The law and your biz in DK

How to register your company
Registration of a company is also referred to as registration for VAT or to get a CVR (Central Business Register) number.Starting up as a sole trader in Denmark is easy. All you have to do isto call Erhvervs- og Selskabsstyrelsen at 72 20 00 32 and tell them youwant to set up a company. You can also register directly atwww.webreg.dk.

Youwill have to fill in an application for registration stating personalinformation, form of business enterprise, and within which trade youwant to operate. Whether you want to set up e.g. a wholesale, retail,or production business and so forth.

This is also referred to as registration for VAT or to get a CVR (Central Business Register) number.
The legal side of starting business takes two weeks – moreover, it’s free of charge.

Registration
If your annual turnover exceeds Dkr. 50,000, if you pay wages or import goods for distribution you must register your business.

Beingan employee or a student is no hindrance to starting business on yourown. However, if you are unemployed you must contact your unemploymentinsurance fund to check whether or not you are allowed to startbusiness. You must then figure out, along with your unemploymentinsurance fund, a way to run your business as sideline.

If youset up a limited company (private or public) you must also registerwith Erhvervs- og Selskabsstyrelsen (the Danish Commerce and CompaniesAgency)
- Registrer din virksomhed direkte på internettet
- Det Centrale Virksomhedsregister
- Adresser på SKAT kontorer
- Business Plan Information in English, Chinese, Vietnamese

Hiring staff to your business is subject to compliance with a number ofrules and regulations. Originally rights, which the employees’ unionshave struggled for over the years, and which are now incorporated intoDanish employment law.The fundamental rules which an employer must comply with concerning employment of staff:

Employment Contract
Whenemploying staff (blue or white collar) for more than 1 month with anaverage working week exceeding 8 hours, the parties must, pursuant toDanish Act on Employers Obligation to Inform Employees on theConditions of Employment, make an employment contract or an alternativedocumentation in writing specifying nature of work, hours of work,wage, holiday, and place of work.


Insurance
DanishAct on Insurance Against Permanent Occupational Injury lays down thatany person employing external manpower – paid or non-paid – for morethan 20 hours per year, must insure this manpower against permanentoccupational injury.
This requirement is met partly by taking outinsurance against consequences of injuries and hazards, partly byjoining Arbejdsmarkedets Erhvervssygdomssikring insuring againstconsequences of sudden lifting injuries and occupational diseases.


Salaried Employees Act
Whenemploying staff it should immediately be verified if the employee issubject to the Danish Salaried Employees Act. This is of greatimportance as it sets forth a series of agreements between employersand employees such as sickness and dismissal.
Typical types of salaried employees:

• Clerks and office staff within selling and purchasing, office work and equal warehouse clerical work
• Persons dealing with technical or clinical consultancy services of a non-artisan or manufacturing nature
• Persons whose work mainly consists of the above types
• Persons managing or supervising workers on behalf of their employer.

       
Even though a person not subject to the Danish Salaried Employees Act is hired this person may be employed at similar terms.

Non-salaried employees are typically paid by the hour and other rules apply to them.

Holidays with Pay Act
Accordingto the Danish Holidays with Pay Act all employees are entitled to paidholiday. An employee earns 2.08 holidays for each month of fullemployment. This accumulates to 5 weeks’ annual holiday (25 days).

Theearning year runs parallel to the calendar year. The holiday must betaken in the year running from 1 May to 30 April (the holiday year)following the earning year.

Dismissal
A dismissal must be in writing and must be of a factual and fair nature.
Thekey stone of Danish employment law is that any employee not subject tothe Danish Salaried Employees Act is dismissible at a fair notice. Totemporary employees this means with immediate effect.
However,this does not apply if the employee is better off by contract orcollective agreement or because the employee has been employed over aconsiderable period period thus having gained a term of notice similarto that of employees under a collective agreement.

Employer’s Administrative Tasks
A company employing staff must be registered as employer at SKAT.
Eachmonth the employer must draw social security contribution (AM-bidrag),special pension plan (SP-bidrag) and tax from the salaries etc. paid toemployees and pay these amounts to SKAT.
SKAT must also know which civil registration numbers salaries have been paid to.
Once a year an information sheet on each employee must be returned to SKAT stating total amount of tax drawn, etc.


