In Denmark, there’s a specific legal structure called a holdingselskab, which functions as a holding company. The primary role of a holdingselskab is to own shares in other companies, often referred to as "operating companies" or "subsidiaries." This setup allows the holding company to invest in foreign subsidiaries, making it easier to manage investment portfolios and take advantage of different tax and corporate regulations across countries. These structures play a key role in the development and optimization strategies of multinational corporations.
Our company is here to help you with every step of setting up a holding company. We provide guidance throughout the entire registration process and make sure all legal requirements are met. With our support, establishing your company will be straightforward and quick, allowing you to focus on growing your business.
Legal forms of holding companies
If you’re thinking about starting a holding company in Denmark, you’ve got two main legal options to pick from, based on what your business needs and your goals.
First up is the limited liability company, or Anpartsselskab (ApS). This one’s pretty easy to set up, which is why many small businesses go for it. A big plus is that it gives owners limited liability, meaning you won’t be personally on the hook for any debts the company racks up. You only risk what you put into it.
Then there’s the joint-stock company, known as Aktieselskab (A/S). This option is a bit more complicated and comes with stricter rules, like needing a higher share capital and following more detailed management and reporting guidelines. Larger companies typically choose the A/S structure, especially if they want to raise money by selling shares and expand both in Denmark and internationally.
If you’re looking at a sole proprietorship, it can’t be a holding company. That’s because a sole proprietorship is owned by just one person, who takes on all the debts personally. A holding company, on the other hand, is meant to own and manage shares in other companies, known as subsidiaries. This kind of setup usually involves multiple shareholders and a more complex organization.
When it comes to deciding between an ApS and an A/S, think about things like the size of your business, your growth plans, and what you envision for its future.
Requirements for a Danish holding company
In order to establish a Danish holding company, which in Denmark is known as holdingselskab, you must meet several important capital and organizational requirements. The basic requirement is to bring in share capital, which varies depending on the legal form of the company. For a limited liability company (Anpartsselskab - ApS), the minimum amount of share capital is DKK 20,000. For a joint-stock company (Aktieselskab - A/S), on the other hand, the required amount is DKK 500,000.
At least one shareholder and one director are required. Directors perform management functions and are responsible for day-to-day operational decisions and the company's strategy. Note that directors do not have to be residents of Denmark, but the company must have at least one representative in the country who is responsible for its administrative and legal affairs.
There is no obligation for the word “holding” or any other designation to appear in the company name to suggest that it is a holding company. The company's name can be anything you want, as long as it complies with Danish law and is not confusing or similar to already existing company names. A holding company does not have to register as a VAT taxpayer, as it does not directly carry out operational activities that generate revenue subject to VAT.
Registration of a holding company in Denmark
Registration of a Danish holding company involves several key steps, which usually take about 6 days and are handled through the Trade and Companies Agency (Erhvervsstyrelsen). The process includes:
1. Obtaining an electronic signature (NemID or MitID):
The first step is to obtain an electronic signature, which is necessary for all paperwork related to the registration of the company and its subsequent management. NemID or MitID are forms of electronic signature required in Denmark, both for the company founder and its representatives.
2. Opening a bank account:
Next, you will need to open a bank account, which will be used to deposit share capital and for the company's day-to-day financial operations.
3. Company registration with the DBA (Danish Business Authority):
After obtaining an electronic signature and opening a bank account, it is necessary to register the company with the Danish Trade and Companies Authority (DBA). The registration process is done online and requires basic information about the company, such as the name, registered office address, shareholding structure and contact information for the board of directors. You will also need to provide documents confirming the contribution of share capital.
4. Employee insurance registration:
If the company plans to hire employees, it is necessary to register them with the social security system. This includes, among other things, health, pension and work injury insurance, which is crucial to comply with Danish labor law and ensure employee protection.
The establishment of a Danish holding company usually begins with its registration before the establishment of the operating companies, but the reverse approach is also possible, with more formal challenges. If an operating company already exists, the process of establishing a holding company can be carried out as a secondary step.
