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NJORD ESTABLISHING BUSINESSSIDE 01

ESTABLISHING BUSINESS IN DENMARK

NJORD LAW FIRM

NJORD Law Firm is a leading law firm with a

strong presence in the Nordic and the Baltic

Sea Area. We provide legal services within all

areas of corporate and commercial law with

an emphasis on international transactions. The

firm is placed in the top category of Danish

legal advisers by independent observers and

is acknowledged as a cutting-edge practice

within a number of practice areas. NJORD

Law Firm was granted the International Law

Office’s prestigious prize the Client Choice

Award in 2010 and 2011.

The firm’s offices in Denmark are situated in

central Copenhagen and Aarhus. The firm

also has offices in Tallinn (Estonia), Vilnius

(Lithuania), and Riga (Latvia). NJORD Law

Firm is one of the few Danish law firms

committed to the development of business in

the Nordic and the Baltic region, which is one

of the more dynamic growth areas in Europe.

An increase in international cooperation

and the pace of technical developments

result in new industries. The ever-changing

demands of the business world present

a challenge to businesses. Changes may

create opportunities, but may also increase

uncertainty about the laws and regulations

applicable to that business.

Legal advisers play a crucial part in identifying

issues and assisting their clients in making

efficient use of new opportunities. NJORD

Law Firm takes pride in developing new, more

efficient ways to deliver high quality legal

and commercial advice to its clients within

all practice areas significant to the relevant

business.

Establishing business in Denmark . . . . . . . . . . . . . . . . . . . . 5

Denmark – a Country of Opportunities . . . . . . . . . . . . . . . . . 6

Framework for Business – Corporate. . . . . . . . . . . . . . . . . . . 8

Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Property and Environment . . . . . . . . . . . . . . . . . . . . . . . 18

Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

The Business Environment – Marketing and Competition . . . . . . 27

Business Structure and Tax . . . . . . . . . . . . . . . . . . . . . . . 35

Winding up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

CONTENTS

ESTABLISHING BUSINESS IN DENMARKPAGE 3

ABOUT THIS GUIDEThis guide is a general guide aimed at

overseas companies, to highlight the legal

issues involved when establishing business in

Denmark. However, the guide will not provide

comprehensive legal advice on applicable

laws or other issues in connection with

establishing and doing business in Denmark.

Prior to any steps towards establishing a

business in Denmark, you should seek specific

professional legal advice. This guide has been

prepared by a team of Danish lawyers from

NJORD Law Firm.

HOW THIS GUIDE WORKSThe guide considers the various business

vehicles you may wish to set up in Denmark,

and aims at addressing some of the main

considerations that may be of relevance, such

as hiring of staff, renting of office premises,

and intellectual property rights. The guide

also deals with the regulatory and business

framework, how profits and tax are treated, as

well as with insolvency and litigation matters.

The web links in this guide provide further

information in English regarding the various

topics dealt with below.

We endeavour to answer a number of

frequently asked questions. Inevitably, you

may require further information with regard

to some topics, or you may have specific

concerns and questions, which cannot be

addressed in this guide. Please do not hesitate

to contact us if you require any further

assistance.

ESTABLISHING BUSINESS IN DENMARK


WHY INVEST IN DENMARK?• Denmark is a country with political stability

and a well-functioning public sector.

• Denmark is an internationally oriented

society with a flexible labour market, e.g.

short terms of notice and high education

standards.

• Denmark has a high industrial productivity

and profitability. Denmark has one of

Europe’s most efficient distribution systems.

• You will find IT and telecom infrastructure,

together with wireless communications and

use of internet and new media in Denmark

to be among the most competitive in the

world.

• Denmark has an ideal geographical location

in relation to Scandinavia, Northern Europe,

and the Baltic Sea Region.

• The workforce is competitive, with good

language skills, and personal and industrial

IT usage is sophisticated.

• The managerial skills are suited to a global

high-tech economy.

• The Danish Government has created

an excellent climate and motivation for

innovative businesses and entrepreneurs.

DENMARK – A COUNTRY OF OPPORTUNITIES


RELEVANT LINKS

THE OFFICIAL WEBSITE OF DENMARKwww.denmark.dk

INVEST IN DENMARK AGENCYwww.investindk.com

MINISTRY OF FOREIGN AFFAIRS OF DENMARKwww.um.dk

THE DANISH CHAMBER OF COMMERCEwww.danskerhverv.dk

THE CONFEDERATION OF DANISH INDUSTRY (DI)www.di.dk

DANISH EXPORT ASSOCIATIONwww.dk-export.dk

COPENHAGEN CAPACITYwww.copcap.com


Commercial objectives, the extent of

proposed activities, tax considerations,

and business structures would be

key factors behind any decision to

establish a business in Denmark.

Having decided to establish a business in

Denmark, you would need to determine

whether to:

1. Establish a business on your own

2. Acquire an existing business

3. Enter into business with others

ESTABLISHING A BUSINESS ON YOUR OWNShould you choose to set up a business

on your own, you would have the options

to establish a branch (“filial”) or to form a

separate Danish subsidiary.

BRANCH OR SUBSIDIARY? The branch of

a foreign company, although not a separate

Danish legal person, must keep its own

accounts, and its profits would be taxed in

Denmark. Profits would also be taxable in the

foreign company of which it is part, but in

most OECD countries and many others, tax

paid in Denmark is deductible.

The Danish tax authorities may audit the

branch and the foreign company in order

to assess the taxable profit of the branch.

If, however, you form a subsidiary, the tax

authorities would not be permitted to audit

the parent company.

ESTABLISHING A DANISH SUBSIDIARY A

Danish subsidiary would normally be set up as

a company limited by shares (“limited liability

company”) with one or more shareholders

(who may be individuals or legal persons).

The shareholders’ liability would be limited to

the amount invested in the company.

A limited liability company may be public or

private. A public company may apply for its

shares to be listed on the stock exchange,

or offered to the public at large to issue

or acquire shares or other securities. The

minimum issued share capital (to be paid

in cash or contributed as assets) required

for a private limited liability company

(“anpartsselskab, ApS”) would be DKK

FRAMEWORK FOR BUSINESS – CORPORATE


50,000 (EUR 6,700) and for a public limited

liability company (“aktieselskab, A/S”) DKK

500,000 (EUR 67,000).

A limited liability company is a legal person,

which means that it can own property, enter

into agreements, and employ staff.

Establishing a limited liability company,

including registration with the Danish

authorities, can be done online and in a few

days.

ARE THERE ANY RESTRICTIONS AS TO THE CHOICE OF NAME? A limited liability

company may be given any name that is

not too similar to that of an already existing

company or trademark, provided that the name

is not offensive. The name has to include ApS

or A/S, depending on which type of limited

liability company is chosen. If a branch office is

chosen, the name must include “filial” (branch

office).

HOW SHOULD THE MANAGEMENT BE ORGANISED? A public limited liability

company can choose to have either a board

and a managing director or a supervisory board

and a managing director. A private limited

liability company can choose either to have just

a managing director or to have a board and a

managing director. In either case, the board

must consist of at least three board members.

The managing director and the board would

be responsible for the management of the

business and organisation of the limited

liability company. There are no mandatory rules

regarding the frequency of board meetings. The

board would be responsible for the following:

• Issuing written instructions on how work

is to be divided within the board and

between the board and the managing

director

• Ensuring that taxes are paid on time

• Ensuring that the annual accounts are

prepared and filed with the authorities on

time

• Reporting any changes to the information

kept in the official registers

• Supervising that the managing director’s

business conduct is in accordance with

the instructions from the board

• Ensuring fraud prevention

• Taking out the relevant insurances

WHO IS AUTHORISED TO REPRESENT THE COMPANY? The joint board of directors will be

authorised to sign on behalf of the company.

