In recent times, traveling abroad for work has become a common phenomenon. A frequent reason for such a change is the opportunity for development and attractive salary conditions. Denmark is one of the most frequently chosen countries to which Poles go for work.
Citizens of countries that are members of the European Union can go to work in Denmark without a visa. According to EU regulations on the movement of workers and services, any person who takes a job in Denmark is entitled to work and live there legally, without a work and residence permit. However, confirmation of registration is required, which can be obtained from the regional government administration. Citizens of EU member states may stay in Denmark for a maximum of three months. Job seekers, on the other hand, may stay in the country for a maximum of 6 months, provided they are able to support themselves.
TRADITIONAL EMPLOYMENT OF AN EMPLOYEE IN A COMPANY VS. EOR, OR „EMPLOYER OF RECORD”
Traditional employment of an employee in a company
Denmark is a country that does not have a uniform labor code. Danish law also does not regulate minimum wages or the rules of cooperation between employee and employer. Matters pertaining to employer-employee relations are regulated by a master agreement between the Danish Confederation of Employers and the Danish Federation of Trade Unions.
Under these agreements, issues related to working time, vacation time, wages and retirement age are regulated. However, there is a provision in Danish law regarding the employment of foreigners, according to which their salaries cannot be lower than those of Danes who are employed in the same positions.
The terms of the master contract, which is concluded between the Danish Confederation of Employers in the Danish Federation of Trade Unions, can be negotiated once every four years. The exception is the employee salaries aspect, which is negotiable every 2 years.
About 85% of working people in Denmark belong to trade unions. Their position is therefore quite strong.
Collective labor agreements apply to many companies in a given industry. They set the amount of compensation for work. Depending on the work performed, remuneration may be calculated, for example, on the number of hours worked, on the results of work, on piecework, or on other terms.
Collective agreements also establish other elements of remuneration such as sick pay, the amount of allowances for afternoon and night work, or pension allowances. Under some agreements, wages may include an allowance of a minimum amount, which is set individually with the employee. Collective agreements are usually nationwide.
Wages may also be set during negotiations within the company. In addition to the amount for the number of hours worked, the total salary usually includes other components. An entrepreneur can obtain information on wage conditions in a given sector by contacting sides of the labor market that are covered by agreements. The employer also takes into account the employee’s experience and skills. The lowest wages in Denmark usually start at DKK 110 per hour gross.
Top-down rates are set:
– For drivers who perform cabotage and combined transport. Their minimum gross rate per hour must not be less than DKK 163 per hour.
– For production workers. Their minimum gross rate per hour must not be less than DKK 127.
Salary components in Denmark include:
– minimum rate established,
– in the case of agreements on minimum wages and unspecified rates, elements of remuneration are based on local agreements, personal wage, and personal allowance,
– pay for vacation leave,
– pay for vacation days established under collective agreements,
– remuneration for public holidays,
– remuneration for overtime,
– contribution to the company pension scheme,
– contributions to the salary account (special savings),
– in the area of ordinary wages, remuneration usually includes fixed allowances for all salaried employees,
– allowance for shift work,
– allowance for evening, night and weekend work,
– allowance for staggered working hours,
– allowance for work outside the company and business travel, which includes a social allowance that does not constitute reimbursement for expenses incurred,
– pay for the first day of a child’s illness,
– in addition to the benefits that result from the Maternity Leave Act, additional pay for maternity leave,
– remuneration for incapacity for work due to illnesses not covered by sick pay,
– the amount of wages and terms of collective bargaining agreements according to selected professional groups (construction workers, bricklayers, painters, electricians, carpenters and joiners, operators and assemblers, cleaning personnel, unskilled laborers, skilled laborers, dispatched drivers).
From the first day of work, it is worthwhile to take care of the contract aspect. For the employee, it provides some protection against various situations. First of all, a fixed-term employment contract must be drawn up in writing. Otherwise, it will be difficult to prove the terms of the contract. Danish law does not regulate the period for which such contracts can be concluded or how they can be renewed. When the duration of the employment relationship exceeds one month and 8 hours per week, the employer is required to provide the employee with the terms and conditions of employment.
Do not sign an employment contract if it is incomprehensible. This also applies to other documents. In case of unfamiliarity with the language, it is advisable to use a translator in this regard. Before signing a contract, you can verify its terms with a trade union representative.
