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Denmark Holding Company

Denmark Holding Company

A Danish holding company is a regular company that keeps shares in another company (subsidiary) from Denmark or abroad. This manner of organization gives this type of company an advantageous tax regime and decisional powers in the subsidiaries’ actions. Our law firm in Denmark has extensive experience in establishing holding companies and can help foreign clients set up such a company in the country. 

Quick Facts  
Denmark holding company – definition  A type of company that manages and controls the assets and investments of its subsidiaries from Denmark or abroad

Minimum number of shareholders 

 At least 1

Minimum number of directors 

 At least 1

Accounting and Audits

 There are no specific accounting and record-keeping procedures mandated by the government.

However,  holding companies are required to have their accounts audited on an annual basis by their accountants in Denmark

 Taxes

No corporate tax for foreign stocks; 

 Investors who own less than 10% of the share capital are subject to Danish capital gains taxes 

Investors who own between 10% and 50% of the share capital in a Danish holding company are exempt from Danish capital gains taxes 

Investors who own 50% or more of the share capital are  exempt from Danish capital gains taxes; U.S. taxpayers must report all global income to the IRS

 Advantages

Foreign ownership 

 Tax-free (in most cases)    

Fast company formation by Danish law firms      

Low minimum capital share 

No required accounting system

 VAT

 Does not engage in business activities that require to register for VAT

 Liability

 A Denmark holding company can be held liable for the debts of its subsidiary company

Company formation

 Documents will be submitted by the law firm in Denmark to the Danish Commerce and Companies Agency, which assigns a unique registration or CVR number to the company

Time frame for the incorporation (approx.)   6 days
Number of double taxation treaties (approx)

 68

Joint Taxation Regime

 If a holding company owns more than 50% of another company in Denmark, it becomes the administrator of a joint taxation scheme between the holding company and the subsidiary company

The joint taxation scheme is mandatory when the two companies are located in Denmark

Optional in other countries

Local director required in Denmark (Yes/No)

 No

Shelf companies

 Investors who want to set up a holding company in Denmark have the option to purchase a shelf company instead of starting a new one from scratch

Dividend tax rate   Tax exemption; no withholding tax

What is the taxation regime for holding companies in Denmark?

Along with the double tax treaties signed by Denmark and the EUParent-Subsidiary Directive, which grants major minimizations or even exemptions from the withholding tax on dividends, interests and royalties, Denmark has signed tax exchange information agreements which grants the access of financial nature information regarding the companies to the foreign tax authorities. These measures are taken in order to prevent tax fraud.

Also in order to avoid tax frauds, Denmark is following the controlled foreign corporation regime (CFC taxation). This way, the incomes of all its subsidiaries are added to the Danish parent company, but only if a parent company controls more than 50% of the voting rights in the subsidiary and more than 10% of the subsidiary’s assets and 50% of the taxable income consists in financial income.

Discussing with our accountants in Denmark prior to commencing the holding company incorporation process, or even after the company is registered, is helpful for investors who wish to understand the compliance requirements for these types of companies.

These measures are usually taken in order to make the holding companies opened in Denmark appealing to investors. 

The list below includes some of the most important taxes for Danish companies, and provisions that also influence the manner in which holding companies are treated:

  • the usual Danish corporate tax rate is 22%, and resident companies are taxed on their worldwide income; because they do not derive income from Denmark, holding companies can benefit from an effective exemption thereof;
  • the general withholding tax on dividends is 27%, however, this is reduced to 22% for companies because 5% can be reclaimed; our accountants in Denmark can give you more details about how this applies in practice;
  • additionally, the dividend withholding tax rate is 15% when the recipient company holds less than 10% of the company paying the dividends (and when the tax authorities from the country in which the recipient company is based have a tax exchange agreement with Denmark).

Our Danish lawyers can offer you more information on how the double tax agreements work.

The nature of a holding company’s activities can influence its accounting requirements. Nonetheless, all companies in Denmark are required to prepare annual financial statements and prepare the documents by using the Danish GAAP or the International Financial Reporting Standards. Our Danish accountants can help you with complete solutions for a holding company.

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What legal entity is suited for opening a holding company in Denmark?

The holding companies created in Denmark can be organized as “Anpartselskab” (private limited company- ApS) or“Aktieselskab” (public company- A/S).

The requirement for establishing these types of businesses in Denmark is that a minimum share capital is necessary: 40,000 DKK for a private limited liability company and 500,000 DKK ) for a public limited liability company. The contribution can be paid in cash or in kind.

Besides the above possibility, the holding companies established in Denmark can be formed from shelf companies. A shelf company is a company that has fulfilled all the requirements for registration and can be purchased by investors that wishes to avoid the waiting time caused by the registration of a company in Denmark.

The video below shows the main features of holding companies in Denmark:

What are the company formation steps in Denmark?

The process of registering a holding company in Denmark is very easy and involves only four steps: obtaining an electronic signature (Nem ID), opening a bank account and depositing the minimum share capital, register with the Danish Business Authority system and registering the employees for the social security contribution. We detail these below:

  1. Choose the type of company: this is decided according to the budget (in some cases), as well as the size of the intended business;
  2. Prepare the documents: both the private and the public companies are based on a set of constitutive documents: the Articles and the Memorandum of Association;
  3. Open a bank account: this is a corporate bank account opened in Denmark into which the share capital is deposited;
  4. Finish the documents: the founders sign the final version of the constitutive documents and also provide their own identification documents, as needed;
  5. Register the business: once the documents are in order, the actual registration of the business can take place with the Danish Business Authority; after the registration of the new business, the company is registered for tax purposes.

The name of the holding company does not need to reflect any relation to the companies in which it holds shares, as is the case for a branch in Denmark (which is an extension of the parent company abroad and it will have the same name, as available for registration in Denmark).

The public company will have more complex requirements for its management bodies and, for the purposes of a holding company in Denmark, business owners may also be subject to more complex audit and disclosure requirements, as may be the case. For example, the Danish authorities may ask some companies to obtain an assistance report prepared by an independent auditor, in the context of the applicable anti-avoidance rules.

As previously mentioned, a holding company is a Danish-registered business which is not used to engage in manufacturing or the provision of services, but merely in the holding of shares in other companies, or the holding of intellectual property. Because this is the case, the holding company will not need to engage in an additional post-registration step, which is applying for and obtaining the necessary special permits and licenses for activating in certain industries. At our law firm in Denmark, we also specialize in assisting company owners with their applications for these licenses.

Investors should allow around one week to open a private or a public limited liability company in Denmark. The effective registration process with the business authorities may not take this long, however, the extra days are allocated for the adequate preparation of the company documents, as well as meeting the other formalities. We advise foreign investors to get in touch with our attorneys in Denmark for complete information on the stages during which they need to be present in the country, as well as the option to have one of our company formation specialists handle part of the registration steps through a power of attorney.

Do not hesitate to get in touch with our corporate lawyers in Denmark for any company formation request.