The branch is a separate office of the company, based in a different jurisdiction where the foreign corporation expands its business activities. It can carry out any of the activities the foreign company is allowed to perform, however, it cannot expand beyond these. In essence, the Danish branch is an extension of the parent company that has a set of advantages and is a preferred means of business expansion, especially for banks and other financial institutions.
Opening a branch in Denmark is an easy process if a few requirements are met such as the legal form of the parent company (it has to be a limited company, a partnership or a form of business accepted by the Consolidated Act on Certain Commercial Undertakings) and the location of the foreign company (must be in the EU, EEA and if it’s a non member country, it has to bring evidence that Denmark’s companies are free to open branches there). At least one manager must be a resident in Denmark or in an EU or EEA country.
| Quick Facts || |
| Applicable legislation (home country/foreign country) || |
The branch operating in Denmark is subject to Danish law.
Best Used For
| The same business activities as the parent company abroad |
| Minimum share capital (YES/NO) |
| NO |
| Time frame for the incorporation || 1 week |
| Management (Local/Foreign) || Locally managed by one or more appointed branch managers |
| Legal representative required (YES/NO) || |
| Local bank account (YES/NO) || |
| Independence from the parent company || NO |
| Liability of the parent company || Full |
| Corporate tax rate || 22% |
| Possibility of hiring local staff (YES/NO) || YES |
In general, companies that are allowed to set up branches in Denmark in 2023 can be included in one of the following categories: they are foreign public limited companies, limited partnership companies, private limited companies or other companies that have a similar corporate form and are based in an EU/EEA country, the United States of America, Switzerland, Georgia or South Korea. The Danish Business Authority may grant a permit for other companies to do business in the country under the form of a branch. Alternatively, the same permission may be granted by the Business Authority if it is believed that a Danish limited company enjoys the same rights in that specific country.
The name must clearly state the status of the branch
and must contain the name of the foreign company’s country (not mandatory for the countries included in the Consolidated Act on Certain Commercial Undertakings). If you intend to invest in Denmark
by setting up a branch office here, our team is at your disposal.
Registration of a branch in Denmark
The following documents are needed in order to register the branch with the Danish Business Authority:
• Copies of the Articles of Association: the head office must provide copies of the parent company’s Articles of Association; this may not be needed when the foreign entity is located in EU/EEA;
• Confirmation from the local company register: a document confirming the fact that the foreign company is duly registered with the local company’s register is needed for incorporating a branch.
• Power of attorney: this document is required for the individual who will be appointed as the branch representative; it will state the identification information as well as the powers;
• Reciprocity statement: this is only required when the parent company is based in certain jurisdictions; it is a declaration from the foreign company stating that it may open branches.
The registration of the branch with the Danish Business Authority can last more than one week. By contrast, the registration of a new limited liability company can, in principle, take place within 24 hours if all the documents are in order.
Therefore, the time needed to register the business can also be an important factor for foreign businesses deciding on the business form under which they will operate in Denmark in the future.
Our Danish company formation experts can provide foreign companies with complete details on how they can expand their business operations in this country. After an initial evaluation of the business, including the industry in which it operates and the country in which it is registered, we will be able to answer detailed questions about your options.
Regulations for branches in Denmark
After receiving a unique registration number, the Danish branch must also register for social security purposes.
Even though is not considered a legal entity, a branch is advantageous especially because it doesn’t have to prepare its own audited financial statements. However, a certified copy of the audited financial statements of the parent company must be deposit at the Danish Commerce and Companies Agency. Also, the bookkeeping is necessary as the branch must pay VAT like any ordinary local company.
The Danish branch is subject to taxation in the country at the applicable rate of 22%. It is treated as a permanent establishment in Denmark for taxation purposes. Our team of agents who specialize in company formation in Denmark
can give investors more details about how the provisions of double tax treaties apply in case if branches (when such a treaty exists between Denmark and the country in which the foreign parent company is based). The branch will also need to observe the requirements for VAT registration in Denmark
One of the most important issues to take into consideration for foreign companies that expand their business to Denmark using a branch office is the liability level: the parent company abroad is fully liable for the debts and obligations of its Danish branch.