I. Registering a holding company after the establishment of operating companies:
In this scenario, transforming the existing structure can be more complicated, as it requires adjusting contracts, ownership structure and updating legal documentation. Formal transformations may need to be carried out, which may generate additional costs and require compliance with detailed legal requirements.
II. Using the same initial capital:
Another option is to register a holding company using the initial capital that has already been invested in the operating company. This can be done by transferring or splitting the working capital that was used to establish the operating company. This way can simplify the process of financing and integrating the two companies.
An alternative way to establish a Danish holding company is to purchase a ready-made company that already meets all legal and administrative requirements. Such companies are often run by specialized companies that prepare and sell such entities. Such a solution can significantly speed up the process and minimize the waiting time for registration.
Before buying a ready-made company, it is worth carefully checking its legal and financial status. Make sure that the company has no hidden liabilities or legal problems. It is also important to understand how the transfer of ownership will affect tax issues and what responsibilities will be associated with the continued management of the company. It is a good idea to consult a legal or tax advisor to make sure that all the paperwork has been properly completed and that the transaction complies with applicable laws.
Advantages and disadvantages of a Danish holding company
Advantages of a holding company:
- Quick and easy registration: The process of registering a holding company in Denmark is relatively quick and simple. It only requires filling out basic formalities and filing the relevant documents with the Danish commercial register. This makes it easy for entrepreneurs to start a holding company without unnecessary delays.
- No accounting procedures other than an annual audit of the books: Holding companies are not required to follow detailed accounting procedures, which simplifies bookkeeping. The only accounting obligation they have to comply with is to conduct an annual audit of their books of accounts. This audit is intended to ensure financial accuracy and transparency, but does not impose additional requirements for daily bookkeeping.
- No requirement to register for VAT: holding companies in Denmark are usually not required to register for VAT. Since their activities mainly involve managing shares in other companies rather than directly conducting business, they do not have to deal with VAT accounting, which simplifies financial management.
- No minimum number of shares in other companies required to be considered a holding company: In Denmark, there is no specified minimum number of shares that a holding company must hold in other companies to be recognized as a holding company. As a result, different capital structures can be tailored to the owners' needs, allowing greater flexibility in building an investment portfolio.
- Attractive tax rates for dividends and gains on the sale of shares: Holding companies enjoy preferential tax rates that significantly reduce the tax burden on dividends and gains on the sale of shares.
- Ability to transfer deficits from one operating company to another under joint taxation: Within a group of holding companies, there is the possibility of transferring financial losses from one operating company to another, thus reducing the overall level of taxes.
- Ability to transfer dividend profits from one company to another to conserve capital: Holding companies can transfer profits in the form of dividends from one operating company to another within the group, thus protecting capital and optimizing the financial structure.
Disadvantages of a holding company:
- Usually no operating activities other than managing the ownership of operating companies: Holding companies typically do not engage in operations, focusing only on managing and controlling their ownership in other companies. Such a model can limit revenue-generating opportunities, as the holding company itself does not engage in direct business activities.
- Tax laws vary depending on the number of shares held and the legal form of the subsidiaries: Taxation of holding company income can be complicated by differences in tax laws depending on the number of shares held and the legal form of operating companies. In Denmark, the rules for taxing dividends and gains from the sale of shares vary depending on whether the shares are in private or public companies and the percentage of ownership. This requires careful management and monitoring to optimize the tax burden.
- More difficult registration of Danish holding company if operating companies are established first: The process of registering a holding company in Denmark can be more complex if operating companies are established first. In this case, additional requirements and formalities may have to be met to integrate the companies and ensure that the holding structure meets all legal requirements.
- Complexity of legal relationships between the holding company and subsidiaries, which can be complicated without the support of specialists: The management of a holding company involves complex legal and financial relationships between it and its subsidiaries. This structure can be difficult to manage without adequate legal and financial support. Problems can arise in terms of contracts, capital flow regulations, profit distribution or regulatory issues.
- Possibility of being held liable for operating company debts: Although a holding company limits its liability to its holdings in other companies, in some circumstances it can be held liable for the debts of operating companies. This can occur if the holding company has significant influence over the management of the operating companies, or if there are guarantees or other financial obligations provided by the holding company.
