Well known as a peaceful nation and hailed as one of the least corrupt countries worldwide, Denmark has a very inviting environment for businesses. It constantly ranks as one of the happiest countries, mainly because of the excellent work-life balance practiced by many corporations. Also, around 40% of the country’s energy is powered by wind, making it one of the most sustainable countries in the world.
All these things contribute to Denmark being a superb choice for businesses and expatriates who want to expand their horizons abroad. For those interested in setting up a business in Denmark, check out how you can do it in this guide.
Why Do Business in Denmark?
Denmark’s robust economy is backed by its innovations in technology. The World Bank ranks Denmark the number 1 country on the ease of doing business in Europe list. Furthermore, it is fourth in the same category when compared to other countries worldwide. These ratings are a good reflection of how welcoming the country is when it comes to establishing new businesses and encouraging the growth of existing ones.
Its strategic location positions itself as a gateway into other European countries. As such, Denmark hosts regional offices of numerous international corporations and has one of the largest shipping economies in the world. It also has access to more than 500 million consumers.
Advantages to Doing Business in Denmark
Here are some important advantages of doing business in Denmark:
- Most people speak English well, so communication will not be a problem.
- The labor market is flexible, so there are lesser litigations that happen in the country, in comparison to other developed nations.
- Business infrastructure is one of the best globally, with reliable utilities and a well-developed financial system to back the industry.
- A strong and stable economy that the World Bank trusts.
- Business-friendly tax rules that are highly attractive to foreign investors.
- It has an advanced healthcare sector.
- Support for technology and innovation.
- Denmark’s excellent education system produces highly skilled graduates.
- Openness to international investment makes the country a very conducive market for organizations.
Legal System in Denmark
Denmark is under a parliamentary democracy, with the parliament called Folketing. It has a multi-party system. The official head is the Danish Queen. However, her role is mainly ceremonial. The Prime Minister is the leading figure in governing the country.
Business Entities in Denmark
For those who want to start a business in Denmark, there are several types of legal entities to choose from. Both local and foreign investors can incorporate any of these entities:
- General Partnership
- Sole Proprietorship
- Limited Partnership
- Private Limited Company
- Public Limited Company
- Branch and Representative Office
The type of business entity to register will also depend on the available capital and plans for the company. It is possible to change the type of business entity when the situation demands it.
Taxation in Denmark
Denmark belongs to the list of countries with the highest tax rates worldwide. It has a progressive tax system that both residents and non-residents must adhere to.
Personal income tax is rated up to 52.06% of the salary, with a bottom tax base rate of 12.11%. Meanwhile, the corporate tax imposed on businesses is 22%. Taxes are generally paid after expenses have been deducted. Employers in Denmark pay a low social contribution rate at 1% of the employee’s salary, which is capped at €1,350. The country has no double taxation rules for Danish companies with overseas branches.
Working Hours in Denmark
The working hours in Denmark are usually 37 hours per week. Anything shorter than the 38 hours is classified as a part-time job.
The country, however, has the “48-hour rule” that states that within a four-month period, the average working time per week must not exceed 48 hours. There is also the “11-hour rule,” which says that employees are entitled to 11 hours of rest within a 24-hour period.
There is no main rule for doing overtime work other than what is on the contract. Employees must agree to do overtime work even without prior notice unless a more urgent reason is given to refuse to do so.
Denmark has a holiday legislation called ‘Ferieloven’. According to this law, employees accrue 2.08 holidays per month and can be carried over the following month. It means that within a year, employees get five weeks’ worth of vacation leave days.
However, this Danish holiday law does not entitle employees to receive compensation for the day/s they are away unless expressly stated in the contract. Some employers allow care days and additional holiday days aside from those mandated under the Ferieloven.
Employers have the right to determine whether sick leave can be awarded full compensation. The good news is that the majority of employers give full salary benefits for a certain period of sick leave taken.
Employers usually pay sick leave holidays for up to 30 days, so long as the employee has worked at least 74 hours in the past eight weeks before the illness. In case rest is needed after 30 days, the municipality where the business is registered will cover the sickness benefits of the employee, as long as they satisfy the necessary requirements.
Public Holidays in Denmark
- New Year’s Day
- Maundy Thursday
- Good Friday
- Easter Monday
- General Prayer Day
- Ascension Day
- Pentecost Sunday
- Whit Monday
- Christmas Eve Day
- Christmas Day
- Second Day of Christmas
Healthcare in Denmark
Denmark has a decentralized health system wherein the national government provides block grants to municipalities that handle the delivery of health services to residents.
Residents are entitled to free primary, specialist, and hospital care services including mental, preventive, and long-term care health treatments. Almost all residents opt for Group 1 coverage, wherein general practitioners are preferably accessed for free before they are referred to specialists.
Registered immigrants are also covered by the Danish universal healthcare system.
Residents and non-residents may still acquire complimentary insurance to cover additional services and doctor prescriptions. Private companies also offer supplemental insurance for expanded access to private medical service providers.
INS Global in Denmark
As one of the world’s leading global PEO providers we are able to help businesses who wish to expand to Denmark or elsewhere in Europe. Our comprehensive set of services allows your business to hire and pay staff in Denmark, recruit top talent in the region, and invoice clients without having a local entity setup. Our goal is to simplify doing business in Denmark for you. Get in touch with us right away and let our consultants walk you through our flexible processes.