Foreign businessmen may open subsidiaries in Denmark, characterized by the fact that the foreign shareholders have the majority of the voting shares. The main advantage of establishing a subsidiary in Denmark is that the foreign company is not liable for its actions and doesn’t need to submit its own financial statements to the Danish authorities.
|Applicable legislation (home country/foreign country)||
|Best Used For||
Expanding the company's activities in Denmark
Setting up the company's Nordic counterpart
Minimum share capital (YES/NO)
Yes, DKK 40,000 for the private limited company (ApS)
|Time frame for the incorporation (approx.)||
|Legal representative required (YES/NO)||
|Local bank account (YES/NO)||
|Independence from the parent company||Yes|
|Liability of the parent company||N/A|
|Corporate tax rate||
Dividend distribution is subject to the EU Parent-Subsidiary
Directive or another Double Taxation Agreement
|Possibility of hiring local staff (YES/NO)||Yes|
|Characteristics of a Danish subsidiary||A Danish subsidiary is a business form in which a foreign company or shareholders hold the majority of the voting shares, while allowing expansion into the Danish market|
|Public limited liability, private limited liability, among the most popular|
Steps for opening a subsidiary in Denmark
Choose a name for the subsidiary;
Contact one of our Danish company formation specialists for guidance;
Select business structure and meet the necessary requirements;
Fill out the incorporation form;
Register for tax;
– Memorandum of Association (notarized),
– Articles of Association,
– Shareholder register,
– Minutes of general meetings, etc.
Submit financial statement to the Danish Business Authority (DBA) on an annual basis
– corporate tax,
– dividend tax,
– payroll tax, etc.
– incentives for activities related to research and development,
– incentives for machinery or equipment,
– incentives for the use of raw materials,
– double tax treaties, etc.
If a Danish subsidiary receives dividends from shares in companies that are not publicly listed and in which it owns less than 10% ownership, 70% of those dividends are considered taxable income for the subsidiary;
Additionally, dividends from shares in companies that do not fall under this category are subject to the standard corporate income tax rate of 22%.
|Number of shareholders||
1 or more (no limit)
|Annual general meeting||Can also be held virtually|
|Differences between a Danish branch||
– legal personality,
– incorporation time,
– business operations and activities,
– accounting procedures, etc.
Physical (rented or owned) or virtual
|Number of double taxation treaties (approx.)||
|Advantages of opening a subsidiary in Denmark||
– you do not need a residency permit,
– quick incorporation process facilitated by our Danish company formation experts,
– you can gather annual general meetings online,
– a separate legal entity with limited liability,
– tax incentives.
|Assistance||You can contact our team for assistance in opening a subsidiary or company in Denmark|
Both the branch and the subsidiary are business forms that may be used to expand to the Danish market in 2023. However, as revealed in this article by our team specializing in company registration in Denmark, the two have very different characteristics and while the branch may be preferred by banks and financial institutions, the subsidiary offers important advantages in terms of reduced liability for the foreign company.
What are the characteristics of a Danish subsidiary?
The subsidiary is a company that is controlled by another legal entity, in this case, the parent company abroad. while both the subsidiary and the branch are owned by the foreign company, there are significant differences, as highlighted below.
- Legal entity: the subsidiary is a legal entity, completely separate from the foreign company.
- Liability: the parent company abroad is not liable for the subsidiary’s debts and obligations in Denmark.
- Activities: the subsidiary is not limited to perform the same business activities as a foreign company.
- Accounting: the maintenance of the accounts for the subsidiary is performed separately from the foreign company’s.
- Investment percentage: the foreign company’s ownership in the subsidiary is above 50% but it is not 100% like in the case of the branch.
Having understood that the subsidiary is a separate business form, it is worth mentioning that it is incorporated as per the corporate laws in Denmark and it is treated just like any other locally registered company.
The two forms of business that the subsidiary may take are public limited liability companies and private limited liability companies.
A private limited liability company opened in Denmark (ApS) is based on a share capital of at least 40,000 DKK, it offers limited liability to the founders and needs to be registered with the Business Authority. All members can be foreign individuals, there are no requirements for those on the Board of Directors to have a certain nationality or residency, and neither for the members of the Executive Board.
A public limited liability company registered in Denmark is based on a share capital of at least 400,000 DKK. The management of such a company is assured by a board of managers formed by at least 3 members, one of them being the general manager. This company is subject to more complex requirements, for example, a mandatory two-tier management system and it can be listed on the stock exchange.
Both public and private companies are good alternatives for foreign investors looking to set up a subsidiary in 2023. Both can engage in all types of business activities, however, a limited number of such activities can only be performed by the public LLC, for example, banking activities in some cases. The private limited company is subject to fewer regulations than the public one, this is why most investors will choose to incorporate the Aps. If the business evolves in such a manner that an expansion will be required, the private LLC can be easily transformed into a public LLC provided that the capital requirements are met.
We invite you to watch the following short video about Danish subsidiaries:
Subsidiaries as private limited liability companies
Private liability companies are a common form of a subsidiary in Denmark.
A private liability company must have at least one shareholder. Shareholders of a private liability company have limited liability, which means their personal assets are generally protected. Their liability is limited to the amount of share capital they contribute to the company. If the company faces financial difficulties or legal issues, the shareholders’ personal assets are not typically at risk beyond their initial investment.
The company is required to have a minimum share capital of DKK 40,000. Shares of a private limited company cannot be publicly traded on a stock exchange.
Our Danish company formation specialists can provide more details regarding incorporating subsidiaries as private liability companies.
