Business Operations in Denmark (Portfolio 959)

Tax Management Portfolio, Business Operations in Denmark, contains the basic information that will enable a business to determine the best method of conducting its operations in Denmark from both the tax and the general legal points of view.

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The Portfolio analyzes in detail the statutory and procedural framework of Danish income taxation as applied to individuals and corporations. This analysis also includes many other legal details vital to the organization of a Danish company. In addition to a detailed explanation of the income taxation, the Portfolio discusses the value added tax, and gift and inheritance tax.

The Worksheets in the Portfolio include an example of a computation of an individual's income tax, the memoranda of association and articles of association for both joint stock and private limited companies, and the Denmark-United States tax treaty.


Business Operations in Denmark was authored by the following experts.
Christian Emmeluth

Christian Emmeluth obtained an L.L.B.M. from Copenhagen University in 1977 and became a member of the Danish Bar Association in 1980. During 1980–81, he studied at the New York University Institute of Comparative Law and obtained the degree of Master of Comparative Jurisprudence. In 1988, Mr. Emmeluth was admitted to the Supreme Court in Denmark. Mr. Emmeluth has previously worked in London and is now a member of the niche firm “CPH LEX Advokater” in Copenhagen. He is also assistant professor at the University of Copenhagen lecturing on international tax issues.

Table of Contents

Detailed Analysis

I. Denmark - The Country, Its People and Economy

II. Operating a Business in Denmark

A. Foreign Investment Regulations

B. Currency and Exchange Controls

1. Direct Investment

2. Financing a Danish Subsidiary

3. Financing Loan from a Parent

4. Cash Pooling

5. Payments Between Residents and Nonresidents

6. Deposits in Foreign Currency Accounts

7. Conversion to the Euro

a. Impact of the Introduction of the Euro

b. Costs Relating to the Implementation of Changes Consequent to the Introduction of the Euro

c. Foreign Exchange Gains and Losses

C. Trade and Commerce Regulations

1. Imports and Exports

a. Licenses and Quotas

b. Import Duties

2. General Regulation of Business

a. Monopolies

(1) Agreements Limiting Competition

(2) Competition Board

(3) Granting of Exemption

(4) Terms and Conditions for Trading Issued by a Business Having a Dominant Position in the Market

