Denmark

Introduction

Denmark is a Nordic country in the north of Europe. As the smallest of the Scandinavian countries, it consists of the main peninsula, Jutland, as well as an archipelago of 443 islands. It borders Germany to the south, and its capital city is Copenhagen. It is characterised by sandy coasts, attractive coastal towns and idyllic islands.

While Danish is the main language, close to 90% of the population also speak English. It is famed for its contemporary culture and alternative lifestyles, and is also considered a frontrunner in terms of clean, renewable energy.

Denmark is a world leader in cutting-edge, urban design and building cities that bring communities together. The Danish philosophy is to increase safety and create a society where citizens come first. Its architecture is world-famous, and the country is home to internationally acclaimed brands such as Bang & Olufsen and Royal Copenhagen porcelain. The Sydney Opera House was also designed by Danish architect, Jørn Utzon.

As the oldest continuing monarchy in the world, the Danish royal family is hugely popular in the country and an immense attraction for tourists. The Viking age also began in Denmark back in 725 AD, where they developed their maritime expertise sailing between Denmark and Norway.

Denmark is a wealthy country with a mixed, modern economy that is well integrated into the global marketplace. Although Denmark has been an EU member state since 1973, their currency is the Danish Krone after they negotiated an opt-out from the euro in 1992.

Salaries are much higher when compared with other countries, while the most important sectors of the Danish economy are education, defence, health and social work activities, public administration and wholesale/retail trade. Intra-EU trade accounts for 61% of the country’s exports, while 70% of imports come from EU member states.

Registry/Registration  

Citizens from the Nordic countries, other EU countries and the EEA are entitled to live and work in Denmark without a work or residence permit. That being said, if you are an EU/EEA or Swiss citizen and plan to reside in Denmark for more than three months, then you need to apply for an EU residence document. You also need to apply for a registration certificate within 90 days of arriving in the country.

If you do not fall into this category, then you are required to apply for a residence and work permit before you enter the country. There are a number of different schemes you can join, including the “Fast-Track Scheme,” the “Positive List,” the “Pay Limit Scheme,” “Researchers and Guest Researchers” and the “Start-Up Denmark” list. You can enter the country if you have a job offer, although you still need a visa before entering.

The visa application process typically takes between one and three months and is carried out online through their immigration platform. Once you’ve selected the type of visa that best matches your working circumstances, you will then need to create a case order ID, pay the visa fee (typically DKK 3,025 (approx. EUR 406) and submit the required documentation. For those applying for a Danish Self-Employment Visa, you will need to carry out the above steps in addition to submitting the self-employment visa application form, AR2. Once your visa is approved, you then need to register in the country for your tax number.

Income Tax

Denmark’s personal income tax system is considered relatively complex based on different sources of income such as labour, pensions, interest and dividends. Income tax is charged on a progressive basis, meaning the more you earn, the more you pay as a percentage of your income.

Individuals who qualify for Danish tax residency are tax liable of their worldwide income from employment, business income, share income and so on.

If you are self-employed and working in Denmark, the following income tax rates as of 2020 apply:

  • DKK 0 – 50,543: 8%
  • DKK 50,543 – 577,174: 41%
  • DKK 577+: 55-56%
  • A municipal tax rate that varies depending on where you reside (average 36%)

Social Security

In Denmark, a person is considered to be self-employed if he or she works at their own expenses and does not receive payslips. A self-employed person is understood to have ownership of a company, whether they operate a one-person business or as an employer. In any case, as a self-employed contractor or freelancer in Denmark you must be registered for VAT.

You can receive social security benefits if you fulfil certain requirements. For instance, in order to receive financial aid, the self-employed worker must have been a member of an unemployment fund for at least one year. Further, he or she during the last three years must have had a professional activity on a certain scale for a period of at least 52 weeks.

To receive sickness benefit and maternity leave, a self-employed worker must have exercised a minimum of 18.5 hours average weekly work for a minimum of six months within the last 12 months.

Employment Rules

Denmark is a country with an agile talent base and deep cultural values. Technological advances and global competition has generated corporate interest in how freelancers fit with the national economy and workstyle. Over time, the Danish industry is becoming more accepting of a flexible, blended workforce that also consists of freelancers.

Danish labour law is considered one of the most flexible in Europe. In general, Danish employment laws offer a certain level of protection for employees and are considered employee-friendly.

If you are self-employed without employees, then there is no legal form of employment between self-employed workers and employees. This can make matters complicated for third party groups on the labour market (freelancers), as they are neither typical employees nor typical self-employed workers.

A contractor or freelancer who works independently is typically paid for specific work. The extent to which the individual is bound by instructions depends on the nature of the work being carried out. A contractor is normally registered with a CVR number, which is a unique identifier for a business in Denmark’s Central Business Register. An invoice must then be issued for the work completed.

Banks

Denmark’s banking system is modern, safe and relatively large. There are around 20 national and regional banks in the country, while the three largest banks control 50% of Denmark’s total banking assets.

To open a bank account in Denmark, you must have a Danish CPR number. Therefore, only individuals with a valid residence permit and address registered with the Danish authorities can open a bank account.

All those living and working in Denmark must have a designated bank account, known as a Nemkonto (aka ‘Easy Account’). This makes state payment transactions faster, easier and more cost-effective.  

You can open an account online or visit your local branch. Danish banks are generally open Mondays to Fridays from 10am to 4pm. On Thursdays, most banks open until 5pm. When visiting a branch, be sure to request assistance in English as most banks have staff to assist foreigners in English. That being said, internet banking is not always available in English, so be sure to check this before opening an account.

Corporate Structures

We offer Danish self-employed services and Danish employed payroll services. Our local Danish accountant can assist you with all aspects, whether you are employed or self-employed in Denmark.

At Chesterfield, we also assist with all registration and criteria requirements. Our services include, but are not limited to local tax and accounting. If required, we can also offer establishment of your own company and can structure the invoicing to your specific requirements.  

Chesterfield and Contracting in Denmark

The Danish labour market is internationally renowned for its flexibility and security. The welfare state model combines a flexible labour market with social security for all workers. Chesterfield possesses plenty of experience working with contractors in Denmark, and can assist you with the process of freelancing and contracting in the region. Our contracting and payroll department works tirelessly to support you with all of your administration needs. To learn more, please contact Chesterfield’s team of dedicated advisors.