The company may decide on the provisions

regulating the power to bind the company. The

managing director can often sign on behalf of

the company – possibly together with a board

member.

WHAT IS THE ROLE OF THE MANAGING DIRECTOR? The board is to appoint a

managing director. The managing director is

responsible for the day-to-day operations of

the company if not otherwise instructed by the

board.

WHEN CAN A SHAREHOLDER, DIRECTOR, OR MANAGING DIRECTOR BE PERSONALLY LIABLE? A director or managing director

would be liable for damages if, intentionally

or negligently, he/she causes damage in

performing his/her duties. The director or

managing director may also be liable for any

loss or damages suffered by a shareholder or

another person due to breach of the provisions

of the Companies Act, the legislation applicable

to annual accounts, or the memorandum and

articles of association of the company.


Any shareholder, who, intentionally or by

gross negligence, causes damage to the

company, another shareholder or person by

cooperating in breach of the Companies Act,

legislation applicable to annual accounts, or

the memorandum and articles of association

could also be held liable. If two or more

persons were liable for the same damage,

they would be jointly and severally liable.

ESTABLISHING A BRANCH OFFICE (“FILIAL”) A branch office would be a part of

a foreign company with its own independent

administration in Denmark. The foreign

company and the Danish branch share a legal

identity, and the foreign company is liable for

the activities of the branch.

The branch office shall be managed by at

least one branch manager, who would be

responsible for all business activities. The

branch manager would sign on behalf of

the branch office and thereby the foreign

company’s activities in Denmark. A branch

office shall be registered with the Danish

Business Authority (Erhvervsstyrelsen).

The branch office shall keep its own accounts.

The provisions governing bookkeeping and

accounts for Danish limited liability companies

would, with some exceptions, also apply to

foreign branches in Denmark.

MAY THE OWNER OR THE BRANCH MANAGER OF A BRANCH OFFICE BECOME PERSONALLY LIABLE? The owner of a

branch office would be personally liable

for the debts of the branch office. Persons,

including the branch manager, who are in

breach of applicable laws, may become liable

for damages.

BUYING A DANISH BUSINESSWhen acquiring an existing business in

Denmark, you could purchase either its shares

or its business assets. If the existing business

is conducted through a limited partnership

(“kommanditselskab”), or a branch office

(“filial”), you can only acquire the business

assets. This guide will, however, place its

emphasis on share purchases.

HOW ARE SHARES TRANSFERRED TO THE BUYER? The ownership of shares would be

transferred when the parties have entered

into a binding agreement on the transfer of

shares. In order to exercise ownership rights,

the buyer shall receive the original share

certificates and be entered as the registered

owner of the shares in the company books.

ARE THERE ANY RESTRICTIONS ON THE TRANSFER OF SHARES IN LIMITED LIABILITY COMPANIES? As in most other

countries, shares may be freely transferred, and

there are no restrictions on foreign ownership

of shares. The only permitted restriction on

free transfer would be pre-emption rights,

where the articles of association provide

that existing shareholders or other persons

shall be entitled to purchase shares, which

have been transferred to a new owner. This

provision would be common in companies

with few owners. Free transfer of shares may

also be limited by an agreement between

the shareholders, but such agreement would

only be binding on the parties concerned. An

acquisition, which is contrary to a contractual

restriction on the transfer of shares, would

not prevent the buyer from exercising his/her

rights in the company.

MAY AN INSIDER FREELY SELL AND PURCHASE SHARES IN A LIMITED LIABILITY COMPANY? Denmark has


extensive legislation, based on EU law,

regarding the right for an insider to sell and

purchase shares. Generally, the regulations

would apply to securities normally traded

in an organised market place. The definition

of an insider is wide and would cover, for

example, directors, the managing director,

executive employees, and close advisers to

the company. An insider who is in breach of

the regulations may face a fine, imprisonment,

or the forfeiture of any financial gains.

ESTABLISHING A BUSINESS WITH OTHERSRather than establishing a fully owned

subsidiary, you may want to establish business

in cooperation with a local partner. This can be

done directly by establishing a joint venture,

a limited liability company, a partnership,

or a limited partnership; or indirectly by

the appointment of a commercial agent or

a distributor or by setting up a network of

franchisees.

JOINT VENTURES Many companies, which

lack sufficient capital, skills, or market

knowledge to break into a new market,

would prefer to establish a joint venture or

another strategic alliance. Joint ventures

would have no legal status of their own

but could be organised as limited liability

companies or partnerships. Your choice

of type of organisation would depend on

commercial as well as tax considerations. A

joint venture must address all major issues

by way of a shareholders’ or partnership

agreement, including initial and future funding,

management structure, intellectual property

rights, distribution of profits, and termination.

In the event that the joint venture is established

as a limited liability company, it would be

subject to the applicable company legislation.

CONDUCTING BUSINESS AS A PARTNERSHIP If two or more persons

decide to run a business together, they have

established a partnership. There are two types

of partnerships: partnerships and limited

partnerships. In a limited partnership, the

liability of at least one of the partners would

be limited to the amount invested in the

partnership by the said partner.

The partners may be foreign citizens and are

not required to be resident in Denmark. There

is no obligation to appoint a managing director

or an accountant. If none of the partners in a

trading or limited partnership are residents

in Denmark, a person authorised to accept

service in Denmark must be appointed.

Generally, the partnership agreement would

regulate the shares in income of profits and

losses. Where a partnership agreement is silent

in this respect, profits and losses are divided

equally among the partners. The partners are

taxed on the profits of the partnership.

APPOINTMENT OF A COMMERCIAL AGENT If you only have limited knowledge of the

Danish market, the first step in establishing a

business would normally be the appointment

of an intermediary, be it either a commercial

agent or a distributor.

While the parties to a distribution agreement

enjoy the freedom of contract, the Danish

Commercial Agents Act governs an agency

relationship.

The Danish Commercial Agents Act is partly

mandatory, including provisions protecting the

commercial agent with regard to the period of

notice prior to termination and the possible

payment of indemnity upon termination of the

relationship.

The potential rights of the commercial agent

to claim an indemnity upon termination (if


and to the extent that certain qualifying

conditions are met) may be considered a

disadvantage for a company that wants

to begin exporting to Denmark. However,

there are certain advantages from operating

through a commercial agent: in particular, the

establishment of close and direct customer

contact and the ability to control resale prices

without having to consider competition law.

There is a grey zone between self-employed

commercial agents and employed sales

people. In case of ordinary employment, the

principal will have to pay national insurance

contributions, withhold and pay tax on the

salary paid, and make holiday payments. To

avoid this, the principal shall make sure that

the commercial agent is truly independent

and self-employed.

APPOINTMENT OF A DISTRIBUTOR As an

option, rather than commercial agents, the

company may want to appoint a distributor

who buys the products in his/her own name

and at his/her own expense for resale to the

market. When appointing a distributor, the

parties enjoy the freedom of contract without

having to consider protective mandatory

legislation.

When appointing a distributor, competition

law shall be applicable, in particular the EU

Commission Regulation 330/2010 on vertical

restraints.

FRANCHISING OR SELECTIVE DIS-TRIBUTION As an option, rather than

appointing an intermediary, be it a commercial

agent or a distributor, you may consider

establishing a franchise system or a selective

distribution system.

