Costs for Starting a Business in Denmark
Business Start-up Costs in DenmarkUpdated on Friday 19th February 2021
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Business start-ups are encouraged in Denmark as businessmen find it very easy to deal with local authorities and are encouraged to innovate and invest. Furthermore, Denmark offers one of the quickest and simplest start-up procedures in the world. Starting a business in Denmark is an easy process that can be done in less than a day. Regarding the costs for starting a business in Denmark, certain aspects, such as the minimum share capital and the registration fee, should be taken into consideration.
Our lawyers in Denmark can help you set up your business and offer you detailed information about the start-up costs.
The costs of incorporating a business in Denmark
The company set up costs depend on the type of company you have decided to set up. There are two kinds of expenses you should have in mind: the registration fee and the minimum amount of capital. You don`t need to invest any money as share capital and pay no registration fee if you start an unlimited company or a sole proprietorship in Denmark (IVS). Below, we list the most important costs, according to the type of company:
- 1 DKK: the minimum share capital for the IVS or the entrepreneur limited company.
- 40,000 DKK: the minimum share capital for the ApS, also known as the private limited company.
- 400,000 DKK: the minimum share capital for the A/S or the public limited company.
- 670 DKK: the registration fee for the company, applicable in almost all cases.
Like in many other countries, the costs for starting a business in Denmark are higher as the complexity of the legal entity grows. In other words, the simplest business form, the sole trader or the one-man business, will have the lowest costs while the public limited company, which is suited to large businesses with many shareholders and employees, will demand the largest investment.
The incorporation costs will also be related to the lawyer’s fees as well as any applicable notary fees. Others may include the costs for sworn translations when these are needed (for example, in the case of branches in Denmark when the Articles of Association of the parent company may need to be translated). These are all variable fees and differ according to the internal fees practiced by the notary, the translator or other service providers.
Our attorneys in Denmark will gladly answer any further question you may have on our lawyer’s fees for company formation, drawing up the Articles of Association or drawing up a power of attorney that will allow one of our agents to handle some of the steps on behalf of the company founder.
Pre-launch business start-up costs in Denmark
When deciding to open a company, investors can expect to incur the initial pre-launch costs, the fixed business costs, and the variable business costs.
The pre-launch costs are those that include the research costs, the initial ones during the market research phase when the founders are preparing the business plan and are analyzing the market. the pre-launch costs can be included in the overall promotional or marketing costs as, in some cases, the company will wish to advertise before the launch date.
The incorporation and registration of a new firm in Denmark will involve several other costs, in addition to the share capital and the registration fee mentioned above. These can include:
- Bank's fee for opening a corporate bank account in Denmark, necessary for depositing the minimum share capital when setting up your company in this country;
- Register the company with the Danish Business Authority (DBA). This step can be performed on line and implies the registration of ownership and voting rights. After registration, the company becomes subject of taxation in Denmark;
- Obtain a NemID signature. This is a common secure login on the internet that allows you to access online banking services for your company, to contact public authorities on behalf of your company and to sign official documents and forms. You may request up to 3 NemID signatures for your employees. A charge of DKK 80 is paid for any extra NemID signature you solicit;
- Costs for registering employees with workmen`s insurance. Your employees have to be insured against occupational illness and industrial accidents.
Please note that the Danish Tax Administration, SKAT, may operate changes to its fees. If you want a complete and updated assessment of the costs involved when starting a business in Denmark, please contact our Danish law firm.
Naturally, the start-up costs will also depend on the business field in which the company will activate. Some companies will need to take into consideration the costs for equipping an office, such as purchasing office equipment and furniture as well as desktops or laptops for all of the employees. Other companies may need to consider the costs of purchasing the equipment used to manufacture the product or for the fleet of cars or trucks, for logistics companies.
Another important cost will have to do with the rented or purchased office space. Again, this is a cost that will depend on how large the company is and if it is a services company or a manufacturing company. Investors who purchase a property in Denmark will need to apply for registration with the Land Registry. This is an online submission that will be subject to a registration fee of 1,660 DKK as well as a percentage of the transaction price. When the company will construct a new warehouse or building, there will be costs associated with this process. A notable one would be the request to obtain the connection required for water and sewage, amounting to approximately 112,211 DKK. The electrical works will also involve certain costs as well as the registration with the authorities for the internal and external installations.
Companies in certain business fields will need to obtain special permits and licenses, a process that can also include a fee. We recommend getting in touch with our lawyers in Denmark for more information on the fields that are regulated and the authorities that release the needed licenses or permits. When applicable, these too can be included in the pre-launch start-up costs for the business as the company will need to obtain them before actually engaging in business (as soon as it is registered with the Danish Business Authority).