The employer is obliged to pay the agreed salary. It is also obliged to provide employees with adequate breaks. People employed in Denmark are entitled to a minimum of 5 weeks of paid vacation per year, which means 30 working days including Saturdays. The vacation year in Denmark begins on May 2 and ends on April 30 of the following year. Vacations and days off are agreed upon with the employer. It is worthwhile for such arrangements to be consulted with a union representative.
Between May 1 and September 30, an employee must take 18 days of uninterrupted vacation. During this time, the right to leave and pay is established by law. In a situation where an employee does not work the entire calendar year, his or her vacation entitlement is approximately 2.08 days for each month worked.
It is also the employer’s duty in Denmark to ensure that employees are safe at work. He must familiarize employees with health and safety regulations in a language they can understand. It is also on his side to provide all necessary health and safety equipment such as protective clothing, cleaning products, or other equipment depending on the industry in question (helmets, dust masks, protective visors, etc.).
For both the employee and the employer, illegal work in Denmark is punishable by a fine or imprisonment.
Internship in Denmark
Internship programs in Denmark are funded by the state. The duration of an internship ranges from 6 to 18 months. To get an internship, you must meet the following conditions:
– age between 18 and 35
– possession of a relevant diploma, obtained no later than 18 months prior to employment
– knowledge of Danish, German, Swedish, Norwegian or English is often required.
In a situation where the intern does not receive a salary, the applicant must demonstrate his financial capacity.
At the end of the internship, most interns stay at the enterprise where they acquired experience.
NNF Food Workers Union
The union is a member of the Danish Confederation of Trade Unions. It has about 30,000 members of small and large companies. Its mission is to ensure safe working conditions and decent wages for its members. The NNF union treats all its members equally, regardless of which country they come from.
Workers (both skilled and unskilled) in bakeries, the meat industry, dairy plants, confectionery production, and the tobacco industry can join the NNF Food Workers Union.
In most companies, NNF union members elect a shop steward. His job is to make sure that each worker gets what he is entitled to. The shop steward, together with the NNF union, helps its members with issues such as working conditions, pay, further training, and retirement. Members who have a poor command of the Danish language and do not want to be cheated by their employer can rely on the union to help them with matters related to signing an employment contract.
In situations where the employer does not comply with the collective agreement, the Union can take the employer to court so that members can receive payment of back wages, or compensation.
Employees posted abroad who are covered by a collective bargaining agreement can, as of October 2016, in certain cases (if the employer does not recognize their claims), take advantage of the Labor Market Fund.
Cost of labor
The German Statistical Office conducted a comparison of the cost of an hour of labor in European Union countries. It shows that the cost of labor in Denmark is 45 euros per hour. In addition to wages, labor costs also include social security, taxes, health and safety measures, or employee training.
Low labor costs attract investors and encourage the creation of new jobs. A country where labor costs are not high is therefore in competition with other countries where these costs are higher. What is important for the employee is the amount of his salary in relation to the total labor costs. High employment costs benefit not only the employee himself, but the entire country.
Labor costs in Denmark are one of the highest in Europe. However, it should be noted that thanks to the taxes that employees pay on their salaries, free education, free libraries, free health care and social support are financed in Denmark.
EOR (Employee of Record)
The Danish market requires knowledge of regulations not only locally, but also regionally and globally. Doing business in Denmark can involve high costs, considerable business risk, a high level of responsibility, commitment, and vigilance. By using the services of an EOR (Employee of Record), an entrepreneur does not have to handle everything personally.
EOR is a modern tool that is used to manage human resources in another country. It involves the professional provision of formal care for employees by an outside organization. This means that companies can gain an employee who is hired in accordance with local laws and reports to a formal employer who is an EOR entity.
This solution makes it possible for entrepreneurs who want to expand into foreign markets to manage their company from anywhere in the world, while the EOR takes care of the entrepreneur’s HR and payroll matters in another country. This is very beneficial from a financial, strategic and operational point of view, as it saves time, reduces costs, and does not require the creation of new structures.
An example of a company providing EOR services is Uniqorrm, which has been doing so for many years. It serves its principals with expertise and experience, as well as international infrastructure. This company carries out orders in accordance with the requirements and regulations directly related to the employment of workers, payroll and immigration. More information is available at https://uniqorm.com.
By taking advantage of cooperation with EOR, an entrepreneur is free to develop his business and leave HR and payroll issues in the hands of experts. The EOR employment model thus offers the advantages of gaining more time, reducing costs, full control and lowering business risks.