The establishment of a network of franchisees

or selected distributors implies a more direct

establishment on the market at the retail level.

Such an establishment should be limited to

business concepts that are well-structured

and highly developed for the local market

conditions.

In relation to these distribution systems,

Danish legislation does not include any

statutory provisions. Only general statutory

provisions and competition law aspects need

to be considered.

A franchise is a right granted by a franchiser

to use certain intellectual property rights in

exchange for direct or indirect fees, for the

purpose of marketing particular goods or

services.

WEB

THE DANISH BUSINESS AUTHORITY

www.erhvervsstyrelsen.dk

THE DANISH FINANCIAL SUPERVISORY AUTHORITY

www.finanstilsynet.dk


LARS LOKDAMAttorney, Managing Partner

Tel.: +45 77 40 11 [email protected]

RENÉ LYKKE WETHELUNDAttorney, Partner


LARS MERRILD HARESKOVAttorney, Partner


JAN ØSTERGAARDAttorney, Partner


CONTACTFRAMEWORK FOR BUSINESS – CORPORATE

When hiring employees in Denmark,

the terms of an employment contract

in Denmark shall comply with Danish

legislation, collective bargaining

agreements, and individually ne-

gotiated agreements such as

personnel policies.

Some mandatory provisions are made to

protect employees and to regulate e.g.

working hours, holidays, dismissals, unfair

dismissals, and dispute resolution.

In comparison with other countries, Denmark

is considered to have a flexible labour market

where redundancies are easily carried out,

and the Danish state will support financially

and assist the people made redundant.

You may consider the appointment of

an agent, distributor, or franchisee as an

alternative to establishing business on your

own and employing your own staff.

IN GENERALHOW ARE EXECUTIVE EMPLOYEES AFFECTED? The mandatory rules will

normally not apply to executives, i.e.

managing directors. Employees holding

these positions would usually represent the

company in employment matters and are

therefore treated separately. The contracts

of the executives may be freely negotiated,

and many of the statutory provisions and

collective agreements mentioned below

would not apply, unless the parties have

agreed otherwise when negotiating the

employment terms.

MAY FOREIGNERS BE EMPLOYED TO DO WORK IN DENMARK? Any citizen of an EU

member state may work in Denmark without

a work permit. An employee from outside the

EU shall have a work and residence permit in

order to work in Denmark.

THE PROTECTION OF EMPLOYEESIt is mandatory to issue an employment

contract outlining all essential terms and

conditions.

EMPLOYMENT


The provisions of the Danish Salaried

Employees Act are mandatory in respect

of all salaried employees and contain rules

regarding the terms and termination of

employment. An employment contract would

normally continue for an indefinite period

(indefinite term contract) until terminated.

The statutory minimum notice period for

the employer or the employee (as the case

may be) is one month. The employee may,

however, be entitled to a longer period of

notice when the employment is terminated

by the employer, depending on the length

of service. The maximum notice period is six

months. The employee would be entitled to

wages and other employment benefits during

the notice period.

An employee may only be dismissed on

reasonable grounds. If that is not the case,

the employer will risk being met with a legal

claim. Notice of dismissal shall be given in

writing and shall in general contain certain

information regarding the reason for dismissal.

If the dismissal relates to the conduct of the

employee, the notice shall be given within a

certain time limit.

Summary dismissal (immediate termination of

employment) may take place only in the event

that the conduct of the employee constitutes

gross misconduct.

THE WORKING ENVIRONMENTIt is in general recognised in Denmark that a

healthy work environment is best achieved

by the cooperation between employers and

employees. Employers are under a duty to

create a safe working environment, ensuring

that the employees are protected from injuries

or health damages and that the work place

complies with health and safety regulations.

EQUAL OPPORTUNITIESEmployers shall comply with anti-

discrimination legislation, based on EU law,

which makes it unlawful for an employer to

discriminate on the grounds of sex, ethnic

origin, disability, age, or sexual orientation

in connection with recruitment, promotion,

salary, and dismissal. Employers may be liable

to pay compensation if they are in breach of

these rules.

COLLECTIVE AGREEMENTSTrade unions play an important role in the

Danish labour market. A collective agreement

can be entered into by a trade union – on

behalf of the employees – and an employer

or employers’ association. Through collective

agreements, it is possible to dispense with the

rules in Danish legislation.

Collective agreements usually regulate the

contents of the employment contracts for

blue-collar workers.

Trade unions shall be consulted regarding

all major issues and changes, including

expansion, reorganisation, closing of or

cutbacks in operations, transfer of a business,

recruitment policy, and working hours.

If the employer fails to consult the trade union,

the trade union is entitled to demand that

such consultations take place. Trade unions

will have no veto, but could substantially delay

important business decisions.

ARE THE EMPLOYEES ENTITLED TO BOARD REPRESENTATION?The employees have the right to appoint at

least two representatives for the board of

directors if the company has 35 employees

or more and this has been the case for the

last three consecutive years. The position of


the employee directors of the board would

essentially be the same as that of other

directors and they would hold the same

responsibilities.

HOLIDAYSMinimum holiday entitlements and holiday

pay are regulated by the Danish Holiday Act.

The minimum holiday entitlement is five weeks

per year, but often the employee is entitled to

an additional five days’ paid holiday.

The employee earns 2.08 days’ paid holiday

for each month he/she is employed.

MATERNITY AND PATERNITY LEAVEEmployees have a statutory right to take

maternity and paternity leave. The maternal

leave starts in general 4 weeks before birth

and ends 14 weeks after birth.

A father is entitled to 2 weeks of leave. Apart

from these minimal rules, additional grants are

offered in accordance with law and collective

bargaining agreements.

Whether or not the employee is entitled to

half or full pay during the leave of absence

depends on whether or not the employee

is a salaried employee, or employed under

collective bargaining agreements, or on

individually agreed conditions.

Furthermore, the mother and father are

entitled to 32 weeks of parental leave.

PENSIONSEmployees will receive retirement pensions

(state pension and state supplementary

pension) from the Danish authority

“Udbetaling Danmark”. However, it is

common practice for the employers to pay a

supplementary pension for their employees.

In some cases, this is regulated in a collective

agreement.

Regarding expat tax, see “Special tax regime

for expatriates”, page 38.

WEB

THE DANISH IMMIGRATION SERVICEwww.nyidanmark.dk

CONFEDERATION OF DANISH INDUSTRYwww.di.dk


MIRIAM MICHAELSENAttorney


LARS LOKDAMAttorney, Managing Partner


CONTACTEMPLOYMENT

Land and property can be either

leased or owned according to Danish

law. The choice between buying and

leasing property should be made

after careful considerations and after

obtaining legal advice regarding the

specific business in hand.

LEASE OF PREMISESThe statute applicable to business leases is

the Danish Business Lease Act, and it is in

general made to protect the tenant. However,

the parties are to a large extent free to agree

on the terms of the lease. A lease agreement

may be entered into for either a specified or

an unspecified term. The majority of business

leases in Denmark run for an indefinite

period of time. Furthermore, the landlord

is only entitled to terminate the lease if the

termination is based on one of the specific

reasons listed in the Business Lease Act.

BUYING AND SELLING REAL ESTATEPlease find below a brief description of the

typical process involved when buying and

selling a real estate situated in Denmark,

including the costs and tax issues involved

and the most common types of precautionary

measures normally taken in connection

therewith.