Mostbusiness owners use specialised companies to handle the complexadministration of wages, e.g. dataløn – a company run by banks.- Se funktionærloven
- Se guideline til ansættelseskontrakt

Unemployed are allowed to start business as sideline. However, certainrequirements, administered by your unemployment insurance fund, must bemet.Thus, you must consult your unemployment insurance fund before you geta CVR (Central Business Register) number. This is important as you mayrisk losing your unemployment benefits if you have not been allowed tostart business as sideline status.

Sideline status
For your business to qualify for sideline status:

• By solemn declaration you must verify that the business is entirely run as sideline and that it appears as such
  
• You must be seeking job to a normal extent - full time or part time insured
  
• The work in your own business must not be a hindrance for you to carry out paid work within normal business hours of the trade
  
• Youare only allowed to run your business as sideline for up to 18 months –hereafter you must decide whether to be pay earner or sole trader.

Ifstarting business as sideline is an option to you this is a very goodway of getting organised during the period until you have tested yoursurvival skills as a full-fledged sole trader.

Several Danish acts regulate specific aspects of employment. Such actsare mandatory - i.e. they cannot be dispensed from by employers.Danish mandatory employment law includes:

• Working Environment Act
• Holidays with Pay Act
• Equal Treatment Act
• Childcare Leave Act
• Sickness Benefits Act

Working Environment Act
The Working Environment Act sets forth rules to secure businesses a safe and sound working environment.

Holidays with Pay Act
Accordingto the Holidays with Pay Act, all employees are entitled to paidholiday. An employee earns 2.08 holiday for each month of fullemployment. Annually, this totals five weeks´ (25 days) holiday. Theearning year runs parallel to the calendar year.
The holiday must be taken in the year running from 1 May to 30 April (the holiday year) following the earning year.

Salaried employees are entitled to salaried holiday and a 1% holiday bonus calculated on the earning year gross salary.
Hourly workers are entitled to a 12½% holiday pay calculated on the earning year gross pay.

Equal Treatment Act
Advertisingfor staff must be gender neutral, according to the Danish EqualTreatment Act. Thus, all job titles must carry a m/f suffix.
On employing, transferring, promoting, dismissing, etc. men and women must be treated equally according to this act.

Childcare Leave Act
Accordingto the Danish Childcare Leave Act, employees have the right to takeleave (protected by law) to take care of their own children up to 8years of age for a consecutive period of no less than eight weeks andno more than 13 weeks.
Employees must file an application for leavewith AF (public employment service) who will make a decision on whetheror not to grant the leave.

Sickness Benefits Act
Salariedemployees are entitled to full salary during sickness, as sickness,according to the Salaried Employees Act, is lawful absence. This alsoapplies to some employees under a collective agreement.
Not so forhourly workers who will have to turn to sickness benefits when they areill. However, an employer do not have to pay sickness benefits unlessthe employee has been employed in the company for the last eight weeksleading up to the absence, and have been employed for at least 74 hoursduring that period.
The period subject to sickness benefit payment is two weeks counted from the first full day of absence.

Simonsen

Another useful publication: "Ansatte" (Employees), Forlaget Thomson- Læs om bogen Jura for iværksættere
- Køb bogen: Ansatte - Forlaget Thomson
- AnsættelsesCirklen - fra stillingsannoce til anbefaling

The Danish Marketing Practices Act outlines the framework of the way you are allowed to market your product or service.The main principle is lined out under section 1: The Act applies toprivate enterprise and comparable public enterprise. Such enterprisesmay not carry out activities contradicting fair marketing practice."

Asit appears from this very first section you are entering a grey zone –because what exactly is fair marketing practice? Therefore, you mustexamine the current situation before instigating your marketing.
Below are some extracts from the act:

You are not allowed to

• Give wrongful information about your competitors
• Use false, misleading or inadequate specifications on your product
• Use guarantee as a selling point if it does not go beyond statutory legislation
• Use others´ distinction: logo, slogan or likewise
• Discriminate
• Be importunate or inflict inconvenience on a customer

You must

• Give proper information relating to service life, hazard of risk, maintenance, etc., when selling a product or making an offer.
• If you compare yourself to your competitors you must do so in a loyal and relevant manner.