EOR helps entrepreneurs:
– speed up going through the process related to all formalities
– provide employees with, among other things, payment in Danish kroner and employee benefits including, for example, pension insurance and medical care.
– reduce business risks.
The cooperation usually proceeds as follows: The entrepreneur provides information about the employee, sets the period of employment and the rate of pay. Employees of the company providing EOR services complete all formalities such as an identification number, registration or a visit to the office. On the last day of the month, the entrepreneur provides information on the number of hours worked by the employee. The entrepreneur is then issued an invoice in the amount of the employee’s salary in PLN at the NBP exchange rate. When the transfer is booked, the employee in Denmark is paid.
FORMALITIES FOR LEAVING AND STARTING WORK IN DENMARK
A person traveling to Denmark must remember to bring an identity card, as this is a document that is valid in all European Union member states, including Denmark. It is advisable to have with you a contact to the Polish Embassy, on whose help you will be able to count in various situations, such as in case of becoming a victim of fraud.
Due to the language barrier, many Poles going to Denmark are engaged in manual labor. So it is worth learning at least basic vocabulary and phrases. Their knowledge will be an asset. During a stay in a foreign country, it is easy to see how necessary it is to know the language there, even at a basic level. Knowledge of English may also prove helpful.
Danish citizens know the most foreign languages in Europe. The vast majority of them speak at least one foreign language. Many speak two or three foreign languages. In addition to Danish, the easiest languages to communicate in Denmark are English and German. Knowledge of Danish, however, provides the most opportunities for professional development.
The more qualified an employee is, the better salary conditions he can negotiate. When planning a future trip to Denmark, it is therefore worthwhile to take advantage of various courses and trainings, as professionals are highly valued in this country.
Where is the information on leaving, staying and working in Denmark available?
Information regarding departure, stay and work in Denmark is available:
– on the website of the Polish Embassy in Copenhagen
– on the Danish pages of the Ministry of Employment
– on the Danish pages of the Office for Foreigners
– on the Danish Labor Inspectorate website
– on the Danish pages of the Labor Market Agency. There you can find information for foreigners seeking employment.
– On the website of the 3F Trade Union Association.
Some of these sites are available in Polish.
It is a good idea to use the online guide for foreigners moving to Denmark. Detailed information can also be found on the website of the Danish Immigration Office and the website of the Danish Embassy in Warsaw.
How to look for a job in Denmark?
You can look for work in Denmark:
– with the help of intermediaries – you can use the services of agencies that specialize in job placement. It is worth remembering to use only intermediaries with a good reputation, as it is very easy to fall victim to fraud. Safe and easy access to job opportunities can be obtained from the Public Employment Service in Denmark. Those who use their services can expect support in the recruitment process as well. They also give you the opportunity to upload your resume to their database. They also offer courses and vocational training
– on the Danish Employment Center website
– on the website www.jobnet.dk
– on the website www.jobzonen.dk – this is the largest portal with job offers in Denmark
– on the website www.workinfo.dk
– on the website www.workindenmark.dk
– on the website www.eures.dk
– on the website www.studiejobs.dk
– on the website www.job-guide.dk
– on the website www.dk-jobs.dk
– on the website www.copcap.com
– at Job-shops and Job-boxes, which operate in Danish cities. These are places where job offers can be viewed. They are located in offices, post offices, or libraries. Announcements with job offers are posted there.
– Directly on the portals of companies
– through friends.
An employee delegated from Poland to work in Denmark
More and more employees from Poland are being delegated to work in European Union countries. The A1 certificate is confirmation that they are subject to the social security system of the country issuing the document. In Poland, the A1 certificate is issued by the Social Insurance Institution. It is therefore a confirmation that an employee posted abroad is subject to insurance in the Polish Social Insurance Institution. This allows posted employees to work freely in EU countries without the need to apply different legislation in an alternating manner.
European social security law indicates the application of a single applicable legislation, as well as the compatibility of the legislation with the place where the professional activity is carried out. However, there are situations in which other criteria can be applied.
When applying for an A1 certificate, an employee posted from Poland must meet the following requirements:
– the employee must perform work abroad on behalf of the company that posts him or her
– the posting company must conduct its business (or at least a significant part of it) in Poland
– the period of the employee’s posting must not exceed 24 months
– the employee cannot be posted to replace another posted person
– the posted employee must, prior to the start of employment, be subject to the legislation of the EU country in which the registered office of his employer is located.
