A holding company in Denmark is a common company that owns shares in another company – called a subsidiary – from this country or from abroad. The percentage of share ownership ensures that the holding has voting rights in the respective company or companies and thus it is able to control its activities and policies. In practice, the holding will own enough stock to control the companies, however, it will most often oversee the business and not be involved actively in the daily corporate operations.
This type of business entity is chosen by numerous entrepreneurs because it offers certain profitable tax rates and decisional rights in the actions of the owner or partially owned companies.
Denmark is perceived as a convenient holding company jurisdiction in Europe because of the general tax rules, the range of signed double tax treaties and the easiness of company formation.
Our company formation advisors in Denmark can offer assistance in opening this type of company in the country.
How is a holding company incorporated in Denmark?
Company formation in Denmark is a simple process and investors who wish to start a holding company in the form of a private limited liability company or a partnership will follow the incorporation rules for their chosen business type. The main company formation steps in Denmark for a private limited liability company are the following:
- choose the company name: the business name needs to be a unique one and a prior verification can be made.
- draw up the company documents: the company will need to have its Articles of Association and its Memorandum drawn up.
- register the business: all companies are registered with the Danish Business Register; the actual registration is a quick process.
- have the minimum capital: the private limited company, or ApS, has a minimum share capital of 50,000 DK, deposited in a corporate bank account.
- other registrations: registration with the Danish tax and social security authorities is handled once the business is formally registered.
Our team of company formation agents in Denmark has chosen to exemplify the main company formation steps for the ApS because it is the vehicle commonly used for opening a holding company. Investors also have other options when selecting their preferred business form and one of our specialists can provide more detailed information.
A number of features are available in Denmark to investors who choose to open a holding company:
- • Advance tax rulings: these are available for the purpose of clarifying the existing tax arrangements with respect to the taxation policies.
- • Taxation principles: the company is not subject to taxation upon the issuance of shares or when the share capital is increased and when shares are transferred.
- • Tax treaty network: the tax treaties signed by Denmark offer certain advantages, as described below by our agents who specialize in company formation in Denmark.
- • Shelf company: investors have the option to set up a holding by purchasing a shelf company in Denmark.
- • Regulatory principles: holding companies are subject to a disclosure policy that will include audit requirements.
The regulatory regime for holding companies needs to be observed in Denmark and, to a certain extent, the regulations apply to other types of businesses. We list below the common requirements for Danish holding companies:
- • Minimum share capital: when incorporating a holding company, investors need to observe the minimum share capital requirements as per the chosen type of company (lower for a private company).
- • Bearer shares: these can only be issued by public companies, not by private companies.
- • Shareholders: the requirements for company shareholders and the shareholder register need to be observed.
- • Directors: the company needs to have a minimum number of directors, with more stringent rules applicable to public companies.
- • Audit: the accounts of a company will need to be audited as prescribed by law and the documents stored and lodged accordingly.
What are the laws that influence the Danish holding company regime?
Together with the DTAs (double tax agreements) signed by Denmark and the Parent-Subsidiary ordinance which grant important deductions or even exemptions from the withholding tax on dividends in the country, as well as royalties and interests, Denmark has certain agreements on tax exchange information in place.
These agreements enable the access of financial data connected to companies for the foreign tax authorities. These measures were put in place to prevent tax frauds.
For the same purpose, Denmark has adopted the controlled foreign corporation regime (CFC taxation). Accordingly, the profits from all subsidiaries are added to the parent company in Denmark.
However, only when the later controls in excess of 50% of the voting rights in subsidiary and in excess of 10% of the assets of it, as well as when 50% of the taxable income is made up of financial gains. Our company registration experts in Denmark can offer more details on these matters.
What are the taxes applicable in Denmark?
Denmark follows the Parent-Subsidiary directive of the European Union which ensures a withholding tax exemption for dividends sent by a subsidiary in the European Union to a holding company in Denmark.
Among the advantages of holding companies in Denmark, our Danish company formation professionals mention that, in order to qualify for this exemption, the company in Denmark has to control minimum 20% of the shares of a subsidiary in the European Union within a 12-month time frame.
In case a subsidiary does not fall under the above-mentioned directive, it could qualify for the deductions offered by more than 80 DTAs that Denmark has signed. The majority of these DTAs offer a withholding tax rate of only 5%.
The Danish holding company may receive an exemption from the corporate income tax rate in the country for the dividends received from its foreign subsidiary when it meets the aforementioned 20% shareholding percentage and the period for this shareholding. Additionally, the corporate tax exemption applies to those cases when the company abroad is not a controlled foreign corporation. This means that 33.3% of its assets are financial assets and the foreign company has been subject to a lower level of taxation. One of our agents who specialize in company registration in Denmark can give you more details about controlled foreign companies.
Companies in Denmark are not taxed on the capital gains on subsidiary (the company partially owned by the Danish holding). There is no withholding tax applicable to capital gains on shares.
As a holding company jurisdiction, Denmark has an attractive general tax regime, no restrictions on business activities or foreign ownership (100% foreign-owned companies) and fast company formation.
If you wish to open a Danish holding company, we invite you to get in touch with our company registration representatives in Denmark.