Denmark is one of the best countries of the world that offers good start-up opportunities. The business set up is quite straightforward, as there is no room for words like ‘corruption’, ‘bureaucracy’, and ‘fraud’. It is a stable country with lots of opportunities for entrepreneurs around the world.”Can I start business in Denmark easily?” and Answer if perfectly YES!!
With world class IT infrastructure, 4G cellular coverage and high speed internet connection —- one can say that the civilians of Denmark are adapting new technology at a fast rate.
According to the report generated by World Bank, Denmark is the 7th best market in the world to trade across borders. Compared to the companies in other European countries, Denmark companies can import or export goods within a time frame of 4-5 days.
Any individual or firm from around the world can start their business in Denmark. To operate as an independent company or be self-employed, you have to apply for work permit. Your company should be registered with Danish Commerce and Companies Agency. Starting a Business in Denmark is as easy as starting a business in USA
Before going into details, let’s see what type of businesses can be opened in Denmark.
What are the types of businesses in Denmark
Denmark is a home for many small, medium and large companies providing excellent investment opportunities. The IT industry in Denmark is growing rapidly and is supported by the world’s techno savvy population. The process of starting a business in Denmark is quite easy, as there are only a few restrictions. You can start different types of businesses, which are as below –
- Sole Proprietorship
You can set up your company in Denmark as a Sole proprietor who has full liability of company’s obligations. If you are involved in trading or have a few employees, you should be registered with tax authorities.
- Danish Public Limited Company (A/S)
You can start a public limited company as a single shareholder with a capital of around 500000 DKK. The shares can be traded publicly or with other members of the company. The shareholders are not liable for the obligations of the company.
- Danish Limited Partnership (K/S)
You can start a limited partnership business with minimum 2 partners. However, one partner should have a limited liability for company’s obligations and the company should be registered with Danish trade register.
- Danish General Partnership (I/S)
You can start business with Danish General Partnership with minimum 2 founding members who are fully liable for company’s obligations. Moreover, the partnership must be registered in Danish trade.
Step by step procedure to start business in Denmark
Denmark is making it easier for entrepreneurs to set up their own business. The government of Denmark has streamlined the process of setting up business with minimal cost and restrictions. The country has a number of government supported schemes to assist foreigners in setting up their business. There is a misconception that setting up business from scratch can be daunting. But, it is much easier than what you think.
Step 1 – Choose the type of business
Choose the type of business you wish to start in Denmark. Consider the details of prospective company and the risk associated with it. Collect information about the clients and they type of business you want to do. Check if there are any potential liabilities of staring business in Denmark. Based on the answers to these questions, you can decide between A/S, K/S and I/S.
Step 2 – Find a suitable location
When it comes to finding a suitable location, there is plethora of options. Denmark has many office locations that are easily accessible and are available on monthly lease. These offices also provide additional benefits as your business grows.
Step 3 – Register your company
Once you have decides the type of business, you should know the criteria to register your company. To carry out work in Denmark on a temporary or permanent basis, you need a license, permit or authorization. You will get a Central Business Registration Number (CVR number), once you complete all the registration formalities.
The CVR number is the identification number of your business, which can be used for private entities and public authorities. After registering the business successfully, the details of your business are sent to Danish Custom and Tax Authorities (SKAT).
Step 4– Register with tax authorities
Danish Custom and Tax Authorities (SKAT) collect the details of your business and provide necessary tax advice. You may need to register separately for different types of taxes, depending on your business. Some of the common taxes are – Payroll tax, VAT, duties, A-tax, import/export etc.
For example – 1) If you are dealing with foreign countries, you need to register for import/export tax. 2) If you have employees, you need to register for A-tax.
Step 5 – Prepare employment contract
Prepare employment contract for existing employees by hiring a lawyer. All the employees must have industrial injury insurance, which is added to the salary as employer’s contribution. You can even transfer your employees to Denmark. However, the new business setup process is a bit different. If you are transferring Non-EU residents, the employee must have a residence and work permit.
Step 6 – Prepare structure of your business
You must set up your corporate structure in Denmark, instead of using it as profit center for international operations. This will help you overcome issues related to taxation. It is advisable to take assistance of a professional lawyer in Denmark to set up your business. This will enforce you as legitimate business with authorities. You can set up a corporate structure in three simple steps – i) creating case order ID ii) paying the fee iii) submitting duly filled application.
Step 7 – Set up bank account and payroll
Open a corporate account in a reputed bank in Denmark. You can submit a duly filled form in Danish Bank with reference from your local bank in your home country. You need to submit supporting documents along with company report. The report must include information about the ownership, articles of association and copy of memorandum. Your bank account will be activated once the bank receives all the documents in signed condition.
A financial year can be started on any date and it is appropriate to follow the financial year of parent organization. Your accountant must file tax on a quarterly and half-yearly basis depending on the size of your company and overall turnover.
What is the success rate to start a business here
Starting a new business is one of the scariest things, especially if you are not sure about its success rate. Most of start-up companies in Denmark survive in the first year of their operation. It is estimated that more than 50% of businesses scale down within 5 years. Only 30% of companies celebrate their 10th anniversary.
Fortunately, the economic condition of the country doesn’t seem to affect the success rate of any new business. The longer your business lasts, the more is its success rate. Business owners underestimate the capital needed for fund operations. At the same time, they can overestimate how quick their products reach the target audience.
What are the benefits of starting business in Denmark
Denmark is home to many multi-national companies. It is said to have one of the most efficient distribution systems in Europe. Some of the benefits of starting business in Denmark are –
- Denmark is ranked for extremely low level of corruption, and hence is considered as the best location for business activities.