In a situation where a posted employee is to perform work in more than one country, he or she may be subject to the legislation of either the place of residence or the seat of the employer. An employee who performs work in more than one EU country is subject to the legislation of the country in which his residence is located if he performs a significant part of his work there. On the other hand, if he does not perform a significant part of his work in the country of his residence, he is subject to the legislation of the country in which:
– the registered office or place of business of the employer, if the employee is employed by one employer or at least two employers established in the same member state
– has the registered office of the employer, other than the EU country where the employee resides, if he is employed by two or more employers whose registered office is located in two member states, one of which is the member state where the employee resides
– is domiciled if employed by two or more employers based in two member states other than the EU country of residence of the employee.
An employee who performs work in two or more EU countries shall first apply to the insurance institution in the country of residence.
The A1 certificate can only be withdrawn by the institution that issued it. In order for this certificate to be withdrawn, the insurance institution must show that the documents submitted were not factually correct. Another possibility of withdrawing the A1 certificate is a change in the circumstances that formed the basis for its issuance.
Before going to work in another country, the employee should be provided with employment documents if the duration of this work exceeds 1 month. In addition to the information contained in these documents, he should also be informed of:
– the duration of the work
– the currency in which he will be paid
– the certificates drawn up concerning his job position
– information on cash benefits, related to his stay in another country
– the conditions for returning to his country.
Registration of residence in Denmark
In case the duration of stay will be more than 3 months, in addition to the confirmation of registration, you should also obtain a certificate of residence registration. It gives you the authority to continue to operate in Denmark. Information on registration is available in Polish at www.statsforvaltning.dk.
Formalities related to residence registration can be done at the Danish administrative office (Statsforvaltning). This can be done at the Danish embassy in Poland or by mail. On the Danish administration’s website you can find a list of conditions that must be met in order to confirm the right of residence. The certificate of residence registration is valid for as long as the conditions that form the basis for its issuance are met. An indefinite residence card can be applied for after 5 years of continuous residence in Denmark.
To obtain a CPR (Central Person Register) tax identification number, you must have a certificate of residence registration. The CPR number is issued by the Citizen Service Office (Folkeregistret) in the local municipalities and the Foreigners Service Offices, which operate in Copenhagen, Aalborg, Odense and Aarhus. When applying for a CPR number, you must present:
– proof of identity
– employment contract
– proof of residence (e.g., a rental agreement).
Having a CPR number gives you the opportunity to obtain a health insurance card. This card allows you to receive free medical care.
Tax payer card/the advance tax return (forskudsopgørelse)
Regardless of the length of your stay, you will also need a tax payer card. The application can be completed and submitted on form 04.063 or electronically. The application must be accompanied by copies of the following documents:
– ID card or passport
– Married persons should submit a Marriage Certificate. Persons living in Sweden should submit a family certificate.
– Those outside the member states of the European Union, Iceland, Liechtenstein, Norway or Switzerland must submit a work permit
– An employment contract signed by the employer.
You must also declare your income. The advance tax return contains information on expected future income, tax deductions, tax-free amounts, as well as the tax rate used by the employer for withholding. If the employee’s situation changes, the advance tax return must be amended.
An employee taking a job in Denmark must pay tax on his income. The employer collects the employee’s tax card, through which tax is automatically deducted.
Establishing a bank account and registering it in the NemKonto system
Some of the issues related to going to Denmark, can be handled without leaving home. These include setting up a bank account into which Danish earnings will be deposited. You can consider opening an account with Wise, which allows you to exchange currency at the average market rate.
To receive wages into the account, it must be registered in the NemKonto system. In this system, the account can be registered as a Danish bank account or a foreign bank account. To set up a Danish bank account for yourself, you can contact a Danish bank. The bank will set up the account and register it in the NemKonto system. For more information, visit www.nemkonto.dk.
It is also worth setting up a NemID/MitID for yourself. This is an electronic signature that allows you to access virtual Denmark. It is also used to log on to official government websites and Danish online banks. NemID can be set up at Borgerservice, the local resident service office. When setting it up, you will need to present an ID card or passport. You can also come with someone who can confirm your identity.
Occupations sought by Danish employers
Occupations that Danish employers are looking for include:
– caregivers of the elderly
– social care officers
– IT specialists
– machine operators
– occupations in the hotel industry
– professions in the catering industry
– professions in the trade industry
– occupations in the transport industry
– occupations from the construction industry
– workers for seasonal work.
