Starting A Business In Denmark In 2024? Here Are Some Key Considerations

Denmark is applauded for its strong emphasis on sustainability and innovation, which deeply influences its culture and industries. The country is a leader in renewable energy, particularly wind power, and has a flourishing tech sector.

These characteristics make Denmark an attractive destination for entrepreneurs. However, there are essential factors to consider when setting up a business in Denmark. Entrepreneurs must evaluate the economic environment, understand the legal and regulatory requirements, navigate the taxation system, and comply with labor laws.

With a favourable business climate and a strategic location in Europe, Denmark offers many opportunities, but thorough preparation is key for successfully launching a business venture there.


Economic Overview


Denmark’s economy is currently experiencing steady growth, with both positive trends and underlying concerns. The economy is expected to grow by approximately 2.6% in 2024, largely driven by strong industrial production, particularly in the pharmaceutical sector according to the European Commission.

Additionally, Denmark maintains robust public finances, with a healthy budget surplus and low public debt, providing a reliable financial safety net. The unemployment rate remains low, indicating a stable labour market.

However, some challenges are evident. Growth has slowed compared to the robust recovery of recent years. Inflation, although slightly reduced, still exerts pressure on household budgets. The housing market faces potential investment dampening due to rising interest rates and high uncertainty.

Looking ahead, Denmark’s economic outlook is generally positive, but certain risks remain. The long-term impact of inflation and potential issues in the housing market require careful monitoring.


Legal And Regulatory Framework


Denmark is recognised for its business-friendly environment, and has a straightforward process for establishing a company. Entrepreneurs can choose from various legal structures, with the limited liability company (anpartsselskab) being the most common choice for foreign investors.

The country benefits from a transparent and well-defined legal system, which simplifies regulatory compliance.

The Danish Business Authority (Erhvervsstyrelsen) provides an online platform (“Start Virksomhed”) for company registration, which significantly streamlines the process. This service requires a Danish social security number and a digital ID. Additionally, Denmark has a relatively low minimum share capital requirement, currently set at DKK 50,000.

After registering your company, it is essential to register with the Danish Tax Authority (Skat) to fulfil tax obligations. Depending on your industry, you might also need additional permits or licenses to operate legally.


Taxation And Financial Management


Denmark’s taxation system, while reputed for high personal income taxes, offers a relatively straightforward structure for businesses. According to MGI Worldwide, the corporate tax rate is a flat 22% on taxable profits, which is competitive compared to other countries.

Startups can benefit from the “business tax scheme,” where reinvested profits are taxed at the lower rate of 22%, while profits taken as personal income are taxed at standard income tax rates.

The standard Value Added Tax (VAT) rate in Denmark is 25%, applicable to most goods and services as reported by Skat. Certain items, like groceries and public transportation, benefit from reduced VAT rates. Businesses with an annual turnover exceeding DKK 50,000 must register for VAT.

Employers in Denmark are required to contribute a percentage of employee salaries towards social security and labour market schemes. Additionally, businesses may be subject to municipal taxes, depending on their location.


Hiring And Managing Employees


Danish labour law emphasises employee protection, ensuring employee well-being with regulations on working hours, vacation time, parental leave, and sick leave. Many industries have strong unions, and collective bargaining agreements set minimum wages and working conditions.

Anti-discrimination laws also ensure fairness throughout recruitment. It is mandatory to have clear and detailed employment contracts outlining terms and conditions.

The Danish work culture values collaboration and consensus-building. Flexible working arrangements, such as part-time work and remote work options, are common. Offering competitive salaries and benefits packages is crucial for attracting and retaining talent.

Understanding Danish labour laws is vital. Resources like Work in Denmark provide comprehensive overviews of labour market regulations, while the Danish Employer Confederation (DA) offers guidance on employment law and regulations.

In conclusion, Denmark presents a compelling environment for entrepreneurs, characterised by its strong emphasis on sustainability and innovation. While the country offers numerous opportunities, particularly in renewable energy and technology, thorough preparation is essential.

Prospective business owners must navigate the economic challenges, legal and regulatory frameworks, taxation system, and labour laws to ensure a successful venture. With the right approach, Denmark can be a promising location for new business endeavours.