THE TRANSACTION INVESTIGATIONS Usually, a transaction

commences by the purchaser conducting

a due diligence on all relevant information

regarding the real estate in question. The key

types of legal information are information from

the Danish land registry, lease agreements

and rent levels, searches conducted by local

authorities, and information on the insurance

policies taken out on the real estate.

The seller normally prepares a “sales package”,

containing the usual documents required by

the purchaser. Depending on the real estate

in question, an environmental report and a

building survey may be essential in order for

the purchaser to establish whether there are

any specific problems which should be taken

into consideration when drafting the sales and

purchase agreement or which could otherwise

affect the decision to go through with the

transaction.

PROPERTY AND ENVIRONMENT


COMPLETION OF THE REAL ESTATE TRANSACTION When the parties have

agreed on a transaction of the real estate, the

terms are laid down in a sales and purchase

agreement and a digital deed of conveyance

is prepared, usually by the purchaser’s legal

counsel. The digital deed of conveyance will

be in Danish and make reference to certain

of the main terms of the sales and purchase

agreement, including, among others, the date

of completion and the purchase price.

In order to secure the title to the real estate

against creditors and bona fide contracting

parties, the deed of conveyance is required

to be registered with the Danish land registry.

When the deed of conveyance has been

digitally signed by all parties, the deed of

conveyance will therefore be submitted to the

land registry for registration, accompanied by

the registration fee. This is usually handled by

the purchaser’s legal counsel.

In addition to the above documentation, a

completion statement is prepared. This is

a statement of all expenses to be refunded

between the parties in connection with the

sale of the real estate. Real estate tax is for

example usually paid in January, covering

the first six months of a calendar year. If the

date of completion is 1 March, the purchaser

will need to refund the seller an amount

corresponding to the period 1 March to 30

June. Furthermore, the completion statement

will handle any deposit and lease income paid

by tenants, etc. The completion statement

is usually drafted by the purchaser’s legal

counsel based on information received from

among others the Seller.

Depending on the agreement between the

parties, the purchase price of the real estate will

normally be deposited on an escrow account

and will only be released from this account,

with possible reductions in accordance

with the completion statement, when the

purchaser has obtained unconditional title to

the real estate according to the land registry.

The release of the purchase price will usually

take place between one and three months

after the actual entering into possession of

the real estate by the purchaser.

COSTS AND TAXCAPITAL GAIN TAX Any gain from the sale

of land and buildings in Denmark is taxable

as income for the seller (for companies

at a rate of 23.5% (2015 level)), subject to

certain deductions. Sale of tax depreciable

buildings will lead to taxation of recaptured

depreciations.

REGISTRATION FEES The registration fee for

registration of the deed of conveyance with

the land registry is a base fee of DKK 1,660

plus 0.6% of the highest value of the purchase

price or the public value of the real estate.

In some geographical parts of Denmark

(Sealand) this stamp duty is usually divided

equally between the parties, while it in other

parts of Denmark (Jutland) is borne by each

of the parties by half. Basically, this is subject

to negotiations between the parties.

Depending on the corporate structure of

the seller of the real estate, the possibility

of carrying out the transaction as a sale of

the corporate body owning the real estate -

Special Purpose Vehicle - instead of an asset

sale should be considered. No registration fee

is payable if the object of the transaction is a

limited company already being the owner of

the real estate. Such structure of a transaction

is therefore often considered in order to

minimise the registration fee and capital gain

tax. In these transactions, security in the real

estate itself may, however, not be possible due

to Danish financial assistance law.


VAT Sale and purchase of real estate is as a main

rule not subject to Danish VAT. However, some

exemptions are applicable to commercial

transfer of real estate.

Commercial transfers of new buildings are

subject to VAT in Denmark. The transactions

subject to the new rules include:

• transfer of new buildings with or

without land;

• transfer of building sites, irrespective of

whether they are developed or not; and

• separate transfers of built-up sites.

It is possible to register a building for VAT

purposes in order to obtain VAT deduction

on construction and repair of buildings.

Building for private housing can, however

not be registered for VAT. If the building is

registered for VAT purposes, the buyer will

need to assume the obligation to adjust the

VAT that has already been deducted. If the

future use of the real estate is subject to VAT,

the obligation to adjust is usually assumed

by the purchaser. A transaction of a real

estate will only trigger the VAT adjustment

obligation if a real estate registered for VAT

prior to the transaction will not be used for a

purpose liable to VAT after the transaction.

Furthermore, an enforcement notice may be

held in force in respect of subsequent owners

of a polluted property subject to the following

conditions:

if the property is a company in

operation, i.e. it has not closed down,

if prior to the takeover of the company,

notice had been given that an

enforcement notice would be served

- or an enforcement notice had been

served and the enforcement notice

had not been complied with,

if the seller had not complied with

enforcement not ices issued,

irrespective of an injunction or a

restraining order,

if at the time of the takeover of the

company, the buyer knew or should

have known that notice had been

given of the issue of an enforcement

notice or that an enforcement notice

had been issued, and

if the buyer has taken over the company

from someone who was or might

become obliged to comply with an

enforcement notice.


WEB

THE DANISH ENVIRONMENTAL PROTECTION AGENCYwww.mst.dk

THE DANISH GEODATA AGENCYwww.gst.dk

ANETTE KUSKAttorney, Partner


HANS ERIK STEFFENSENAttorney, Partner


ERIK LARSSON

Attorney, PartnerTel.: + 45 77 40 11 48

[email protected]

CONTACTPROPERTY AND ENVIRONMENT

The system for the protection of

intellectual property rights is well-

developed in Denmark. Business

names, trademarks, inventions, and

designs can be protected against

competitors by registration. The

intellectual property rights mentioned

above may often be licensed, but

there are no specific laws governing

licensing. However, Denmark is a

signatory to most international

conventions regarding intellectual

property rights.

WHAT HAPPENS IF INTELLECTUAL PROPERTY RIGHTS ARE INFRINGED?Sanctions for the infringement of intellectual

property rights would vary between different

types of intellectual property. In most cases,

infringements would give rise to both criminal

and civil liability. The means of preventing

infringements in Denmark were improved a

few years ago by the introduction of an act

which confers upon the holder of intellectual

property rights the power to carry out civil

law searches of premises (infringement

investigation), including searches for

counterfeit goods, in order to secure evidence.

If there are reasonable grounds for suspecting

that someone has committed an infringement,

the court may order a search for objects or

documents deemed to be of importance to

the proceedings. This enforcement tool is

valuable and unique to the rightful holder

when enforcing his/her rights in Denmark.

PATENTS A patent would protect technical

inventions and provide its owner with the

exclusive right to exploit the invention for

a certain time. Patents would be protected

against competitors by registration.

The right to a patent would belong to the

inventor or his/her successor(s) in title. The

Danish Patent and Trademark Office may

only grant patents upon application and

registration. An application shall contain a

full description of the invention, including

any drawings, a claim of the invention that the

applicant wants to protect, and an abstract,

etc. The Danish Patent and Trademark Office

would conduct an initial formal examination of

the application. The applicant would receive

INTELLECTUAL PROPERTY


a preliminary finding from the Danish Patent

and Trademark Office, stating whether the

invention may be patentable.

A patent may only be granted in respect of a

new invention. The requirements in Denmark

are the same as for European patents, i.e. they

are based on the principle of absolute novelty.

In general, the patent shall be granted for any

invention that could be applied in industrial

use, is new, and would involve an inventive

step. The maximum duration of a patent

would be 20 years from the application date.

TRADEMARKS Trademarks would be

protected against competitors by registration

or use.