Danish Center for Assessment of Foreign Qualifications – CVUU
This is an institution that evaluates education in terms of the Danish labor market and the Danish education system, after which it issues an opinion. The duration of this procedure is about 1 month. However, it can be extended by 3 months if further expert opinions are required. An entity interested in matters of recognition of qualifications and diplomas for professional purposes can send CVUU documents related to education and qualifications that were obtained outside Denmark.
Since the official language in Denmark is Danish, it is advisable to have documents in Danish. Those outside the Kingdom of Denmark can take advantage of the opportunity to learn Danish offered by the country’s magistrates. Tuition is provided on a day or evening basis. Classes of 18 hours per week may be free of charge. The condition for taking advantage of them is having a CPR number.
A hotline +45 7222 3399 has been set up for Poles looking for work in Denmark, and there is also a website www.seasonalwork.dk for those who would like to take up seasonal work.
Family members may accompany job seekers to Denmark upon presentation of the following documents:
– marriage certificate
– birth certificate
– a document that will provide proof of kinship.
WORKING TIME AND EARNINGS IN DENMARK
Denmark is one of the European countries offering high wages. It has the distinction of having the smallest differences between average wages and the lowest wages compared to other European Union countries.
Working hours and pay in the Danish labor market are regulated by collective agreements or individual contracts between employer and employee. Foreign companies that post employees to work in Denmark are not required to be covered by agreements.
Working time in Denmark
Denmark is a country that allows for a balance between work and family life. Hence, the weekly working hours set by the agreements are 37 hours. Such working hours are also adopted by many sectors that are not covered by collective agreements.
Since working time in Denmark is not regulated by law, it is important to pay attention to the terms of the contract (e.g. work system, overtime, days off) when signing an employment contract. Typically, the average weekly working time in Denmark does not exceed 37 hours (about 6 – 6.5 hours per day). However, collective agreements allow it to be extended to 50 hours per week. During the daily working time, an employee is entitled to a meal and rest break of 30 to 60 minutes.
If the employee exceeds 37 hours per week, he is entitled to an additional bonus. And if an employee performs his work in the evening or night hours of 34 hours per week or on public holidays, he is entitled to a bonus on this account.
Employees who work in shifts, depending on their contract with the employer, may receive an additional 2 hours of leave for 37 hours of work per week.
Overtime pay is calculated separately, usually at 50% of the rate for the first 2 hours and 100% of the rate, or even more for subsequent hours and for work on public holidays.
If a white-collar worker incurs expenses related to travel or staying away from home, he or she may be reimbursed by the employer for necessary expenses. The employer is required to partially cover them in advance.
– The time during which the employee is at the disposal of the employer at the workplace is not considered as time off work. If, on the other hand, he is at the disposal of the employer outside the workplace, this time is considered time off, provided that the employee does not perform work during it.
The possibility of waiving the above rules is possible in the agriculture, animal and plant breeding, and personal care sectors.
The above rules do not apply to:
– work that is performed in the employer’s private household
– certain types of work in road transportation
– unloading and loading work, as they are governed by separate regulations
– employees under the age of 18, since special rules on the labor market apply to them. When hiring such people, the employer must pay attention to their age, health, development and whether they will be able to reconcile work with compulsory education. Working hours for minors must not exceed 8 hours a day and 40 hours a week. Those between the ages of 13 and 15 may not work more than 2 hours a day on days when they have school classes and 7 hours on other days.
Wages in Denmark
Salaries for blue-collar workers, who are not required to have specialized education and qualifications, average between DKK 20,000 and 30,000 net (about PLN 10,000). Salaries in this amount are received by those working in positions related to construction and finishing industries, transportation, or factory work. White-collar workers, who must have the right education and qualifications, can earn 2 to 3 times more than those in physical positions.
In Denmark, there is a high demand for qualified specialists and professionals. This makes it possible for even people who do not speak Danish to get a job. To find and keep an employee, companies are raising pay rates. In 2019, the lowest hourly rate was DKK 110. This was the rate paid to workers who did not speak Danish or have specialized qualifications.
In Copenhagen in 2019, the average monthly wage was DKK 20,000. Cleaners received about DKK 15,000. This is one of the lowest salaries in Denmark. In the same year, drivers earned about DKK 40,000. The highest salaries in Denmark are enjoyed by doctors. Their earnings in 2019 were DKK 70,000. Lawyers and programmers earned slightly less.
