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Employing in Denmark

At a glance

Employment in Denmark

Danish employment law is relatively straightforward and flexible. There are minimal statutory requirements with regards to contracts, termination procedures as well as employee pensions and holidays. Employer compliance requirements are therefore much lower than in other European countries. However, it is still recommended that professional legal advice be sought when employing in Denmark.

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Payroll & Tax in Denmark

Denmark does not impose a complicated or onerous tax system on foreign companies operating in the country. The primary concerns for a foreign company that needs to comply with tax laws in Denmark are: Individual income tax (IIT) for employees in Denmark, social security costs, payroll tax, VAT, withholding tax, business tax and permanent establishment concerns.

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Immigration / Work Permits in Denmark

As Denmark is both a member of the European Union (EU) and the Nordic Council, differing immigration rules will apply to foreign workers coming to Denmark, depending on their nationality. Foreign workers from non-EU / EEA and non-Scandinavian countries are generally required to hold a residence and / or work permit before entering Denmark. Work permits are generally issued on the basis of an individual’s qualifications and sometimes, Danish labour market considerations. The Danish government has several schemes in place to allow highly-skilled professionals to obtain residence and work permits in Denmark quickly and easily.

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Incorporation

There are three types of business forms available to foreign companies in Denmark. Each of these business forms has distinct advantages and disadvantages, as well as differing scope of business activities, registration requirements and minimum capital requirements. In most cases, it will depend on the degree of commitment a company has to Denmark and the planned business activity.

When setting up a company in Denmark, you have the following options:

  • Corporation (A/S or ApS)
  • Branch Office
  • Representative Office

This article provides a general guideline for foreign businesses on entering Denmark for business purposes. In particular, it looks at common pathways to establishing a business presence in Denmark, generally through a corporation, branch office or representative office. In addition, various economic, tax and regulatory factors are provided throughout as a source of useful information to assist those who will enter the Danish economy. The guide also looks at some immigration requirements such as obtaining appropriate visa status.

Data is based on the time of writing, August 2015 or closest available dates.

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GEO Solutions or DIY Employment in Denmark?

GEO Solutions or DIY Employment

Companies entering Denmark must make a decision whether to use their own resources for a Do-It-Yourself (DIY) approach, or to use a Global Employment Organization to handle payroll and employment responsibilities. A GEO or Denmark Employer of Record solution makes it faster, easier and cheaper to deploy staff if they don’t have a Danish entity established that can run payroll.

A DIY approach will typically take 6-9 months until there is a properly incorporated WFOE ready to run payroll and cost up to 6 figures if registered capital is required. Shield GEO can deploy foreign staff in 4-6 weeks and local staff in 48 hours. Additionally Shield GEO is responsible for all compliance issues related to the employment.

Shield GEO

Shield GEO provides a fully outsourced employment service in Denmark. Companies expanding into Denmark can contract with Shield GEO to employ and payroll their staff on their behalf in Denmark.  Shield GEO then assumes the legal responsibility for these employees, becoming the Employer of Record, sponsoring them on work permits, complying with local employment law and running their monthly payroll.

Using Shield GEO Employer of Record Services in Denmark

Payroll Denmark
Management Fee for Employer of Record Services / Monthly Payroll Costs

Please contact us for a quote.

Notes

Payroll taxation in Denmark (Loensumsafgift) only applies to companies carrying out specific VAT exempted activities. Different rates apply for different VAT exempted activities such as financial activities, import and publishing of newspapers etc.

  • Banks, insurance companies and other financial businesses; levied on total payroll: 12.2%.
  • Other VAT-exempt businesses, including some public bodies; levied on total payroll plus taxable profits, adjusted to exclude financial income and expenses: 4.12%
  • Lotteries and information activities performed by tourist offices, other organizations and some public bodies; levied on total payroll: 6.37%
  • Publishers or importers of newspapers; levied on the value of newspapers sold: 3.5%
 
Grossed income Tax Rate (%)
First 49,900 0
Next 438,200 40
Over 488,100 56

The rates above are based on average municipality rates and do not reflect the voluntary church tax.