E-mails and Sales Letters
Acompany is not allowed to use e-mails for direct marketing, unless thereceiver has requested an e-mail or concented hereto. This also appliesto facsimile – whether b-2-b or addressing private consumers. (cf. sec.6a of the Danish Marketing Practices Act)

You are allowed tomail out advertising material via individually addressed letters, butit requires a quarterly checking of the Robinson List – a list ofpersons who do not want to receive this type of advertisement.
Thelist is available at a moderate fee at: CPR-kontoret, Datavej 20, 3460Birkerød, ph# 45 94 03 00 – either as a file, CD-Rom or paper.

Sale of Goods Act
Itis essential to be well-informed about the Danish Sale of Goods Act ifyou are addressing private consumers. Among other things, its latestamendment implies that the warranty period has been extended from 1 to2 years.

Carlslund- Link til Forbrugerstyrelsen
- Link til Datatilsynet
-  Læs Markedsføringsloven
- CPR - Find Robinson-listen

The fundamental principle of the Danish VAT rules is that VAT is addedas a fixed percentage on sales. The present rate in Denmark is 25%,abroad the rate is slightly lower. Your company must pay VAT to thecentral authorities similar to tax.An example:
Price of service: 200 Dkr.
+ 25% VAT: 50 Dkr.
= Customer’s price: 250 Dkr.

Eventually, the 50 Dkr. VAT must be paid to the central authorities.

Purchasinggoods for distribution or private consumption the VAT registeredcompany can set the VAT it pays to its suppliers off against the VATreceived from the company’s sales.
Thus, only the net VAT, and not the total VAT from sales, must be settled.

An eksample



VAT Registration
Mostcompanies are obliged to keep VAT accounts. There are few exceptionsfrom the VAT duty, e.g. general practitioners, dentists, cab drivingand education.

Many people see registration for VAT equal to”starting business”. In a sense this is correct, as VAT registration isthe single formal thing you under all circumstances must do to “get inbusiness”.
You get your VAT registration number at the same time as you get your CVR (VAT) number.

Output Tax
Outputtax is the VAT you charge on your sales and which you have to pay toSKAT (the Danish Central Customs and Tax Administration). Earlier knownas output VAT. When you sell a commodity at, say, 100 Dkr. you must add25% to the amount.

When must output tax be added? If you arein doubt you should consult SKAT or your accountant, but usually it isvery easy: Most companies must charge output tax on their total sales.

Input Tax
Inputtax is the VAT you pay to your suppliers which is set off against theoutput tax payable. If you buy at 60 Dkr. + VAT, you pay a total of 75Dkr., but the 15 Dkr. Are returned from SKAT, either directly or bysetting off against the output tax payable.

The fundamentalprinciple is as logic as for output tax. Just like most companies areliable to charge output tax on all sales, the input tax on theirexpenses is allowable against the VAT accounts.

SKAT Help and Assistance
Anumber of rules apply to retailing. Any VAT registered company canconsult their local SKAT office who will offer their help andassistance in answering questions.
SKAT has published a series of pamphlets on various aspects of the legislation. These pamphlets are free of charge upon request.

Thomsen
- Registrer din virksomhed direkte på internettet
- SKAT´s hjemmeside
- Basic Accountancy

Keeping accounts is a crucial business management tool, moreover, itmust comply with the Danish Company Accounts Act and provisions on VATsettlement.Running a company you must keep annual accounts providing information on all economic activities in your firm.

Accountsmust be kept on a regular basis and must be well documented withvouchers (invoices, receipts, pay slips, statements, etc.).

Vouchers must be filed for five years. You do not have to keep the accounts yourself, but you are responsible for the keeping.

Asa side effect from this work, you will be able to calculate the annualtax base and currently keep track of your VAT payable.

Annual Accounts
Annualaccounts and VAT settlements are the two mandatory SKAT (the DanishCentral Customs and Tax Administration) requirements.
Annualaccounts must be kept in such a way that it is clear to SKAT how youhave reached the profit of your firm. Being a sole trader you obviouslyhave to pay income tax on your profit.
This is how you make the annual accounts:

Total sales of the year / turnover
- less the company’s total expenses
= The company’s profit, which is your wage.

