Practical Guide. How to start up a business in Copenhagen

Transcription

1 Practical Guide How to start up a business in Copenhagen

2 Table of contents 1. Intro Choice of business entity Company A/S ApS limited liability company DK company as a platform for Nordic/European expansion Branches Representation office Agents and distributors Work permit for non-eu individuals Pay Limit Scheme Positive list Tax, VAT and Payroll Four phases of setting up a business Practical Guide Copenhagen Capacity

3 1. Intro Denmark is one of the easiest places in the world to do business. In Denmark, it takes only a few hours to set up a company online with the Danish Business Authority. All corporate registrations can be in place and the company ready to do business from one day to the next. Few formalities apply and these can be handled by with the assistance of local service providers. All of this makes it very simple to start a business in Denmark. The purpose of this Practical Guide is to take you through the overall considerations involved in establishing your business in Denmark. More details may be found in each of the fact sheets relating to corporate, tax, HR and other matters. Useful links Work in Denmark provides employers and international job seekers with a comprehensive portal on international recruitment in Denmark: Entrepreneurship in Denmark gives you an overview and information about being a business owner in Denmark: 3 Practical Guide Copenhagen Capacity

4 2. Choice of business entity 2.1 Company The formation of a Danish limited liability company is so quick and easy that this is the type of business entity generally recommended in Denmark. A Danish company can be incorporated online with all corporate registrations in place within a few hours. Everything is handled by with the assistance of local service providers. No formal signing procedures or presence is required. No requirements for local shareholders or local resident management apply. Two main types of limited liability company may be established. 4 Practical Guide Copenhagen Capacity

5 2.2 A/S ApS limited liability company Two main types of limited liability company, the A/S (public limited liability company) and the ApS (private limited liability company), are the most common type of company in Denmark. Minimum share capital amounts to DKK 500,000 (EUR 67,100) for an A/S and DKK 50,000 (EUR 6,710) for an ApS. The share capital is not regarded as a cost and is not blocked, but may instead be used as part of the operating capital. Share capital above the minimum capital may be subscribed, but later paid in according to specific rules. Apart from the amount of minimum capital, the differences between the A/S and the ApS mainly relate to the composition of management and other formalities. An A/S must have a two tier management consisting of both the Executive Board with a minimum of one member (CEO) and the Board of Directors with a minimum of 3 members. An ApS requires a minimum of one member on the Executive Board (CEO) or one member on the Board of Directors. More members are optional. An over-view with more details may be found in the fact sheet for business entities. The ApS is regarded as the less formal corporate form and is often used to create a fully owned subsidiary of foreign enterprises. Other types of corporation may also be used. Useful links The Danish Business Authority: Registration of newly founded companies: 5 Practical Guide Copenhagen Capacity

6 2.3 DK company as a platform for Nordic/European expansion In many countries a branch is often leaner and more cost efficient to establish and run compared to a company. However, the disadvantage of a branch is that it is subject to double taxation in both the country in which the branch has been established and in the country of the parent entity. Such double taxation may be relieved by applying a double taxation agreement. However, this involves cost, bureaucracy and often results in tax inefficiency. Denmark offers the best of both worlds. According to a unique Danish tax rule, foreign branches of a Danish company are generally not subject to Danish tax. Accordingly, double taxation may be avoided due to this rule. Using a Danish company as a platform for expansion by setting up branches in other countries may be the optimal structure. 2.4 Branches Operating through a branch in Denmark is often not the optimal choice unless special circumstances apply. The income of a Danish branch is often subject to taxation in the country of the parent company as well as in Denmark. Such double taxation may be relieved by applying one of the many Danish double taxation agreements that Denmark has concluded. However, obtaining such relief often involves cost, bureaucracy and tax inefficiency. Double taxation may be avoided by establishing a Danish company instead of a Danish branch. A company is generally quicker and more cost efficient to establish compared to a branch. Furthermore, a Danish company can benefit from the unique tax rule explained under Section 2.3 above. 6 Practical Guide Copenhagen Capacity

7 2.5 Representation office A representative office is often not relevant for business operations in Denmark. A representative office is only allowed to undertake limited business activities of a preparatory and auxiliary nature, such as general marketing activities to investigate the market. Business activities beyond such preparatory arrangements may result in the office being deemed a permanent establishment for tax purposes. In such cases, the office must be registered as a branch for corporate and tax purposes. Even if the activities are only of a preparatory nature, other registration requirements may apply regarding VAT, pay roll etc. Considering that these and other formalities have to be complied with in any case, establishing a Danish company may often end up being the most efficient choice. In addition, a Danish company will have a high level of presence from the start with regard to customers, employees and other stakeholders. 7 Practical Guide Copenhagen Capacity

