Registration of Danish holding company

In Denmark, a holding company (holdingselskab) is a special type of legal entity whose business consists of owning shares in other companies, called “operating companies” or “subsidiaries.”

There are no explicit restrictions on the activities of subsidiaries in Denmark. As a result, a holding company's investment portfolio may include companies in various sectors.

A holding company may hold all of its shares in foreign subsidiaries. Note also that the Danish holding company may be liable for the obligations of the operating company.

How to register a holding company in Denmark?

Registration of a Danish holding company requires going through a process that usually takes about 6 days and takes place at the Trade and Companies Agency. To do so, you need to:

1. Register the company with the Danish Trade Agency (DBA).
2. Open a bank account.
3. Obtain an electronic signature (NemID or MitID).
4. Register employees in the employee insurance system.
   
   

A holding company can function in the form of:

• a limited liability company (Anpartsselskab - ApS),
• joint-stock company (Aktieselskab - A/S).
  
  

Establishing a holdingselskab requires a share capital of at least DKK 125,000 (for a limited liability company) or DKK 500,000 (for a joint stock company). It is sufficient to have one shareholder and at least one director. It is not necessary to have the word “holding” in the company's name, nor to register the company as a VAT payer.

It is standard practice to register a holding company before establishing operating companies, but it is also possible to reverse the process, which is more complicated in terms of legal formalities. It is also possible to use the same initial capital that was used to establish the operating company, combining the two companies under “working capital.” Before transferring personal shares from an operating company to a holding company, it is worth considering the potential tax consequences. Another option is to acquire a holding company by purchasing a ready-made company that meets all legal requirements. Such a step allows you to avoid waiting several days for registration in Denmark.

 
The cost of registering a holding company in Denmark, which can take the form of Anpartsselskab (ApS) or Aktieselskab (A/S), is DKK 670. If you choose to use a law firm or accounting firm, there may be additional costs.

Benefits and limitations of a holding company

Advantages of holding companies:

• Favorable tax rates for dividends and profits from stock transactions.
• Registration is quick and hassle-free.
• It is possible to transfer deficits between operating companies under joint taxation, leading to lower tax rates.
• There is no requirement for a minimum number of shares in other companies to be considered a holding company.
• In addition, there is no requirement to register for VAT.
• There are no specific accounting procedures, except for an annual audit of the books.
• Transferability of dividend profits between companies, which promotes capital preservation.
  
  

Disadvantages of holding companies:

• The complexity of the legal relationships between a holding company and its subsidiaries can lead to a complicated situation without proper expert support.
• There are differences in tax laws depending on the legal form of the subsidiaries and the number of shares held.
• Often there are no operating activities, other than managing the assets of the operating companies.
• Registration of a Danish holding company can sometimes be more difficult when operating companies are previously established.
  
  

Taxation of the holding company

Although regulations do not require specific accounting procedures for holding companies, it is necessary for them to have their accounts audited annually by Danish accountants.

In Denmark, the amount of tax for a holding company depends on the type of income generated:

• Dividends paid by the operating company.  
• Gains from the sale of shares (interests in operating companies).
  
  

In addition, the legal form of operating companies matters, as they can be both private and public.

Tax rates on dividends received from operating companies are as follows:

• Ownership of 10% or more shares in a private company - 0%.
• Ownership of less than 10% of shares in a private company (portfolio shares) - 15.4% (70% of dividends are taxed at a rate of 22%).
• Holding 10% or more shares in a public company - 22%.
• Ownership of less than 10% of a public company's shares (public portfolio shares) - 2%.
  
  

Income from shares is also taxable, and the rates are as follows:

• Holding 10% or more shares in a private company - 0%.
• Holding less than 10% of shares in a private company (portfolio shares) - 0%.
• Holding 10% or more shares in a public company - 22%.
• Holding less than 10% of shares in a public company (public portfolio shares) - 22%.
  
  

When a Danish holding company owns less than 10% of another company, such shares are called “portfolio shares.” Special tax rules apply to portfolio shares in private companies.

By holding 50% of the shares in another Danish company, the company becomes the administrator of the joint tax regime between the operating company and the holding company, according to Danish regulations. If both companies are registered in Denmark, they should be notified to SKAT Erhverv within one month of the start of joint taxation. Joint taxation is also possible when companies operate in different countries, leading to a division of responsibilities between the operating companies and the holding company.

Full liability occurs when the operating company is wholly owned by the holding company, while partial liability occurs when the company is only partially associated with the holding company. It is important that both companies have the same fiscal year. Since the holding company holds a dominant position over the operating company, a change in the holding company's tax year also affects the company that reports to the holding company.

It is important that the Danish holding company is not subject to corporate income tax (CIT) if it only holds foreign shares.

Financial aspects of a Danish holding company

The company generates revenue from two main sources: dividends received from operating companies and profits from the sale of shares in other companies. Expenses related to operations include accounting and banking services. It is worth noting, however, that losses can result from the impairment of shares.

Shares classified as portfolio shares represent less than 10% in a given company. When such shares are held in private companies, special tax rules apply. 70% of dividends are taxed, while profits from the sale of shares are exempt from tax. Shareholders receive dividends at an annual general meeting or extraordinary meeting.

In the tax context, Danish law imposes a 22% corporate income tax, which also applies to other limited liability companies. However, it should be noted that proceeds from the sale of shares in other companies are not taxed.

How is a holding company different from other forms of companies?

In Denmark, a holding structure usually takes the form of a limited liability company such as ApS or A/S, never functioning as a sole proprietorship.

• It is characterized by holding shares in the capital of other companies, called operating companies.
• The main purpose of such a company is to manage its businesses.
• Regardless of the number of shares held, it is always referred to as a holding company.
• The amount of taxes, which are especially low in the case of dividends and the sale of shares, only depends on the number of these shares.
• Typically, holding companies are not registered for VAT.
• In addition, they can take advantage of a tax system that allows deficits to be transferred between companies and profits to be reported as dividends, which helps protect those profits from possible claims and lawsuits.