Exclusive protection of trademarks may be

obtained either by registration with the Danish

Patent and Trademark Office or by proprietary

use. It normally takes up to half a year to

register a trademark. The requirements for

making an application for the registration of a

trademark would be as follows: a combination

of words, letters or numerals, drawings,

symbols, etc, a declaration of the goods or

services, and a list of the classes for which

protection is requested.

The Danish Patent and Trademark Office

would examine whether the application

complies with formal requirements, such

as classification, the distinctiveness of the

trademark, and any potential conflict with

prior trademarks, names, trade names, etc.

Third parties could object to the application

within two months from the day when the

application was published. The duration of

the protection would be indefinite but subject

to renewal every 10 years. A trademark

registration may be cancelled if the trademark

has not been used for the last five years and

the registrant is unable to show any valid

reason for not having used the trademark.

COPYRIGHT The types of works that

copyright would protect are literary works,

e.g. novels, newspapers, and computer

programs, and artistic works, e.g. paintings,

drawings, photographs, sculptures, and works

of architecture as well as industrial design,

etc. Copyright is an unregistered right which

is established once the requirements of

copyright are fulfilled.

The protection of copyright would not

depend upon formal procedures. The work

would be protected by copyright as soon as

it is created and is sufficiently original. The

author’s work would be protected when it is

created. The author may assign the financial

rights to his/her work but not the moral

rights, which would always remain with the

author. Copyright protection would normally

last throughout the author’s lifetime plus 70

years. In respect of neighbouring rights, such

as rights of performers, producers of sound

recordings, and broadcasting organisations,

the protection would last for 50 years from

the day of creation.

DESIGNS Protection could be available for a

product resulting from its aesthetic aspects

or its ornamentation. A design refers to

the appearance of the whole or a part of a

product resulting from the features of the

lines, contours, colours, shape, texture, and/

or materials of the product itself and/or its

ornamentation. The registration of designs

would normally serve as protection against

competitors’ abuse.

Designs meeting certain requirements may

also benefit from protection even without

prior registration (unregistered Community

designs). A design would be protected by

law to the extent that it is new and has an

individual character.


An application for registration with the Danish

Patent and Trademark Office should contain,

inter alia, personal details about the applicant,

an indication of the products in which the

design is intended to be incorporated or

to which it is intended to be applied, and

illustrations of the design. Applicants would

be permitted to combine multiple variations

of the same design in a single application.

The Patent and Trademark Office would

assess whether the application complies

with formal requirements. Apart from that,

the Danish Patent and Trademark Office

would only examine whether the design for

which protection is applied for falls within the

definition of design and that it is not contrary

to public policy or accepted principles of

morality. If the application is accepted, it

would be open to objection for two months.

Registered designs would be protected for

five years and renewable for another two five-

year periods. Denmark is a signatory to the

Paris Convention and the Locarno Agreement.

CONFIDENTIAL INFORMATION AND TRADE SECRETS Confidential information

and trade secrets are governed by the

protection of the Danish Marketing Practices

Act, which prohibits abuse and disclosure

of trade secrets and associated activities,

e.g. corporate espionage and unauthorised

commercial use. Corporate espionage

would be punishable by imprisonment,

but unauthorised commercial use would

only give rise to civil liability in the form of

damages. However, the law does not reduce

the necessity of confidentiality agreements

between business parties.

WEB

THE DANISH PATENT AND TRADEMARK OFFICEwww.dkpto.dk


JEPPE BROGAARD CLAUSENAttorney, Partner


HANNE WEYWARDTAttorney, Partner


PETER GUSTAV OLSONAttorney, Partner


CONTACTINTELLECTUAL PROPERTY

When doing business in Denmark,

you would be subject to general

business regulations, such as the

Sale of Goods Act, the Contracts

Act, the Competition Act, and the

Data Protection Act. This chapter

summarises the general principles of

these statutes.

PRINCIPLES OF CONTRACT LAWDanish law would not impose any formal

requirements for the formation of contracts.

Almost any contract could be oral. The courts

would interpret contracts subjectively and

see through the strict wording in order to

determine the intention of the contracting

parties at the time of entering into the

agreement.

The general principles of contract law are set

out in the Contracts Act, including provisions

governing the formation of contracts, powers

of attorney, and the invalidity of contracts.

HOW IS A CONTRACT FORMED? There are

no formal requirements for the formation of

a contract. Offers, acceptance, and contracts

may be made orally in most cases, but a

written contract would be recommendable.

Unless otherwise stated or agreed, an offer in

writing would be binding during a reasonable

length of time. Terms of acceptance, which

differ from the offer, or late acceptance, would

generally be treated as new offers, which may

be accepted or rejected.

WHEN IS A CONTRACT VOID? A contract

may be void by reason of duress, fraud, or

unreasonableness. A contract may also be

held unenforceable if its enforcement would

be deemed unfair or unreasonable.

HOW IS A CONTRACT INTERPRETED IN DENMARK? When interpreting contracts,

Danish courts would take a subjective

approach seeing through the strict wording

of the contract in order to determine the

intention of the parties. It is a fundamental

principle of Danish contract law that the

intentions and beliefs of the parties determine

the contents of the contract. If an agreement

does not expressly regulate a certain matter,

statutory provisions may be included in the

contract in order to fill the gap.

THE BUSINESS ENVIRONMENT – MARKETING AND COMPETITION


WHAT HAPPENS IF A CONTRACT IS INCOMPATIBLE WITH STATUTES? Contract

provisions, which are incompatible with

mandatory statutory provisions, would be

void. The whole agreement may be void if the

relevant provisions constitute the essence of

the agreement.

SALE OF GOODS AND SUPPLY OF SERVICESCommercial parties are free to determine the

terms and conditions of sale of goods and

supply of services in Denmark. If an agreement

for the sale of goods does not expressly

regulate a specific issue, the provisions of

the Sale of Goods Act would be applicable.

There are no specific provisions regarding the

supply of services, except to consumers, and

it would therefore be important to ensure that

an agreement covers all the key issues.

In case of sale of goods, the parties are free

to determine the terms and conditions of the

agreement. Where an agreement does not

govern a particular issue, the following general

principles would apply:

● The seller shall be under an obligation

to deliver goods in accordance with

the agreement as to the type, quantity,

quality, and other properties of the

product. The goods shall meet the

normal standard, which the buyer would

reasonably regard as satisfactory, and

shall be delivered on time.

● The buyer shall pay for the goods upon

delivery. If the price is not specified

in the agreement, the buyer shall pay

what would be reasonable, taking into

account the nature and condition of the

goods, the prevailing market price upon

conclusion of the agreement, and other

relevant circumstances.

● If a delivery date has not been specified,

the goods shall be delivered within a

reasonable period after the purchase. The

risk of loss of the goods would pass from

the seller to the buyer when the buyer

has collected the goods. If someone

other than the seller would transport the

goods to the buyer, the risk shall pass

when the goods are handed over to the

carrier.

● If the seller does not deliver the goods

on time, the buyer could demand

performance in accordance with the

agreement. If the delay would constitute

a material breach of the agreement, which

the seller anticipated or ought to have

foreseen, the buyer would be entitled to

terminate the agreement. The buyer may

also be entitled to damages. Unless the

seller has been negligent, the damages

would be limited to direct damages.