Every employee with an employment contract, once a year, has the right to engage in salary negotiations. Such negotiations usually take place through a shop steward.
In addition to high wages, Denmark is also famous for its high cost of living. The cost of renting a room without furniture is in the range of 3000-4500 Danish kroner. Utility bills, is an expense of about 1500 Danish kroner. In addition, Denmark is one of the most expensive countries in Europe when it comes to food. Transportation costs are also very high. For those who plan to go to work in jobs with lower salaries, it is most profitable to use the services of an employment agency, which will provide accommodation and necessary allowances.
Earnings for workers who speak Danish, English or German for positions as welders, assemblers, mechanics, plumbers, electricians, CNC operators or construction workers range from DKK 150 to 220 per gross hour.
Earnings for workers who do not speak a foreign language, working in production, on a farm, or as a cleaner are in the range of DKK 110 to 130 gross per hour.
Only the earnings of seasonal workers are lower.
During the year, the employer pays a contractually agreed amount into the employee’s payroll account each month. The amount is always given as a percentage. As of March 01, 2022, the salary account is 7% of vacation pay. The employee can use the funds accumulated in the wage account for additional holiday pay, or for an additional pension.
If an employee becomes ill, he should notify the company as soon as possible. For the first 6 months after employment, the employee receives sick pay through the municipality. After 6 months of employment, the employee becomes entitled to receive full sick pay for the first 9 weeks. In the event of an injury sustained at work, the employee should contact a representative for the work environment.
Sickness of a child
An employee who has worked 9 months has the right to draw full salary on the first day of illness of a child under the age of 14. If the child requires hospitalization and the 24-hour presence of one parent, the employee is entitled to 5 days of paid leave from the company.
Both mother and father are entitled to paid parental leave.
An employee who has worked for 9 months is entitled to at least 2-week training, which he or she can choose from an offer provided by the employer (in addition to training that is related to the area of employment). If the right to an offer from the municipality is exhausted, a subsidy can be sought. During the training, the employee receives 85% of the salary.
Unemployment benefits in Denmark
Denmark is a country where there is no state benefit system. There are, however, unemployment insurance funds (arbejdsløshedskasse, a-kasse). Insurance is arbitrary, and each fund has a different offer. In order to receive unemployment benefits, one must register at an employment agency and be ready to work. Unemployment benefits can be claimed by those who have paid contributions for the last 12 months and have worked for at least 52 weeks in the last three years. Unemployment must not be the result of a conflict with an employer or refusal to accept a job offer. The amount of the benefit is 90% of the insured’s previous earnings in the last 12 weeks. It cannot exceed DKK 827 per day.
HOW TO START A BUSINESS IN DENMARK?
A foreign citizen who intends to set up a business in Denmark can apply to the municipality’s vocational counseling office, employment office, or Customs and Taxation (Skat). In Denmark, anyone can operate a business. Exceptions are occupations that require special qualifications.
Note that the registration of a company in Denmark by a foreign citizen will be associated with frequent travel, which will consume his money and time.
In order for a foreigner to establish a company in Denmark, he should register his residence and obtain a CPR number (tax identification number). He should also submit an application for registration to the Danish Enterprise Authority (Erhvervsstyrelsen) at least 8 days before starting a business that will be subject to taxation, or other fees. This can be done online. If the annual turnover does not exceed DKK 50,000, registration is voluntary. Once the application is accepted, the Danish Enterprise Authority sends the documents to Customs and Taxation (Skat). Based on the documents received, the Customs and Tax Administration assigns a CPR number, which every entrepreneur must have in order to account for income tax and VAT.
The choice between the two depends on the size of the company, as well as the extent of the business in Denmark. Small and medium-sized companies usually establish ApS companies. Most often, they are subsidiaries of multinational companies. Large ones, on the other hand, most often choose to establish an A/S company. It takes more time and money to set up such a company, but their subsidiaries enable them to list on the Copenhagen Stock Exchange.
In order to set up a subsidiary in Denmark, you need to get a NemID, or digital signature, which gives employees the ability to register electronically. You also need to have a bank account, which will be used to deposit investment capital. Employees must also be insured.
In the case of an A/S company, investors’ liability is limited to the amount of shares they have acquired. The investor’s paid-in capital must be at least 25% of the registered share capital. This means that the investor is not required to pay it in full. The minimum amount that A/S companies must invest is DKK 500,000. These companies must file annual financial statements.
