your business structure, the next step is to officially register your company. This is done through the Virk.dk online portal, which is managed by Erhvervsstyrelsen (Danish Business Authority).
To register a company, you will need:
- NemID – A digital identification system for business owners to manage official documents online.
- Company Name and Business Description – A unique company name and a brief description of its activities.
- CVR Number – A unique business registration number assigned upon approval.
- Bank Account – If registering an ApS or A/S company, you must set up a corporate bank account.
The registration process typically takes 24-48 hours, after which your company is legally recognized.
VAT and Tax Registration
Companies operating in Denmark are subject to Danish tax regulations, including VAT and corporate tax obligations.
- VAT (Moms) Registration – If your company earns more than 50,000 DKK per year, you must register for VAT. The standard VAT rate in Denmark is 25%.
- Corporate Tax (CIT) – ApS and A/S companies are required to pay a 22% corporate tax on their annual profits.
- Personal Income Tax – Sole proprietors are taxed on their business income based on a progressive scale ranging from 8% to 55%.
VAT and tax declarations must be submitted electronically through the SKAT (Danish Tax Authority) system.
Opening a Business Bank Account
Having a corporate bank account is a mandatory requirement for limited liability companies (ApS and A/S). Even sole proprietors may find it beneficial to separate personal and business transactions.
To open a business bank account, you will typically need:
- A valid CVR number.
- Proof of company registration from Virk.dk.
- Identification documents for the company owner(s).
- Information about the business’s expected financial transactions.
Banks in Denmark may conduct background checks before approving corporate accounts.
Bookkeeping and Financial Compliance
All businesses in Denmark must follow bookkeeping regulations to ensure transparency and compliance with tax laws.
- Financial Record-Keeping – All companies must maintain records of financial transactions, including invoices and receipts.
- Annual Financial Statements – ApS and A/S companies must submit annual reports to the Danish Business Authority.
- Document Retention – Companies are required to keep financial records for at least five years.
Using accounting software, such as Dinero, e-conomic, or Billy, can simplify bookkeeping and ensure compliance with Danish financial regulations.
Employment Regulations and Payroll
If you plan to hire employees, you must comply with Danish labor laws and payroll obligations.
- Employer Registration – Businesses hiring employees must register with SKAT (Danish Tax Authority).
- Income Tax and Social Contributions – Employers must deduct income tax from employee salaries and pay mandatory social security contributions.
- eIndkomst System – Payroll and tax deductions must be reported digitally through the government’s eIndkomst system.
Denmark has strict labor laws, including minimum wage agreements, vacation allowances, and work-life balance regulations, so it’s essential to stay informed about employer responsibilities.
Business Licenses and Permits
Certain types of businesses require specific licenses or permits to operate legally in Denmark. These may include:
- Food and Beverage Businesses – Must obtain hygiene and alcohol licenses.
- Construction and Engineering Firms – Require permits for building projects.
- Financial and Legal Services – Subject to strict regulatory approvals.
Checking the Danish Business Authority’s licensing requirements ensures that your business operates within legal guidelines.
Foreign Entrepreneurs: Setting Up a Company in Denmark
Foreign nationals can establish a company in Denmark, but there are additional requirements:
- EU/EEA Nationals – Can start a business without restrictions.
- Non-EU Nationals – Must obtain a residence and work permit before registering a company.
- Branch Offices and Subsidiaries – International companies can set up a Danish branch or subsidiary, which must comply with local corporate regulations.
Seeking legal and financial guidance can simplify the process for foreign business owners.
Common Mistakes When Setting Up a Business in Denmark
Entrepreneurs often make mistakes that can lead to compliance issues. Common pitfalls include:
- Failing to Register for VAT on Time – Late registration can result in penalties and fines.
- Mixing Personal and Business Finances – Keeping separate bank accounts ensures transparency.
- Ignoring Financial Reporting Obligations – Failing to submit tax returns and annual reports can lead to legal consequences.
- Lack of Business Insurance – Liability insurance is recommended to protect against unforeseen risks.
Proper planning and professional assistance can help avoid these mistakes.
Setting up a company in Denmark is a straightforward process, but understanding the legal and financial aspects is crucial for long-term success. From choosing the right business structure to registering for VAT and corporate tax, ensuring compliance with Danish regulations will help your business thrive. Using digital accounting tools, following bookkeeping guidelines, and seeking expert advice when needed will streamline your company’s operations and financial management. Whether you are a local entrepreneur or a foreign investor, Denmark provides an excellent business environment with clear and supportive regulations.