● If the seller delivers defective goods,

the buyer could demand remedy at the

expense of the seller. The seller has a

right to remedy the defective goods

in order to avoid sanctions other than

damages. If the seller fails to remedy

the defective goods, the buyer would be

entitled to a reduction of the purchase

price in proportion to the defect. The

buyer could cancel the delivery if the

defect is material to him and the seller

ought to have foreseen this. The seller

may also be liable for damages. Unless

the seller has been negligent, damages

would be limited to direct damages.

In case of supply of services, the agreement

would determine the rights and obligations of

the parties. If there is no agreement, or if the

agreement does not regulate a specific matter,

the provisions of the Sale of Goods Act would

be implied in order to determine the rights and

obligations of the parties.


DEALING WITH CONSUMERSSeveral statutes shall be considered when

dealing with consumers. All those statutes

are drafted in order to protect the consumer

to a reasonable extent and are therefore

consumer-friendly.

The EU directive on distance contracts was

recently implemented in Denmark. A distance

contract would mean any contract concerning

goods or services concluded by means of

distance communication or during a visit by

the seller, e.g. to the home of the consumer.

The seller, shall give the consumer the

following information: the name and address

of the seller; the main characteristics of the

product or the service; the price including

all taxes; the cost of delivery; the means of

payment and delivery; and the right of the

consumer to withdraw from the agreement.

The information shall be provided prior to the

entering into of the agreement and also at

the time when the seller confirms the order of

the consumer. The consumer would have the

right to withdraw from a purchase agreement

for goods within two weeks from receipt

of the goods and may cancel a purchase

agreement for services within two weeks from

the conclusion of the agreement. Where the

right of withdrawal has been exercised, the

seller shall reimburse any payment made by

the consumer.

WEB

THE DANISH COMPETITION AND CONSUMER AUTHORITYwww.kfst.dk


MARKETINGMarketing shall be fair and proper. The

business shall be obliged to document that

its advertisements are not misleading or unfair

in any respect.

The Danish Marketing Practices Act is

generally applicable to businesses and

is supplemented by special regulations

regarding the marketing of specific products,

e.g. drugs, tobacco, and alcohol. The Act

prohibits all unfair or improper marketing.

Unfair marketing shall include marketing

which is unethical, e.g. intrusive, aggressive,

or which exploits fear. Misleading information

regarding the price or the characteristics of

the product shall also be prohibited. The

business may be fined if it is in breach of the

provisions of the Marketing Practices Act.

The Danish Marketing Practices Act is

somewhat more restrictive than EU law and

is therefore currently being reassessed.

PRODUCT LIABILITYThe Danish Products Liability Act provides

that a manufacturer, importer or supplier

would be liable for damages suffered by a

consumer caused by defects in a product.

The provisions of the law implement the EU

directive and are directory.

A person shall be entitled to damages if

he/she suffers personal injuries caused

by a defective product. If the product is

intended and used for consumer purposes,

compensation shall also be paid where the

product causes damage to property. There

shall be no compensation available for

damages caused to the product itself. The

manufacturer, importer or supplier shall not

be liable to pay damages if either:

1. the defect did not exist in the product

when the product was sold,

2. the state of scientific and technical

knowledge when the product was sold

was not such that the defect could have

been discovered, or

3. the defect is attributable to compliance

with any mandatory requirements

imposed by a public authority.

COMPETITIONThe Danish Competition Act contains two

prohibitions; against anti-competitive

agreements, and against arrangements

and conduct which amount to an abuse of

a dominant position. There may also be an

obligation to notify acquisitions and mergers

to the Danish Competition and Consumer

Authority. The Act is based on the equivalent

provisions of EU competition law. Case

law from the Commission and the Court of

Justice of the European Union shall be taken

into account when applying the Danish

Competition Act.

Anti-competitive agreements or arrange-

ments may be exempted from the application

of the Act if the undertaking can show

that the benefits of the agreement or

arrangement outweigh the negative effects

from competition.

Certain types of agreements benefit from

block exemptions. A business may, at its own

risk, assess whether an agreement falls within

the terms of a block exemption.

In the event of an infringement, an undertaking

may be ordered to terminate the infringement

and be liable to pay a fine. Very serious

offences may lead to imprisonment.


In addition, agreements or clauses in

agreements, which infringe the prohibition

against anti-competitive agreements or

arrangements, are void. In rare cases, a

business may be found liable to pay damages

to third parties.

The Competition Act also contains rules

governing concentrations of undertakings,

which would include mergers and the

acquisition of control by the purchase of

assets or shares in another business. A joint

venture, which performs all the functions of an

autonomous economic entity on a long-term

basis, could also constitute a concentration

for the purposes of the Competition Act.

A concentration shall be notified to the

Competition and Consumer Authority where

a) the combined aggregate annual turnover in

Denmark of the undertakings concerned is

at least DKK 900 million, and at least two

of the undertakings concerned each has a

turnover in Denmark of DKK 100 million or

more, or

b) at least one of the undertakings concerned

has a combined aggregate annual turnover

in Denmark of DKK 3.8 billion or more,

and the combined aggregate worldwide

annual turnover of at least one of the other

undertakings concerned is more than DKK

3.8 billion.

The undertakings concerned are generally

the merging undertakings or the business

acquiring control and the business of which

control is being acquired. A concentration

shall be notified by the merging parties or the

party or parties acquiring control.

The Competition and Consumer Authority

may prevent a concentration if it finds that

the merger is likely to have long-term, adverse

effects on competition, or suggest remedies,

which eliminate such adverse effects.

WEB

THE DANISH COMPETITION AND CONSUMER AUTHORITYwww.kfst.dk


DATA PROTECTIONDanish law on data protection is based on

EU law and therefore equivalent to the laws

in other EU member states. The provisions

are mandatory and intended to protect the

person to whom the data relates.

WHAT IS DATA? Data shall be defined as any

kind of information which directly or indirectly

relates to a living individual and which is being

processed and includes an expression of fact

or opinion about the individual. Sensitive

personal data may include information

about the individual’s racial or ethnic origin,

political opinions, health, sex life, and criminal

convictions. Stricter rules shall apply to the

processing of sensitive personal data.

WHAT IS PROCESSING OF DATA? Processing is defined as any operation carried

out on personal data.

HOW SHOULD DATA BE DEALT WITH? Anyone processing data shall comply with

certain principles. The data shall be lawfully

processed, treated in accordance with good

practice, and processed for a limited purpose.

Furthermore, it shall be adequate and relevant,

correct, not excessive, and not kept for any

longer than necessary.

HOW CAN DATA BE PROCESSED LAW-FULLY? The main rule is that data can only be

processed lawfully if the individual has given

his or her consent.

WHAT HAPPENS IF DATA ARE NOT PROCESSED LAWFULLY? If data are

processed unlawfully, the persons responsible

may be fined or imprisoned. They may also be

liable to pay damages to the individual.

WEB

THE DANISH DATA PROTECTION AGENCYwww.datatilsynet.dk


THOMAS RYHLAttorney, Partner


PETER GUSTAV OLSONAttorney, Partner


CONTACTBUSINESS ENVIRONMENT

For tax reasons, when establishing

a business or investing in Denmark,

it is important that the structure

of the business or the acquisition is

compliant with Danish law and does

not imply adverse tax consequences.

Tax incentives for foreign experts are

among the favourable parts of the

Danish tax regime.

CORPORATE TAXATIONUNLIMITED TAX LIABILITY A corporation

is resident in Denmark for tax purposes if it

is incorporated in Denmark and registered

in the Danish Business Authority as having

a Danish place of business. Furthermore,

foreign companies having their actual place of

management in Denmark are also tax resident

in Denmark. The actual place of management

is typically the place where the management

decisions concerning the company’s day-to-

day operations are made.

