Denmark Accounting Questions Answered

What is the Virksomhedsordningen (VSO) and how does it work?

The Virksomhedsordningen (VSO) is a Danish tax scheme for sole traders that allows business income retained in the business to be taxed at 22% (the corporate rate) rather than the personal top rate of up to 55.9%. When profits are later withdrawn personally, normal personal income tax applies.

Should I pay myself salary or dividends from my Danish ApS?

Most Danish ApS owner-managers pay themselves salary up to the topskat threshold (DKK 568,900 in 2025, or approximately DKK 638,000 pre-AM-bidrag gross), then extract remaining profits as dividends at 27%/42%. Dividends avoid the 8% AM-bidrag and top income tax rates, making the effective rate significantly lower.

How does personal income tax work in Denmark?

Danish personal income tax combines AM-bidrag (8%), bundskat (12.06%), municipal tax (~25%), and topskat (15%) to produce marginal rates up to 55.9% for incomes above DKK 568,900. Denmark has one of the highest personal tax rates in the world, which drives significant tax planning around company structures and pension contributions.

How does VAT (moms) work in Denmark?

Denmark charges moms (VAT) at 25% — the highest standard VAT rate in the EU. Unlike most EU countries, Denmark has no reduced rate. Businesses must register when taxable turnover exceeds DKK 50,000 annually. Returns are filed via TastSelv Erhverv with frequency determined by turnover size.

What can I reclaim moms (VAT) on as a Danish business?

Danish businesses can generally reclaim 100% of moms (input moms) on business purchases. Key exceptions: no reclaim on passenger car purchases or running costs, no reclaim on client entertainment and restaurant bills, and complex rules for mixed-use assets like phones and internet.

How do I set up an ApS (private limited company) in Denmark?

A Danish ApS (Anpartsselskab) requires DKK 40,000 minimum share capital and registration via Erhvervsstyrelsen at virk.dk. The process typically takes 1-3 business days. You receive a CVR number (company registration number) upon registration.

Should I operate as a sole trader or form an ApS in Denmark?

For most Danish sole traders earning above DKK 500,000-600,000 per year, forming an ApS becomes tax-advantageous. Below that, the VSO scheme for sole traders can be competitive. The key factors are liability protection, the 22% corporate rate vs up to 55.9% personal rate, and the administrative burden of an ApS.

What is the corporate tax rate in Denmark?

Denmark's corporate tax rate (selskabsskat) is 22% on all taxable profits of resident companies. The rate is flat — there are no progressive thresholds or small company reliefs. It applies equally to a sole-director ApS and a large multinational subsidiary.

What are the employer obligations for a Danish business?

Danish employers must withhold A-skat (income tax) and AM-bidrag (8%) from salaries and report monthly via eIndkomst. They must also pay ATP contributions (DKK 3,510/year per full-time employee), register for AER sick pay insurance, and accrue holiday pay at 12.5% of gross salary.

What are the bookkeeping and accounting requirements for Danish companies?

Danish companies must keep accounts under Bogføringsloven (Bookkeeping Act). From 2024, companies above DKK 300,000 annual revenue must use approved digital bookkeeping systems. Annual accounts (årsrapport) must be filed with Erhvervsstyrelsen within 5 months of year-end.