According to the law’s requirements, these companies must have a two-tier system of supervision, with a board of directors and an executive council. The board of directors must consist of a minimum of three people, one of whom must sit on the executive council. Most often this person is the chief executive officer. Directors are not required to reside in the Kingdom of Denmark.
The minimum capital that ApS companies must invest is DKK 40,000. The investment rules are the same as for the A/S company. Only one shareholder from any country is required for this company. Depending on its needs, the company can have either a one-stage supervision system or a two-stage system. It must also file annual financial statements.
Entrepreneurs are eager to set up companies in Denmark, as setting up a subsidiary is easier in Denmark than in other countries. In addition, it is possible to set up companies online. They can start operations within hours of their establishment. Shareholders and the board of directors can conduct meetings online. There are also no residency requirements for board members. Establishing an ApS company also does not require notarial deeds. There are also no specific requirements for the language used by the company. Tax conditions for these companies are very favorable. The provisions of Danish company law coincide with those that apply in European Union countries. It is also possible to pay dividends before the end of the reporting year.
TAXES IN DENMARK
Denmark is one of the countries where taxes are very high. The funds collected from salaries, fees, or duties make up a sizable portion of Denmark’s budget. However, this translates into the quality of life of Danes, as the state uses these funds to finance, among other things, public health care, education, and academic scholarships.
Taxes in Denmark are one of among the highest compared to other European countries. The Danish tax system is extensive and progressive.
The tax system in Denmark consists of:
– direct taxes, such as income tax or city tax
– indirect taxes, such as VAT, excise tax, and customs tax.
The personal tax rate ranges from 44.63% to 51.70%. This tax includes the following types of obligations:
– linear municipal tax, whose rate ranges from 22.7 to 27.8%. This is a tax paid to the local government
– a progressive tax for the benefit of the Treasury, the rate of which is 5.64% for income exceeding the tax-free amount but less than DKK 421,000 per year, plus income from capital.
A tax for the Employment Fund of 8% is also levied on personal income, as well as a health insurance contribution, at 6%. Denmark’s VAT rate is 25%.
Annual settlement in Denmark
The annual return shows the employee’s income, tax deductions, tax-free amounts, and tax paid. It is available on the self-service website TastSelv from March each year. It can also be adjusted on this site.
An employee who draws a salary from a Danish employer is required to account to the SKAT Tax Office. Based on information collected from the employer, bank, unemployment fund, among others, the Tax Office prepares the employee’s preliminary tax return. It has until March 15 of the following year to do so. The employee, in turn, has until May 1 to make any adjustments. He should check, among other things, whether all the allowances to which he is entitled have been included in the return. Corrections to tax returns can be submitted until July 1. The Tax Office sends the employee a refund to his NemKonto bank account, regardless of whether a Danish or Polish bank account is indicated.
If the employee does not settle his or her tax return with the Tax Office, he or she may be subject to a fine of up to DKK 5,000.
The annual tax-free amount (personfradrag) in Denmark was DKK 46,700 in 2021.
An employee’s entitlement to tax benefits depends on the type of expenses he or she incurs. Tax credits in Denmark include:
– relief for costs incurred in connection with commuting to the workplace. If the one-way journey to work exceeds 12 kilometers, the employee is entitled to take advantage of this relief, regardless of what mode of transportation he uses. The amount of this relief is DKK 1.9 per km. In the annual tax return, transportation expenses should be entered in box 51, while in the advance tax return – in box 417. If the employer pays for the employee’s transportation from the place of residence to the workplace, then the employee is not entitled to this relief
– Increased commuting relief for low-income earners. If the employee’s income is less than DKK 340,800 (for 2021), he or she is entitled to a relief of up to DKK 15,400. For incomes exceeding DKK 290,800, the amount of this relief is gradually reduced.
– Bridge crossing relief. It can be used by any employee who crosses a toll bridge while commuting to work. The amount of this relief depends on the type of bridge and the means of transportation
– relief for paid union dues. In 2021 and 2022, its amount is up to DKK 6,000
– relief for expenses incurred in traveling home
– relief for board and lodging, the amount of which is up to DKK 29,300 per year. In your tax return, you must enter your food expenses in box 53. This relief is available for:
a. temporary work, such as fruit picking,
b. when the employee’s place of residence and the place of work are separated by a long distance, making it impossible for the employee to stay at home
c. when the place of work changes, such as working on different construction sites within the same company.