LIMITED TAX LIABILITY Foreign companies

can be subject to limited tax liability

either through a branch or a permanent

establishment or through withholding taxes

on certain types of Danish source income.

Danish branches and permanent

establishments of foreign companies are

taxed under the same rules and rates as

Danish resident companies:

● Company tax rate Taxable income –

including capital gains – is normally subject

to a corporate tax of 23.5% (2015) lowered

to 22% in 2016. The tax rate is identical for

public limited companies, private limited

companies, and permanent establishments.

● Danish income subject to withholding tax Certain types of payments to non-

residents are subject to Danish withholding

tax, which may be reduced according to a

double taxation treaty.

● Dividends Dividends paid to a parent

company in another EU member state or

a state with which Denmark has a double

tax treaty are exempt from withholding

tax provided that the shares qualify as

subsidiary shares. The same applies to

dividends paid on group shares (that are

not also subsidiary shares, i.e. holdings

below 10%) provided that the recipient

company is resident within the EU/EEA.

BUSINESS STRUCTURE AND TAX



Dividends paid on portfolio shares to a

foreign shareholder are normally levied a

withholding of 27%.

● Interest Interest is generally not subject

to withholding tax unless paid to a foreign

group member company that is tax resident

outside the EU and outside any of the

states with which Denmark has concluded

a tax treaty. In this situation, interest

withholding tax is levied at 22%. Certain

other exemptions apply, mainly relating to

CFC taxation.

● Royalties Royalties are subject to a 22%

withholding tax, while arts are subject to

a VAT exemption. In most cases, the payer

may reduce its withholding in accordance

with the tax treaty applicable to the

payee. Also, the EU Interest and Royalty

Directive may provide an exemption

from withholding tax if the payee is an

immediate parent, sister or subsidiary

company resident in the EU.

TAX BASE Taxable income is generally

calculated as the turnover of the business

activities minus depreciations, interest, and

other business expenses.

CAPITAL GAINS Gains and losses realised

on the sale of tangible and intangible assets,

including goodwill, are generally included in

taxable income. However, gains realised on

the sale of shares are tax-exempt if the shares

qualify as either “subsidiary shares” or “group

shares”.

“Subsidiary shares” are shares held by a

corporate shareholder that holds a minimum

of 10% of the share capital in a subsidiary

located in the EU, the EEA, or a country with

which Denmark has a double taxation treaty.

“Group shares” are defined as shares in

companies with which the shareholder is

jointly taxed or might be jointly taxed.

If the shares do not constitute group shares,

subsidiary shares or treasury shares, they

constitute portfolio shares. Gains on portfolio

shares are fully taxable regardless of the

holding period. Losses on the sale of portfolio

shares are generally tax deductible.

TAX LOSSES Tax losses may be carried

forward indefinitely, but future legislation will

limit this access.

Certain restrictions on the right to carry tax

losses forward apply when more than 50% of

the share capital or 50% of the voting rights

at the end of the financial year are owned by

shareholders different from those that held

control at the beginning of the income year

in which the tax loss was incurred.

Similarly, under certain circumstances, tax

losses are cancelled if a Danish company

receives a debt forgiveness or is the subject

of a comparable transaction. However, there

are numerous exceptions (e.g. intercompany

transactions).

CFC TAXATION According to the Danish

CFC (taxation of controlled financial

companies) rules, a Danish company has to

include in its taxable income the total income

of a subsidiary, foreign or Danish, if such

subsidiary qualifies as a CFC.

The consequence of CFC taxation is that the

Danish holding company is taxable of a pro

rata share of the Danish/foreign company’s

income, irrespective of the rules in a double

taxation treaty, if any.

MANDATORY DANISH JOINT TAXATION A mandatory joint taxation regime obliges

all Danish resident companies and Danish

branches that are members of the same

domestic or international group to file a joint

group tax return. The definition of a group

generally corresponds to the definition of

a group for accounting purposes. The tax

consolidated income is equal to the sum of

the taxable income of each individual Danish

company or branch which is a member of the

consolidated group.

VOLUNTARY INTERNATIONAL JOINT TAXATION A non-Danish subsidiary may

be included as a member of a Danish tax

grouping provided that the group includes

all of its foreign companies and branches in

the Danish tax grouping. In effect, this all-or-

nothing provision rules out the possibility for

major international groups to have their Danish

subgroup file a Danish group tax return that

includes only certain “cherry-picked” (typically

loss-making) foreign group members.

● Tax returns Tax returns are completed

based on audited financial accounts with

adjustments for tax. Tax returns should be

filed no later than six months following the

end of the accounting year. Corporations

with an accounting year-end that falls

within the period from 1 January to 31 March

shall file a tax return no later than 1 August

in the same calendar year.

● Payment of tax Corporate income tax

shall be paid on a current year basis in

two equal instalments due on 20 March

and 20 November. The authorities request

payments of 50% of the average of the

final income tax of the last three years. In

addition, voluntary additional payments

may be made on the same dates; such

voluntary payments are adjusted interest

rate when set against the final tax bill.

The final tax bill is settled by 20 November

in the following year. Underpaid tax is

then payable by 20 November with a

surtax of 5.1% of the tax amount (rate for

2010 tax year). Overpaid tax is refunded

by November of the following year with

interest of 1.6% (rate for 2010 tax year).

TAXATION OF INDIVIDUALSTERRITORIALITY AND RESIDENCE Individuals are subject to full tax liability

when they (1) take up residence or (2) stay in

Denmark without taking up residence when

the stay exceeds six consecutive months

interrupted only by short stays abroad (and

then as from the day of arrival). An individual

subject to full tax liability in Denmark is taxed

on his/her worldwide income and gains

received or accrued.

Individuals are subject to limited tax liability

on Danish source income.

EMPLOYEE GROSS INCOME All remuner-

ation from employment, whether in cash or

in kind, is subject to tax when the employee

has obtained a legal right to the remuneration,

regardless of where payment is made and

regardless of whether remitted. The liability

extends to any living or housing allowance and

any reimbursement of tax or other personal

liability, whether paid directly to an employee

or borne by the employer on the employee’s

behalf.

CAPITAL GAINS AND INVESTMENT INCOME Taxable gains and investment income are

added to taxable income. Certain allowances

are available.

DEDUCTIONS As opposed to corporations,

individuals may deduct certain non-business

expenses.

● Business deductions An employee may

be entitled to deduct travelling expenses,

subscriptions to professional associations,

necessary business literature, tools of


trade, etc. (if exceeding DKK 5,600 per

calendar year). As opposed to corporations,

individuals may deduct certain non-business

expenses:

● Non-business expenses An individual

subject to full tax liability can deduct all

interest paid and contributions or premiums

paid under certain pension schemes with a

Danish pension fund or insurance company.

● Personal allowances A personal allowance

of DKK 43,400 (in 2015) is granted with the

effect of reducing income tax payable at

ordinary rates. The allowance is granted to

each individual, but where a spouse cannot

utilize the entire personal allowance, the

balance is transferred to the other spouse.

SPECIAL TAX REGIME FOR EXPATRIATESA special legislation relates to foreign

employees working temporarily in Denmark.

Assuming that certain conditions are met,

these expatriates can be covered by a 26%

tax rate for a period of up to 60 months. The

26% rate is after a deduction of labour market

contribution of 8%.

TAX RATES: STATE AND LOCAL INCOME TAX Personal income after deduction of 8%

labour market contributions, i.e. the effective

marginal tax rate is (100-8) x 51.5% or (8 +

47.38) = 55.38%.