General partnerships and subsidiaries
Two types of partnership firms can be established as subsidiaries in Denmark: general partnerships and limited partnerships.
To establish a general partnership, there must be at least two partners, either natural persons or legal entities. Each partner is individually taxed on his/her share of the profits generated by the partnership.
General partnerships are typically created through a partnership agreement. This agreement outlines the terms and conditions of the partnership, including the roles and responsibilities of each partner, profit-sharing arrangements, and other important aspects of the business relationship. Unlike some other business structures, there is no minimum capital requirement to establish a general partnership.
Our specialists in company formation in Denmark can help you register a subsidiary in the form of a general partnership if you are interested.
What are the requirements for opening a subsidiary in Denmark?
The registration of the subsidiary in the Danish Commercial and Companies Agency is mandatory just like for any other legal entity. The necessary documents are the decision of opening a subsidiary, the articles of association, details regarding the subscribed capital, and the contribution of each shareholder.
Following registration in the Commercial Registry, the investors must submit an application for registering the workers for the employee’s insurance.
Below, we list the steps needed to open a company in Denmark:
- Choose the business form: the private or the public limited liability company, the business form that fits the goals of the foreign company establishing its presence in the country.
- Choose a company name: for the subsidiary, the name does not need to be the same as that of the parent company; it does need to be a unique one.
- Register the business: any company is registered with the Danish Business Authority and it receives a central company register number or CVR.
- Register for tax: companies need to comply with the requirements for VAT registration in Denmark when they sell goods and services above a certain annual revenue.
- Hire employees: a subsidiary can hire Danish employees or transfer existing employees to Denmark easily.
When opening a subsidiary, the founders will also need to open a bank account in Denmark and set up payroll. The business account can be opened with any Danish bank, however, certain information about the foreign company may be required, especially in those cases in which the foreign legal entity holds more than 25% of the shares in the Danish subsidiary.
The subsidiary is also required to have an office in a Danish city and for this purpose, investors can purchase or rent a property or choose to work via a virtual office.
The whole process of registration of a Danish subsidiary takes about 4 working days if all the documents are correctly deposited.
Differences from a branch
A branch and a subsidiary are two different forms of establishing a business presence in Denmark. Our team can explain the key differences between them.
A branch is considered an extension of the parent company and does not have a separate legal identity in Denmark. Registering a subsidiary in Denmark creates a separate legal entity from the parent company.
In terms of liability, the parent company is directly responsible for all the obligations of the branch. In cases of subsidiaries, the parent company’s liability is limited to its investment.
Branches are subject to taxation on income derived from sources within Denmark, while subsidiaries are typically taxed on their global income.
Branches are required to file financial reports with the Danish Business Authority, and these reports may need to be consolidated with the parent company’s financial statements. However, subsidiaries have their own reporting requirements and must prepare separate financial statements.
Registration might seem more complex in cases of subsidiaries since it involves opening a company in Denmark. However, our team can provide assistance in this process.
What are the advantages of establishing a subsidiary in Denmark in 2023?
Denmark is often seen as an attractive business destination not only because of the tax policy, for example, there is no withholding tax on the subsidiaries’ shares where the shareholding company keeps at least 10% of the capital, but also because of the ease of doing business. Investors who open a company in Denmark are faced with a simple and straightforward process.
The usual corporate income tax rate in Denmark is 22% and subsidiaries are taxed on their worldwide income because they are treated the same way as any other resident company. As far as the accounting requirements are concerned, the subsidiary must prepare annual financial statements and it will be required to present an audit report only if it surpasses certain annual thresholds. In general, it is advisable to seek specialized aid when preparing financial statements and the corporate tax return. Our specialists can explain more about taxes when you open a subsidiary in Denmark.
Also double tax treaties with more than 90 countries were signed by Denmark. These treaties grant the absence or low withholding taxes on capital gains or on dividends, interests, or royalties paid to the foreign country. In general, the dividend payments made to a parent company are not subject to withholding taxes. This is an important advantage when setting up a subsidiary in Denmark.
One of our agents who specialize in company incorporation in Denmark can give you specific details on the tax treatment of these legal entities according to the parent company’s country of residence.
Foreign companies will find that Denmark presents a number of attractive characteristics for doing business. The suitable business form is chosen based on the type of business that will be undertaken as well as the projected level of activity in Denmark. The actual registration phase can be performed quickly, with another number of weeks required for obtaining residence and work permits, when required for company employees.
Opening a subsidiary in 2023 in Denmark is not a complicated process, however, foreign entrepreneurs will need to check that they can travel to the country. If this is not possible or if it is delayed, our team can handle part of the procedures on your behalf. Through a power of attorney, we can help represent our client in front of the Danish authorities and for the purpose of submitting all or part of the documents required for incorporation.
Why invest in Denmark?
Denmark can successfully be used to establish the Nordic headquarters of a company, either in the form of a subsidiary or a branch.
It is a great idea to invest and open a Danish company, especially when looking at these statistics provided by Statistics Denmark:
- There were over 300,000 enterprises in Denmark in 2021;
- In 2020, there were over 40,000 enterprise groups, which include subsidiaries, in Denmark.
- Most business in 2021 (36.21%) were in the trade and transportation sector;
- Manufacturing accounted for 4.80% of the total companies in 2021;
- In 2021, there were over 2 million full-time employees in active enterprises in Denmark.
For more information regarding the characteristics of Danish subsidiaries or personalized consultancy for your business, our company formation specialists are here to advise. Please feel free to contact us. Furthermore, if you need legal assistance here, our Danish lawyers will be happy to help.