Companies are also liable to tax, although the calculation differes from that of an ordinary taxpayer’s.

VAT
Duringyour first year as a business owner you will receive a giro transferform every three months on which you have to report how much VAT youhave received and how much you have paid. The difference between thetwo amounts is paid to SKAT.
After the first year in business you make an individual VAT settlement agreement with SKAT.

Who is to keep the accounts?
If you can manage the various economic routines yourself then you have met most of your administrative obligations.
Youyourself do not have to keep the books etc. Most let an accountant dothe job, others hire a freelance book keeper or have a consultancy takecare of it.
- Læs om bogen Få styr på bøvlet - om bogføring og
- Download et bogførings og regnskabs program
- Basic Accountancy - how to take care of your money

Being a business owner your taxable income is the company’s net income,i.e. the company’s profit after deduction of total operating costs.The key stone to the Danish tax system, the sequence, is the same as for pay earners:

Advance Tax Assessment Tax Return Notice of Assessment Itis likewise important to emphasize, that tax on a given amount earnedas pay earner is eventually identical to tax on a similar amount earnedas sole trader. The Big Difference The taxation difference between pay earners and sole traders shows in the way tax is collected. As a sole trader you obviously do not have an employer who automatically calculate and withhold your tax payable. You must, based on expected earnings of your company, notify the tax authorities about your taxable income. Advance Tax Assessment Thetotal tax, i.e. the tax implications you have reportet in the advanceassessment, is levied as so-called “tax not collected at source”. Thistype of tax is paid by monthly instalments either by giro transferforms forwarded by the tax authorities along with the advance taxassessment sheet or by PBS (Danish Payment System). Notice of Assessment At the end of the year a sole trader receives a tax return sheet just like any other pay earner. Butcontrary to that of the pay earner’s it is not pre-completed and youare under all circumstances obliged to complete and return it. Thecompany’s profit must be reported in a box on the tax return sheet. Your tax account sheet must be kept in your file. Thetax accounts show the company’s profit and loss account, the balancesheet and usually the owner’s private assets and external income isalso stated in the accounts. Special Scheme for Businesses Sole traders can choose to use the Special Scheme for Businesses when working out the tax accounts. TheSpecial Scheme for Businesses is a complex set of tax rules, which isoptional for the taxpayers to make use of. You can choose this option(on an annual basis) when you file your tax return. The Special Schemefor Businesses is an exception from the main rule that tax on acompany’s net income is calculated the same way as tax on earnedincome. Making use of it usually calls for the assistance of anaccountant.- Samling af skatteregler - Vejledning fra Skat - Basic Accountancy

Even if you have already registered your company/gotten a CVR (VAT)number, you might very well need additional authorisations to carry outbusiness.Below is a listing of the most commonly required authorisations and their authorising bodies:

• The Municipality’s Technical Administration
  Providesinformation on which buildings and premises can be used for businesspurposes. Not all premises can be used for business purposes – e.g. ifthey are located in a housing area.
  
  You are, however, allowed torun business from home as long as the activity does not disturb thesurroundings. If you run a translation agency alone it will not be aproblem running it from home.
  However, you would soon get into trouble if you were to sell used cars from your house in a housing estate area.
• The Municipality’s Environmental Control
  Approvesand supervises companies subject to environmental provisions prior tostarting business (noise, waste, stench, wastewater, etc.).
  In particular, such provisions apply to restaurants and polluting companies such as auto garages.
• The local Food Inspection
  Administratesregistration and supervision of all trade of food products as well asregistration, approval and supervision of all retailing and handling offood products.
  Among other things, they inspect the hygiene levelin bakeries, restaurants and other food product outlets. They carry outrandom unannounced checks. The webaddress is: www.foedevarestyrelsen.dk
• Chief of Police
  Issuestrade licenses to companies selling food products and additionalalcohol license in case beer, wine and/or spirits are to be served.
  
  Youmust beware that various authorisations and licenses apply to differenttrades: admission, authorisation, license, certification, etc.
  
  Signingup for membership of an industry association within your trade can beuseful as they will assist you concerning which licenses are requiredwithin a specific area.
  
  Updated:- Link til Fødevarestyrelsens hjemmeside