Taxation and costs of a holding company in Denmark
The cost of registering a holding company in Denmark is DKK 670, regardless of whether it takes the form of Anpartsselskab (ApS) or Aktieselskab (A/S). Keep in mind, however, that additional expenses may arise if you decide to enlist the help of a law firm or accounting firm.
In Denmark, the amount of tax for a holding company depends on the type of income it earns. The key categories of income are:
1. Dividends paid by the operating company: Dividends that a holding company receives from companies in which it has invested are taxable. Generally, 70% of dividends received by the holding company are subject to income tax.
2. Gains from the sale of shares (interests in operating companies): When a holding company realizes a gain from the sale of shares in other companies, these gains are usually exempt from income tax. This means that the holding company can enjoy tax benefits in this regard, which is an important convenience for financial management.
In addition, the legal form of the operating companies from which the holding company receives income is important. These can be private (ApS) or public (A/S) companies. Depending on whether the operating companies are private or public, different tax laws may apply, as well as different rules regarding the payment of dividends and the realization of profits. The legal form of operating companies can affect how income is taxed and how a holding company can manage its finances and tax obligations.
Although Danish law does not specify the detailed accounting procedures that must be followed by holding companies (holding selskab), there is an annual obligation to audit the accounts. This auditing obligation is intended to ensure the accuracy and reliability of the financial information presented, which is crucial to the transparency of the holding company's operations. The audit makes it possible to assess the compliance of the accounting books with applicable standards and laws, as well as to detect any irregularities or errors in the financial records.
If a Danish holding company owns less than 10% of another company, such shares are referred to as “portfolio shares.” Portfolio shares are shares that do not have a decisive influence on the management or control of the company in which they are held, which often means that an investment in such a company is more speculative or passive. If a Danish holding company owns only foreign shares, it is not subject to corporate income tax (CIT) in Denmark. This means that income earned from holding and selling shares in companies based outside Denmark is exempt from income tax in the holding company's home country.
Income earned from holding shares in Denmark is subject to different tax rules, which depend on the type of shares held and the legal form of the company:
- Owning less than 10% of a private company (portfolio shares): Income from portfolio shares that represent less than 10% of a private company's capital is also exempt from income tax.
- Ownership of 10% or more shares in a private company: Income from such shares is exempt from income tax. This tax exemption applies to gains realized both from dividends and from the sale of such shares.
- Ownership of less than 10% of shares in a public company (public portfolio shares): Income derived from owning less than 10% of shares in a public company is also taxed at 22%.
- Ownership of 10% or more shares in a public company: If you own significant stakes (10% or more) in a public company, income from those shares is subject to the standard income tax rate of 22%. This includes both dividends and gains derived from the sale of shares.
If the holding company owns 50% of the Danish company, it becomes responsible for managing the joint tax regime for both companies, according to Danish regulations. If both companies are registered in Denmark, they must report to SKAT Erhverv within a month of starting joint taxation. The possibility of joint taxation also exists when the companies are located in different countries, involving the division of responsibilities between the operating and holding companies. When the operating company is fully owned by the holding company, the liability is total; however, if the company is only partially owned by the holding company, the liability is partial. In addition, both companies must have the same tax year. A change in the holding company's fiscal year also affects the operating company, since the holding company has an overriding position.
Liability for subsidiaries
It’s important to keep in mind that even though a Danish holding company mainly exists to own shares in other companies, it can still be on the hook for the debts of the companies it holds shares in. So, even if the holding company isn’t running any business itself, it still faces some financial risks because of its subsidiaries' liabilities.
On the bright side, there aren’t any strict rules in Denmark about what kind of activities a holding company’s subsidiaries can be involved in. This means a holding company can invest in a variety of industries, which helps create a diverse investment portfolio. You might see investments ranging from tech and manufacturing to trading, services, and finance. This kind of flexibility lets companies spread out their risk and seize different market opportunities, which is especially beneficial for international holding companies that operate across various sectors.