(5) Abuse of Dominant Position

(6) Public Aid Which Distorts Competition

(7) Appeal

b. Mergers

c. Restrictive Trade Practices

d. Price Controls

e. Securities Regulation

3. Licensing and Franchising in Denmark

a. Patents

b. Trademarks and Trade Names

c. Industrial Design

d. Copyrights

D. Immigration Regulations

E. Labor Relations

F. Financing the Business

III. Forms of Doing Business in Denmark

A. Principal Business Entities

1. Sole Proprietorship

2. Joint Stock Corporation

3. Partnership

4. Branch of a Foreign Corporation

5. Other Entities-Cooperatives

B. Joint Stock Companies

1. Formation

a. Registration

b. Articles of Incorporation

c. Bylaws

d. Shares of Stock

e. Capital Stock

f. Costs of Incorporation

2. Operation

a. License

b. Amendment of Bylaws

c. Reduction of Capital

d. Acquisition of Own Stock

e. Corporate Officers: Manager

f. Shareholders’ Meetings

g. Directors’ Meetings

h. Books and Records

i. Financial Statements

j. Dividends and Other Distributions of Profit

k. Reserves

3. Statutory Mergers and Divisions

4. Liquidation

5. Reorganization

C. European Company (SE)

D. Other Business Entities

IV. Principal Taxes

A. Income Tax

B. Capital Gains Tax

C. Estate Duty and Gift Tax

1. Estate Duty

a. In General

b. Calculation of Estate Duty

2. Gift Tax

D. Value Added Tax

E. Salary Tax

F. Capital Investment Tax

G. Trade Tax

H. Net Worth Tax

I. Hydrocarbon Tax

1. Corporate or Individual Income Tax

2. Determination of Hydrocarbon Tax

3. Changes for Concessions Granted Before January 1, 2004

4. Concessions Granted After January 1, 2004

5. Taxation of Individuals Under the Hydrocarbon Tax Act

J. Other Taxes

1. Tax on Real Property

2. Automobile Weight Tax

3. Excise Tax

4. Stamp Taxes

5. Vehicle Registration Tax

6. Stock Exchange Transfer Tax

V. Taxation of Domestic Corporations

A. What Is a Domestic Corporation?

B. Corporate Income Tax

1. Taxation of Worldwide Income

2. Accounting

a. General

b. Accounting Periods

c. Accounting Methods

d. Inventories

e. Joint Taxation

(1) Definitions

(2) Domestic Joint Taxation

(3) International Joint Taxation

(4) Dividends

(5) Allocation of Tax Losses

(6) Debt-to-Equity Considerations

(7) Depreciation Within a Jointly Taxed Group

(8) Allocation of Net Tax Payable

(9) Tax Consequences of Termination of Joint Taxation

(10) Other Limitation Provisions in Relation to International Joint Taxation

(11) Transitional Rules Concerning International Joint Taxation

f. Controlled Foreign Corporation

g. Investment Fund Reserve

3. Calculation of Gross Income

a. General

b. Capital Gains

(1) Shares

(2) Real Property

(3) Claims and Debts

(4) Machinery, Equipment and Ships

(5) Intangibles

c. Dividend Income

d. Income from Foreign Sources

e. Stock Options

(1) Stock Options Granted Before July 1, 2003

(2) Stock Options Granted On or After July 1, 2003

f. Employee Share Ownership Programs

(1) Plans Established Under Section 7A of the Tax Assessment Act

(a) General Rules

(b) General Rules Applying Only to Share Ownership Programs

(c) Warrants and Options

(2) Plans Established Under Section 7H of the Tax Assessment Act

g. Exclusions from Gross Income

4. Deductions

a. Business Expenses

(1) Administrative Expenses

(2) Travel and Entertainment Expenses

(3) Interest and Royalties

(4) Taxes

(5) Depreciation and Amortization

(a) Provisions Applicable to Operating Equipment and Vessels

(b) Operating Equipment and Vessels Used Partly for Commercial and Partly for Private Purposes

(c) Real Property

(d) Advance Depreciation

(e) Depreciation of Goodwill, Patents and Copyrights

(6) Quotas

(7) Contracts

(8) Obsolete Equipment

(9) Charitable Contributions

(10) Capital Losses

(11) Casualty Losses

(12) Reserve Accounts

(13) Bad Debts

(14) Inventory Write-Downs

(15) Rents

(16) Salaries, Wages and Directors’ Fees

(17) Dividends

b. Other Deductions from Gross Income

(1) Research and Development Costs

(2) Gains and Losses on Foreign Exchange

(3) Gains and Losses on Foreign Exchange and Intercompany Loans

c. Capital Expenditures

d. Loss Carryovers and Carrybacks

5. Tax Credits

a. Tax Relief for Foreign-Source Income

b. Relief for Foreign Taxes

6. Tax Rates and Calculation of Taxable Income

7. Assessment and Filing

8. Amalgamation of Companies - Mergers

a. General

b. Tax-free Mergers

(1) Domestic Mergers

(a) Succession Principle

(b) Disposal of Shares in the Transferring Company

(c) Shares in the Receiving Company

(2) Mergers with Foreign Companies

(3) Divisions

(4) Transfer of Assets

(5) Exchange of Shares

9. Taxation of Shipping Income

VI. Taxation of Foreign Corporations

A. What Is a Foreign Corporation?

B. Determination of Taxable Income

VII. Taxation of Foreign Operations

A. Foreign Branch

1. Determination of Taxable Income

2. Method of Taxation

B. Foreign Subsidiaries

C. Tax Regime for Danish Holding Companies

1. Introduction

2. Repeal of Withholding Tax on Dividend Distributions

a. Holding Requirements and Qualifying Dividend-Paying Companies

b. Companies Qualifying for Receipt of Tax-Exempt Dividends

3. Foreign-Source Dividends Received by Danish Companies

VIII. Taxation of Partnerships

IX. Taxation of Other Business Entities

A. Associations, Societies, Unions, Trusts, Foundations and Institutions

B. Cooperative Societies

C. Estates

D. Bankrupt Companies and Individuals

1. Companies

2. Individuals

3. Compositions

X. Taxation of Resident Individuals

Introductory Material

A. Scope of Taxation

B. Residence

C. Determination of Gross Income

D. Allowances, Deductions and Credits

E. Rates and Calculation of Taxable Income

F. Taxation of Seamen

G. Social Security Contribution

1. Chargeable Persons

2. Tax Basis

3. Collection

H. Assessment and Filing

XI. Taxation of Nonresident Aliens

A. Scope of Taxation

B. Personal Income

1. General

2. Section 48E of the Tax at Source Act

a. Subject to Danish Taxation on Worldwide Income

b. Work to Be Carried out in Denmark

c. Further Conditions

d. Limitations

e. Time Limit

f. Clawback Provisions

C. Business Income

D. Investment Income

E. Capital Gains

F. Allowances

G. Method of Taxation: Calculation of Taxable Income

XII. Intercompany Pricing

A. Adjustment of Intercompany Prices

B. Competent Authority

XIII. Avoidance of Double Taxation

A. Foreign Tax Credit

B. Tax Treaties

1. Income Tax Treaties

2. Taxation of Business Income

a. Permanent Establishment

b. Industrial or Commercial Profits

3. Investment Income

4. Exchange of Information

5. Estate Tax Treaties

Working Papers

Working Papers

Table of Worksheets

Worksheet 1 Articles of Association Regarding a Joint-Stock Company A/S

Worksheet 2 Articles of Association for a Private Limited Company (ApS)

Worksheet 3 Computation of Income Tax for Individuals (2005)

Worksheet 4 Corporate Tax Return

Worksheet 5 Controlled Transactions Form

Worksheet 6 Relief from Danish Dividend Taxation Form

Worksheet 7 1948 Denmark-United States Income Tax Treaty

Worksheet 8 1999 Denmark-United States Income Tax Treaty

Worksheet 9 2006 Protocol to 1999 Denmark-United States Income Tax Treaty