Income and allowances are divided into three

categories:

1. Personal income – e.g. cash salary,

director’s fee, free company car, and free

telephone – less pension contributions

2. Capital income, e.g. net interest income and

net capital gains

3. Other allowances deductible from the total

taxable income

Church tax (members only) will be imposed

at a flat rate dependent on the municipality in

question. The country average is 0.7%

TAX CREDITS An individual resident in

Denmark is entitled to deduct foreign income

taxes paid or accrued on foreign source income

from the Danish tax payable up to a maximum

of Danish tax paid on the part of the taxable

income, which is foreign source income.

TAX RETURNS Husbands and wives file

separate returns for the income year. Taxpayers

receive a pre-printed tax return in March,

containing information that the tax authorities

have already obtained from employers,

financial institutions, etc. If the tax return is

not correct, it shall be corrected, signed, and

filed no later than 1 May.

Taxpayers with more complicated tax returns

(most expatriates) shall file tax returns no later

than 1 July.

The tax year for individuals is the calendar year.

PAYMENT OF TAX It is required that

employers withhold income tax from salaries

paid out (“A-tax”). For other types of income,

an advance tax (“B-tax”) has to be paid in ten

equal instalments during the income year.

VATDenmark applies the VAT system established

by the European Union.

Denmark imposes VAT on imports and taxable

deliveries of goods and services at a rate of

25%.

A number of business activities are exempted

from paying VAT. The most important ones

are within hospitals, medical and dental care,

insurance, banking, and certain financial

activities.


ROBERT MIKELSONSAttorney, Partner


NIELS GADE-JACOBSENAttorney, HD-R


CONTACTPROFITS AND TAX

WEB

THE DANISH CENTRAL CUSTOMS AND TAX ADMINISTRATION

www.skat.dk

A limited company and other legal

entities may be winded up by going

into solvent liquidation or being

declared bankrupt. Upon completion

of the bankruptcy proceedings or

liquidation, the legal entity ceases to

exist.

LIQUIDATIONThe owners of a company can decide for the

company to enter into solvent liquidation. The

owners will choose a liquidator to be in charge

of the company. Furthermore, the court can

decide for a company to be put into solvent

liquidation upon request from the Danish

Business Authority. In this case, a liquidator

will be appointed by the court.

The liquidator shall make sure that all

outstanding creditors are paid, and distribute

the remaining assets to the owners, upon

which the company will be dissolved.

BANKRUPTCYHOW IS A COMPANY DECLARED BANK-RUPT? A petition for bankruptcy can be filed

by a creditor or by the company itself - or by

any other legal entity.

The bankruptcy decree is declared by the

court upon a hearing if the court is satisfied

that the company is insolvent. A company is

insolvent when it cannot pay its debts by their

due dates and when this inability to do so is

not just temporary.

WHO TAKES RESPONSIBILITY FOR THE COMPANY SUBSEQUENT TO THE BANKRUPTCY? When issuing a bankruptcy

decree, the court will appoint a receiver

of the bankruptcy estate. The receiver is

the only person entitled to represent the

bankruptcy estate and is obliged to realise

all the company’s assets. In cooperation with

the major creditors, the receiver may decide

to carry on the business of the company for

a limited period.

The receiver investigates the causes of the

bankruptcy, examines whether the company

has violated the law, and audits the company’s

books.

When all assets are realised, all outstanding

issues solved, and the claims have been

WINDING UP



approved, the receiver will prepare the

accounts of the bankruptcy estate. Upon the

approval of the court (and the creditors), the

receiver will pay out dividend payments in

the order of priority of the creditors, and the

company ceases to exist.

WHAT ARE THE RESPONSIBILITIES OF THE PARTNER, BOARD DIRECTOR, AND MANAGING DIRECTOR? The partners or the

board members and managing director shall

assist the receiver and inform him of all the

company’s assets and debts.

RESTRUCTURINGA limited company or any other legal

entity with financial problems can seek an

arrangement with its creditors to avoid

bankruptcy.

In order to have time to investigate the

possibilities of an arrangement, a creditor

or the company – or any other legal entity

- can file a petition for reconstruction to the

court. The court appoints a supervisor and a

person skilled in accounting to watch over the

interests of the creditors.

A reconstruction leads to either a scheme

of arrangement or a transfer of assets. If the

reconstruction fails or is not approved, the

company is declared bankrupt.

The petition for reconstruction is approved,

unless a majority of the creditors disapprove,

thereby enforcing the reconstruction on the

minority of the creditors.

WEB

THE DANISH CENTRAL CUSTOMS AND VAT ADMINISTRATION

www.skat.dk

JØRGEN ERIK FRANDSENAttorney, Partner


MALENE EIGTVEDAttorney, Partner


CONTACTWINDING-UP

A dispute may be settled in court or by

arbitration. Arbitration clauses would

be common in business-to-business

agreements. Undisputed claims may

be quickly settled by a summary

procedure.

LITIGATION AND ARBITRATIONArbitration would be widely used in the

commercial market in Denmark. Many

business-to-business agreements would

include an arbitration clause and would also

be common in standard form contracts.

Most of the arbitration proceedings shall be

conducted in accordance with the Danish

Arbitration Act and the Danish Institute on

Arbitration (Copenhagen Arbitration).

In the event that the parties in dispute have

not agreed to settle the matter by way of

arbitration, the dispute shall be resolved in

court. The court may assist the parties in

reaching a settlement of the dispute and may

also appoint a mediator. If the parties cannot

reach a settlement, the court will resolve the

matter.

Arbitration and court proceedings are

normally instituted by written submissions

from both parties followed by a preliminary

hearing. Written preparation of the case may,

if necessary, continue after the preliminary

hearing. Once the case is prepared, the

arbitrators, or the court, will hear the case at

a final hearing. The arbitrators, or the court,

shall then pass their judgement.

If the case has been tried by the court, the

party who is dissatisfied may appeal the

judgement. One of the major differences

between arbitration and court proceedings

is that court proceedings are normally

conducted in public, whereas arbitration

shall be private. In addition, arbitration will

usually provide a quicker and more expedient

way of dealing with a dispute than court

proceedings, because the parties cannot

appeal the decision of the arbitration tribunal.

However, arbitration will be more expensive

than a court action, because the parties

would be responsible also for the fees of the

arbitrators.

DISPUTE RESOLUTION


THOMAS RYHLAttorney, Partner


KARSTEN GUDMAND-HØYERAttorney, Partner


CONTACTDISPUTE RESOLUTION

LARS MERRILD HARESKOVAttorney, Partner


HANNE WEYWARDTAttorney, Partner



FOR MORE INFORMATIONWe hope that the information in this guide has proved

useful in providing a brief overview on how to establish a

business in Denmark, the options available to companies,

and their rights and obligations when conducting

business in Denmark.

Should you require further information with regard to

any of the matters dealt with in this guide, or if you have

specific concerns or questions, please do not hesitate

to contact us.

www.njordlaw.com

NJORD Copenhagen

Pilestræde 58

DK-1112 Copenhagen

Tel.: +45 33 12 45 22

[email protected]

NJORD Aarhus

Åboulevarden 17

DK-8000 Aarhus

Tel.: +45 33 12 45 22

[email protected]

NJORD Copenhagen • Pilestræde 58 • DK-1112 Copenhagen • +45 33 12 45 22

NJORD Aarhus • Åboulevarden 17 • DK-8000 Aarhus • +45 33 12 45 22

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