New businesses will also need to include the costs for marketing campaigns, website development or app development, as needed. The marketing plan or strategy, as well as the costs, can be prepared in advance, as soon as the founders draw up the business plan. When working with a team of company formation experts, or our attorneys in Denmark, you should also include the services for preparing the company incorporation documents and, for foreign companies opening a branch or a subsidiary, those for translating any required documents.
Fixed business costs for Danish companies
As part of the fixed business costs for the start-up, we can mention the following: insurance, rent or premises costs, costs for staffing and employment, equipment and supplies, technology, sales, and marketing. These are the ones that are to be paid, in most cases and depending on whether or not they are in-house or outsourced, regardless of the financial situation of the company.
For manufacturing companies, the production costs can differ according to the type of manufactured product and the fees practiced by their suppliers.
Start-ups should aim to minimize the fixed and variable costs. For most businesses, the first year is the most demanding and a good financial plan is essential for the survival of the business.
Our team of lawyers in Denmark can help new investors with more information about the different requirements according to the business field in which they wish to open the company. No two businesses are alike, this is why careful planning before the incorporation phase is required. Our team can provide complete services during the pre-incorporation and the post-incorporation phase, for any legal issues that may arise.
The video below highlights some of the most important company formation costs in Denmark:
Tax-related costs for companies in Denmark
The taxes that are payable by companies in Denmark can also be included on the list of costs, not start-up related ones but recurring ones for the entire duration while the company remains active. Denmark has a simple and transparent taxation system and the tax rates are the following:
- 22% is the normal corporate income tax rate, with a higher rate of 25% applicable to companies in the gas and oil sector;
- dividends are subject to a normal 27% withholding tax when they are paid to a non-resident company; businesses can reclaim 5% of this payment, thus reducing the effective rate to 22%; the withholding tax on dividends, interest, and royalties can be subject to different rates when a double taxation agreement is signed between Denmark and the country where the nonresident company receiving the payment is based; our lawyers in Denmark can provide more details on this topic;
- social security between 10,000 DKK and 12,000 DKK per year, per employee;
- stamp duty of 0.6% to 1.5% and an applicable fee of 1,660 DKK;
- a value-added tax of 25% at a standard rate, with the registration threshold at 50,000 DKK for companies that provide certain goods and services.
The local tax policies can be an important factor when deciding to open a company in a certain jurisdiction. Investors who are interested in knowing more about the taxation regime, as well as the compliance requirements for companies can reach out to our attorneys in Denmark.
Doing business in Denmark
Company formation in Denmark is simple and the registration process is a simplified one. Below, our team of lawyers in Denmark lists the main steps for starting a business in Denmark:
- Choose a business form: as seen below, the type of company influences the overall costs; the choice will depend on the budget, size or future development.
- Register the business: the company is to be registered with the Danish Business Authority once the incorporation documents are prepared.
- Register with the tax authorities: the Danish Customs and Tax Administration is the one with which the company is registered for tax and VAT purposes.
- Open a bank account: request the opening of a corporate bank account with a chosen Danish bank branch; various fees apply.
- Find an office: rent or purchase an office space or work via a virtual office.
- Hire employees: this is the stage during which the new company can start preparing employment contracts; one of our attorneys in Denmark can assist.
Investors in Denmark benefit not only for an easy company registration procedure but also for a favorable business climate and opportunities for investments in different business sectors.
Before starting a business in Demark, investors must also know that nationals from a number of countries need to obtain a visa before they can enter the country. This list of countries includes Bahrain, Cuba, Iraq, Maldives, North Korea, Saudi Arabia, South Africa or Vietnam, among others. Visa requirements also apply in the case of Chinese nationals, although those with diplomatic passports and those with a Hong Kong Special Administrative Region are exempt. Russia is also included on the list of countries with visa requirements, although an exemption applies in case of citizens with diplomatic passports.
The visa application procedure will also involve a fee that may be calculated before starting a business in Denmark as a foreigner. Foreign nationals can also be subject to the Start-Up Denmark visa regime that allows foreign entrepreneurs to receive a Danish residence permit if they open and run an innovative company in the country. In this case, the processing fee for this type of visa will be 1,900 DKK. Foreign investors who wish to open a start-up in Denmark should know that a panel of experts will first analyze the business proposal before the visa can be granted.
Our team can provide more details about all of the direct and indirect costs related to company formation.
Contact our law firm in Denmark for complete information on how our team can assist you in opening a company. We provide legal services to small and large businesses alike and can help investors who are interested in starting a business in Denmark's capital city - Copenhagen.