 

Tax Returns Supplied

N/a

Corporate Tax Requirements

Businesses are required to register their income tax particulars as well as VAT with the tax authorities, SKAT

 

Employers Social Security and statutory contributions

The employer pays 180 DKK and must also pay small amounts for compulsory work-related insurances and other specific items. Please refer to the section on Employment ‘Pensions and Benefits’ for a detailed explanation.

Employees Social Security and statutory contributions

The employee pays 90 DKK. Please refer to the section on Employment ‘Pensions and Benefits’ for a detailed explanation.

Insurance requirements

Shield GEO does not provide sponsored work permits in Denmark at this moment.

Corporate Income Tax Rate

The current corporate tax rate in Denmark is 23.5%, which will be reduced to 22% in 2016.

Payroll Tax

There is generally no payroll tax in Denmark apart from companies carrying out specific VAT exempted activities.

Sales Tax

Denmark imposes a Value Added Tax (VAT) on all taxable supplies of goods and services made by a taxable person. The current VAT registration threshold is DKK 50,000 annually.

The current VAT rate is 25%.

Withholding Tax

Denmark imposes withholding tax (WHT) on certain classes of income paid to non-residents:

  • Dividends: 27%
  • Royalties: 22% for payments made after on or after 1 March 2015, 25% if not
  • Interest: 22% for payments made after on or after 1 March 2015, 25% if not
 A reduced rate may be available under an applicable Double Tax Treaty.

 

 

Other Tax
  • Inheritance tax – Inheritance tax is levied at a rate of 15% is levied on the total value of estates exceeding DKK268,900. Non-residents are subject to inheritance tax only if the estate includes property situated in Denmark or if a Danish probate court administers the estate.
  • Gift tax – Non-residents are only subject to gift tax if the donor or donee is a Danish resident or if the gift is Danish real estate. Between close family members there is no tax on gifts up to 60,700 DKK. Gifts exceeding this amount are taxed by 15% or 36.25%. Gift tax on gifts between spouses does not apply. For individuals falling outside the category, e.g. siblings and non-family, gifts may be considered ordinary taxable income and taxed by rates up to 51.95%.
  • Property tax – Levied on 1% of the publicly assessed value for Danish properties up to 3,040,000 DKK (408,000 EUR) and 3% of the exceeding amount. Gains from the sale of property are also taxable (unless it is primarily used for residence).

 

Individuals and corporations are required to file tax returns annually before 1 May of the following year. The tax year in Denmark follows the calendar year. Individuals must inform the tax authorities annually of their expected income and deductions for the year in November (preliminary tax assessment). The preliminary tax assessment includes a tax card, which the employer uses for withholding taxes. Individuals receive a tax card for the coming tax year along with their preliminary income assessment. If no tax card is available, the employer has an obligation to withhold tax at a rate of 55%, in addition to the 8% labour market tax.

 

Preliminary taxes will be included in the annual tax assessment and this will result in either a tax refund, tax payable or equal balance

 

Work Permits
Can Sponsor Work

Shield GEO does not provide sponsored work permits in Denmark at this moment.

Work Permit cost

Shield GEO does not provide sponsored work permits in Denmark at this moment.

Work Permit processing time

Shield GEO does not provide sponsored work permits in Denmark at this moment.

Work Permit process

Shield GEO does not provide sponsored work permits in Denmark at this moment.

Can Work Permit be processed in country

Shield GEO does not provide sponsored work permits in Denmark at this moment.

Can Spouse work on dependent visa?

No

Business Visas
Can do Business Visa

N/a

Business Visa Cost

Shield GEO does not provide business visas in Denmark at this moment.

Business Visa processing time

Shield GEO does not provide business visas in Denmark at this moment.

Others
Can supply private health care

N/a

Can assist opening bank accounts

N/a

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