8 2.6 Agents and distributors Foreign enterprises may pursue local market opportunities through sales agents, distributors or local partners. Danish legislation concerning agents is generally based on EU directives. In other countries, accessing the market through agents or distributors who know local customers and market conditions may provide greater flexibility and involve less fixed cost. The agent charges a commission and the distributor a sales margin for these services. Furthermore, if the agent is later terminated, compensation for good will must generally be paid. In Denmark, however, establishing a sales company and employing local or foreign sales staff instead of acting through a third party is a genuine alternative. Most of the risk and fixed cost that you may wish to source to local partners is not relevant in Denmark. Plus, scaling down is not a challenge as in other countries due to the flexible hiring and firing rules in Denmark. Furthermore, employer costs are low since no social security payments are made by the employer except for a fixed amount of approx. EUR 1,350 per employee per year. Hiring local sales staff with local knowledge of the market may prove to be a more flexible and cost efficient alternative to engaging with local agents or distributors. 8 Practical Guide Copenhagen Capacity

9 3. Work permit for non-eu individuals Foreigners not holding an EU passport must obtain a work and residence permit to work and live in Denmark. Business visas may be issued to cover short periods of stay. However, a business visa will not allow you to work in Denmark, only to participate in preparatory meetings and the like. There are two fast-track schemes for obtaining both work and residence permits at the same time in Denmark. Applicants will normally be granted a work and residence permit after a 30 day processing period. The permit is generally issued for up to a 3 year period with the possibility of extension. 3.1 Pay Limit Scheme If the employee receives a growth salary including certain benefits equal to DKK 375,000 (EUR 50,000) per year, the pay limit scheme may be applied. 3.2 Positive list If the employee qualifies as an engineer, IT specialist, manager or one of the many positions stated in the positive list, this scheme may be applied. The employee must further receive a salary not less than a local employee receives for a similar position. Denmark also has corporate schemes, green cards, red carpet and other schemes on offer to encourage foreigners to work and live in Denmark. The Red Carpet Program: introduces simplified procedures for obtaining Danish Schengen visas for applicants who travel regularly to Denmark for business purposes: 9 Practical Guide Copenhagen Capacity

10 4. Tax, VAT and Payroll As part of incorporating your company for the registration of your branch for corporate purposes, your local service provider will handle the registration for tax, VAT, payroll, import, export etc. This may also be done online. The company or branch registration number will also serve as your VAT number. Depending on expected turnover, VAT should be declared to the tax authorities on a quarterly or monthly basis. VAT on sales less VAT on certain costs must be reported. Net positive VAT must be paid and net negative VAT may be cash refunded. When paying salaries, the employer must withhold and declare taxes on behalf of the employee. As part of the digitalization of the Danish public sector, a digital mail box and a specific bank account need to be set up. This provides easy communication and cash flow between companies and the public authorities in Denmark. Useful links The Danish Tax and Customs Administration gives you information on taxation in Denmark and on how to register your company: 10 Practical Guide Copenhagen Capacity

11 4.1 Four phases of setting up a business CPR Work and residence permit Acquire individual permits and Civil Register Number (CPR-number) CVR Establishment of company Register the company and acquire a Company Number (CVR)* VAT TAX authority registration Resgister the company for VAT and tax purposes 1234 Accounting Engage an accountant *For non-european citizens: Since you need a Danish CPR number to register a company, we recommend you work with a law firm that can help you to register the company. 11 Practical Guide Copenhagen Capacity

12 Market overview We will help you benchmark Copenhagen against other locations in Scandinavia. Industry insight We can help you identify business opportunities in Copenhagen s key industries. Business start-up Let us assist you in all the practical aspects of getting your business ready for take-off. Business development We can assist you in building a strong, compelling business case that will prove the value of your investment in Copenhagen. Land and property search We can help you find the right offices, production facilities or building site for your operations. Partner search & matchmaking Tap into our extensive network to build powerful technology partnerships, strategic company alliances and strong investment portfolios. News Stay updated on business and industry developments in Copenhagen with our newsletter. Sign up on Events We organise and invite our partners to a range of industry events. Sign up for our newsletter on Copenhagen Capacity Nørregade 7B DK-1165 Copenhagen K info@copcap.com 12 Practical Guide Copenhagen Capacity