- Danish labor market is highly flexible. The work force is very productive in Europe, as there are no restrictions regarding overtime.
- It is estimated that more than 96% young people are highly qualified and one can find motivated talent pool in Denmark.
- It is a perfect hub with more than 60 airlines serving across more than 160 destinations and handling nearly 380,000 tons of airfreight every year.
- According to World Bank, Denmark is one of the best places in the world to do business. You can set up business in one day and get work permit within 5 weeks.
- Nearly 42% of electricity in Denmark is generated by Danish wind power, which is controlled by Danish companies.
- Doing business in Denmark is cost effective, as there is no social contribution cost. The office rental is quite low. You can hire management staff for a reasonable salary.
- Danes are considered as the happiest people of the world, as they live high quality life. You can access a wide range of Danish services by having residence and work permit.
- Denmark also has very good success rate in Artificial Intelligence startups (Bigdata) and other upcoming technologies like Block chain
How are the labor laws in Denmark
Labor laws in Denmark are quite flexible and there is freedom of contract. The employee contract describes the salary conditions, annual leave, notice period, workplace and working hours. There is no legislation that determines the duration of employment.
Work Hours in Denmark
There is no legislative provision on normal working hours. Usually, the working hours are fixed at 37 hours per week. Overtime is calculated by collective agreement, where maximum working time is 48 hours. There is no legislation to prohibit night work. However, night work prohibit applies to those who are under 18 years of age.
Danish employees expect to receive their remuneration as weekly or fixed monthly payment. There is no legislation regarding minimum wages. These are often agreed in collective agreement. Majority of Danish employees are encouraged to participate in pension schemes where 5% of employee contribution will be matched to 10% of employer contribution.
The employee must be allowed one day of rest, if he/she works continuously for 7 days. Employees who work in public holidays entitle a bonus of 100%.
Some Important bullet points
Types of companies in Denmark:
Private limited company
Public limited company
Branch, subsidiary or representative office
Bridgewest.eu is also able to offer ready-made Danish companies and VAT registration.
Private limited company (review)
One or more members are required in it. No restrictions on concerning the founders residence status. The partners contribute to the capital with shares that are issued a nominal value. The shares are not negotiable and cannot be transferred. The ap s must hold full accounting and its members are held liable to the company debts only to the extent of their contribution.
Public limited company (review)
One or more founders are required and they may or may not be Danish. The members of the company are not liable for the company debts. The a/s company must provide a minimum Capital of 500000DKK. Its shares can be offered to the general public. The stock company has a legal status and must be registered to the danish commerce and companies agency.
Branch, subsidiary or representative office (review)
Any Foreign company is able to setup branch entities in Denmark. These can be setup as separate entities from the parent company( Danish companies having the foreign company as share holder extensions of the parent company in Denmark)
Any person of any nationality or residence can be director or share holder in a Danish company. The shareholders of a company established in Denmark can be both natural persons or legal entities. A company established in Denmark must hold a local registered office. The incorporation of an Aps require the injection of a share capital amounting to approximately 11000 euros. Services provided by bridgewest.eu
The standard corporate income tax is 25percent. Danish tax law imposes a standard VAT rate of 25 percent of the price of goods and services without any graduated rates. Taxable entities are levied 25percent for withholding tax. Share dividends bare taxed at 28 percent.
Pros of establishing a company in Denmark
Ease and safety in terms of business environment.
Regular time frame for starting a new business in Denmark- a matter of days.
Very low and attractive costs for company formation.
There are no requirement for the company management.The registration of a Danish company can be a straight forward.
Denmark is ranked first in the World Happiness Report created in 2013 and third in 2015 report. The happiness rating of Denmark is 7.526 points out of 10. The happiness report includes rankings of 157 countries that had an average population. The happiness index report is generated considering the gross domestic product per capita, social support, generosity, life expectancy and absence of corruption.
Residents of Denmark enjoy a high level of protection against social risks. The primary reason behind the happiness rate of Denmark is that people are satisfied and contended. The minimum wage is around $20 per hour with strong labor rights. The best thing about Danish culture is that they don’t judge the life of other people. Social life is great in Denmark and their political sphere seems to work in an effective way.
The welfare system of Denmark is financed by the highest taxation in the world. The citizens of Denmark have equal rights with high standards of living. Danes are considered quite helpful, regardless of their social background. They are tolerant, which makes it easier for people from foreign countries to settle well in Denmark.
If you want to do business in Denmark, you should be prepared to experience things that are quite different from your own culture. You may experience a ‘culture shock’, if you go without any preparation. Denmark is seen as an easy place to setup business, as there are only a few formalities. As said above, the legal entities can be established in a day or two. In short, one can start business in Denmark with much ease and run it for years successfully.
Can I start business in Denmark easily
Denmark, one of the happiest countries of the world is often chosen as business center. The key advantage of setting up business in Denmark is its cost-efficiency. It is much simpler and faster to establish a company in Denmark. Ideally, one can start business in a day, while the registration may take a few weeks.
Before setting up a business, it is must to consult a lawyer and accountant to get advice on which business model is suitable for you. Low taxation for corporate companies is the biggest advantage of setting up business in Denmark. It is the only country in the world where you can start business with almost no investment. However, entrepreneurs have to show that they have enough funds — before they start business. So the answer to the question “Can I start business in Denmark easily?” is again perfectly “YES!!”
I hope the information provided in this article is useful for those planning to start business in Denmark. If you have any doubts, please comment below!