Special considerations for opening a branch in Denmark in 2023
Some of the special considerations when opening a branch have to do particularly with the aforementioned liability. Because of this, foreign legal entities that wish to establish their presence on the Danish market can choose to open a limited company instead of a branch. The Danish company formation process is not a complicated one and the opening of a company does not take longer than opening a branch. In fact, in some cases, the entire process may be easier when choosing to open a new company compared to setting up a branch because the new company will not depend on the parent company abroad (and the required documents and statements for branch formation). The company will be completely independent of the foreign entity and will be registered just like any other local company in the country. Moreover, it will be able to function under a different name and it is limited to the activities of the parent company.
Investors who open a company in Denmark
have the option to use it as their headquarters for the Nordic region and this can bring certain advantages, mainly those already specified, the fact that the foreign entity will not be liable for the Danish company’s actions.
An alternative to the Danish branch is the representative office, which can be used for purely promotional purposes. This means that the representative office will not be used to derive income from Denmark and thus it will not be subject to the Danish corporate income tax. It does not need to be registered with the Business Authority, however, given the fact that the scope of its activities is limited, companies that are ready to expand and engage in business activities in Denmark in 2023 do not commonly use it. It can, however, be used by companies that are only testing the Danish market or are in need of engaging in marketing or promotional activities.
One of the main advantages of both the branch and the representative office is that they do not require a minimum capital. On the other hand, the liability of the foreign company is unlimited. By contrast, a Danish private limited company, the ApS, does require a minimum share capital of 40,000 DKK but the liability of the members is limited to the extent of their capital investments.
A branch in Denmark can function via a virtual office. With this service, the branch will have access to professional business facilities, such as office space, a local telephone number, mail forwarding services and, of course, a registered address at a professional location in Copenhagen or another Danish city. The virtual office can be a preferred means of running a business in the country because of the reduced maintenance costs (fees are applicable for the services but they differ from renting or purchasing office space in Denmark as well as equipping and managing the new business premises).
Our company formation packages in Denmark are also available for foreign companies that are interested in setting up a branch in Denmark. One of our agents can give you more details on the process of establishing a branch as well as guide you throughout the registration process. The steps needed for branch formation are not complicated, however, some of the documents need to be prepared beforehand as well as a number of translations into Danish of the official company documents for the parent company abroad.
If you plan on setting up a branch in 2023, our team can help you outline all the needed steps as well as a timeline for the procedure. If needed, should be branch representative appointed for Denmark be unable to travel to the country for the formation procedures, one of our agents can act on his behalf whenever possible. We can help draft the branch documents and handle the mandatory registrations with the Danish authorities.
Doing business in Denmark
A branch not only needs to be registered with the Danish Business Authority, it will also need to comply with the requirements for registering for digital self-services for corporations, as well as comply with the rules of social security and workers compensation.
We advise foreign businesses looking to expand to Denmark to reach out to one of our company formation specialists to find out more about the current registration steps, as well as the laws they need to comply with, in terms of taxation, employment and generally for doing business, before they establish their branch or representative office.
By being fully aware of the Danish rules, which are in line with the EU regulation, foreign investors (especially those from non-EU/EEA countries) will be better prepared to run their Nordic headquarters based in Copenhagen or another Danish city.
Some of the main aspects concerning social security in Denmark include the following:
- - the company pays labor market supplementary pension for employees who work at least 9 hours per week and are aged 16 and over;
- - a company that pays the aforementioned contribution will also pay the financial support scheme for trainees, make contributions co maternity benefits, make contributions to the labor market fund for occupational diseases, and pat sickness benefits according to the employee’s sickness;
- - the branch is registered as an employer by filling in a special form for companies; our team can give you more information about this step;
- - branches that dire employees in Denmark are also liable for occupational injuries and accidents; taking up an insurance policy with a private insurance company is the norm; all workplace injuries are reported accordingly to the Labor Market Insurance.
All companies in Denmark are required to comply with the rules for ensuring a safe and proper work environment. This also applies to branches that operate in the country. Foreign companies incorporated in another EU/EEA Member State can be familiar with much of these regulations, as the Danish laws are in line with the EU regulation, however, in some aspects, the Danish law can prevail and can be stricter than the laws applicable in the EU Member State in which the parent company is incorporated.
The branch will need to ensure the compliance with the working environment rules, both in terms of health and safety, as well as the psychological aspects of the working environment.
Foreign companies can choose to operate via a branch or a limited liability company in Denmark. Their choice will depend on many different factors, among which the desired level of control over their Danish counterpart, the industry in which they activate in their country of origin (as branches tend to be more employed by companies in the financial sector), as well as other issues that may concern their permission to open a branch in Denmark.
Our team has only briefly outlined the conditions for branch registration in the country in this article.