This relief is not available when the employer pays for the board and
– accommodation of the employee
– relief related to running a dual household
– Cross border-worker relief is available to employees with 75% of their annual income earned in Denmark, accounting for a spouse who has not worked in Denmark. The spouse’s income in Poland cannot exceed the annual tax-free amount applicable in Denmark. In order to obtain this relief, one must present a marriage certificate on a European form and an English-translated certificate from the Polish Tax Office on the income of the taxpayer and the spouse. This must be done by 01.06 of the following tax year. This relief is available regardless of the type of employment contract held and the period of employment.
– Relief for paid alimony awarded by the court
– Relief for paid interest on loans in Poland and Denmark. This relief is available to employees who earned 75% of their income in the year being accounted for by working in Denmark. Married individuals must include their spouse’s income. To deduct mortgage interest, you must add 1% of the value of the property
– relief for gifts, donations and contributions to charitable organizations, foundations, institutions, associations and religious communities approved by the Danish Tax Authority. The amount of this deduction is up to DKK 17,000 (in 2021, it will be DKK 17,200 in 2022). The value of the deduction is 26%. This relief does not apply to the purchase of goods.
The right to receive the discount can be certified with the following documents:
– fuel receipts or tickets confirming travel between Poland and Denmark
– bridge receipts
– gate receipts in Denmark
– bills for an apartment in Denmark together with a rental agreement
– certificate of registration in your home country
– documents confirming household management in the place of permanent residence
– marriage certificate
– certificate from the Polish tax office about your spouse’s earnings
– court decision on the award of alimony translated by a sworn translator into Danish or English,
– a certificate of alimony paid for the tax year,
– confirmation of payments for alimony awarded by the court
– a bank certificate, translated by a sworn translator into Danish or English, of the amount of loan interest paid during the tax year under review. This certificate should include:
a. The name of the bank
b. Details of the borrower
c. The amount of the loan
d. The type of loan
e. Information on the amount of credit interest paid.
Residents must pay the difference between the income tax paid in Denmark and the income tax they would pay on foreign earnings in Poland. A tax resident in Denmark is an employee who has an employment contract of indefinite duration. This usually applies to those who have been in Denmark for more than six months. They are required to pay tax on all income earned in a given tax year both in Denmark and in their home country.
Residents are not those who have been in Denmark for less than 6 months and do not have an indefinite employment contract. They pay income tax only on income earned in Denmark. Often applies to those working on a temporary basis. They have the opportunity to claim additional allowances, such as for commuting to work, food or accommodation.
Types of tax capacity
The type of tax capacity depends on whether the employee is married and registered in their home country. There are 4 types of tax capacity in Denmark:
1. Full tax capacity. Applies to foreign workers in the following situation:
– are working in Denmark,
– reside in Denmark or stay in Denmark for more than 6 months,
– the center of their life interests is Denmark,
– the spouse also lives in Denmark.
2. Limited tax capacity. Applies to foreign workers who are in the following situation:
– they work in Denmark,
– live in their home country, often commuting to work in Denmark
– spouse lives in their home country
3. They reside both in Denmark and in their home country, where the place of permanent residence is their home country. This applies to foreign workers in the following situation:
– they work in Denmark,
– they have an apartment in their home country and in Denmark
– the center of their life interests is their home country
– the spouse lives in the home country.
4. They reside in both Denmark and the home country, and the place of permanent residence is Denmark. Applies to foreign workers in the following situation:
– they work in Denmark,
– have an apartment in Denmark and in their home country
– the center of their life interests is Denmark
– the spouse lives in Denmark.
Other income and property outside Denmark must also be declared in the annual return.
You can check your annual return on the TastSelv website. There, you can also correct the data by clicking „Ret årsopgørelsen/oplysningsskemaet” (Change annual tax return or submit tax return).
Termination of employment in Denmark
An employee who terminates employment in Denmark should amend his or her tax return, which means filling out a form and submitting it to the Authority before leaving Denmark.
Based on this information, the tax office calculates the tax. Which country you have to pay it in depends on the type of work of the employee and his place of residence.
You should also inform the Danish Tax Office of your new place of residence. This can be done by sending a message from TatsSelv or by filling out a form in English at www.skat.dk/contact.
Closing the NemKont should be done after you receive your annual tax return, because if you receive a refund, it will be sent to this account.
Once you have done all this, you should deregister from the Danish national registry at your local resident service desk.