From taxes to visas: What entrepreneurs need to know about Denmark
ith the grand opening of our Startup Guide store in Copenhagen next weekend, we take a look at the essentials an aspiring entrepreneur needs to know - from obtaining a work permit as a foreigner in Denmark to the country's investment landscape - before working or starting up there.
Situated in the Nordics, an attractive place for talent to relocate to due to its good work-life balance, high salaries and work culture with flat hierarchies, Denmark is home to some 5.8 million people. The population of the entire Nordic region is 25 million.
Having highlighted Copenhagen’s high quality of life and other benefits for entrepreneurs in the capital of Denmark in a piece we published last year, here are important aspects to know about the country as whole.
The Danish startup scene covers a wide range of sectors and industries. The most popular investment sector is fintech (accounting for 413 million DKK of startup investment in 2017 according to the Nordic Tech List), which is supported by member’s organization Copenhagen Fintech.
The pharma and medtech sector is also strong, thanks to Medicon Valley, Scandinavia’s leading life-science cluster covering Greater Copenhagen and South Sweden. AI and edtech are also strongly represented in the startup scene, though the largest investments in 2017 were made in gaming (Unity with 2.65 billion DKK) and the recommendations industry (Trustpilot with 175 million DKK).
Starting a company
Denmark is one of the easiest countries in the world to do business (the third easiest in 2018 according to the World Bank) due in large part to low corruption, strong infrastructure and simple digital bureaucracy.
To register a new company, you simply log into the public portal virk.dk with your common secure log in (NemID). The website, which is in Danish only, provides you with all the information you need on the different company structures and their requirements. The IVS is designed specifically for startups.
It requires only 1 DKK in startup capital and the owners shoulder no personal liability for the company’s debts, similar to a limited company. To start a business in Denmark, you must either be an EU/EEA citizen, or have a residence and work permit.
Read more: 10 of the hottest startups in Copenhagen
Visas and work permits
While EU and EEA citizens are free to find work in Denmark, strict immigration rules can make it difficult for other international citizens to secure working visas and residency status.
Talented international entrepreneurs can apply to start a business in Denmark and secure a visa under the Start-up Denmark scheme (startupdenmark.info) or apply for a job on the so-called Positive List of professions, where there is a shortage of qualified professionals.
Next best is the Pay Limit Scheme, which provides visas to foreign workers provided the earn at least 417,794 DKK per year. The full list of visas can be found at nyidanmark.dk.
You can register for a social security (CPR) number at your local municipality. Without one, life in Denmark is virtually impossible. You’ll also be supplied with a common secure login (a NemID) used to access state and municipal digital services and online banking.
Free access to quality higher education means that the Danish labor market is brimming with employable talent.
Unemployment is low, which keeps salaries high, and businesses often look abroad to fill their remaining talent needs. Thanks to a high standard of living and quality of life, employers on the whole find the labor they need, although the strict immigration rules can prove a challenge.
Danish higher education emphasizes teamwork and labor-market experience, meaning that many graduates have had relevant work experience during their studies.
Strong informal networks result in many jobs changing hands without being listed, though LinkedIn is becoming increasingly important in finding qualified labor.
Most Danes expect to work 37 hours a week with enough flexibility to be able to pick up children early from daycare. The labor market Flexicurity model makes it easy to dismiss staff, who can fall back on generous unemployment insurance.
There is reason to be optimistic about investment in Danish startups, according to the Danish Growth Fund’s 2017 Benchmark report. Denmark had the highest per capita level of investment from venture capital compared to fifteen other European countries.
Investment has been increasing and has been especially witnessed in seed and startup phases, though the vast majority of investment has been funneled toward fewer more successful companies. For example, in 2017, tech investors Silver Lake invested 2.65 billion DKK in Unity.
The remaining investments identified by digital media Bootstrapping amounted to 1.3 billion DKK, spread across seventy businesses. State-run investment vehicles Innovationsfonden and Vækstfonden were responsible for much of the investment, along with Seed Capital.
For other options, try the Danish Business Angels (danban.org) or the Danish Venture Capital Association (dvca.dk/en). Otherwise, you can just go straight to the source and pitch to some of Denmark’s most accomplished entrepreneurs-turned-investors; for example, Jesper Buch of Just Eat, or Martin Thorborg of Amino and Jubii.
Read more: 13 killer coworking spaces in Copenhagen
Almost all aspects of the Danish health service are free except dentistry (free until age eighteen). Prescribed medicines are subsidized and individual costs capped at 4,030 DKK per year.
Your GP is your access to the health service and must give a referral in order for you to see a specialist doctor. Without a referral, you have to go private or pay. While you can always call 112 in medical emergencies, you cannot present yourself at a hospital without first calling 1813 and getting a hospital referral.
More than two million Danes pay to be members of Danmark, a private health insurance that reimburses a variety of medical costs including dentistry and glasses. There are no compulsory insurances in Denmark, though you would be advised to get a home-contents insurance (indboforsikring) that also often provides coverage for theft of property.
Denmark is highly digitized, and the tax authority Skat has an excellent website (also in English) where you can update your income and deductions. Much of it is automatically filled in. Employers register your income with Skat, while your bank supplies interest paid on your loans, which is automatically deducted.
Other common deductions include unemployment insurance (A-Kasse) payments and union payments as well as deductions for travel if your job is more than twelve kilometers from your home. Income taxes are automatically calculated and withdrawn from your primary paycheck.
If you’re self-employed, you can register your predicted income and pay monthly instalments toward your annual income tax bill. While straightforward, it’s worth running your taxes past an accountant. Ask for recommendations in startup and expat groups on Facebook to find reliable independent accountants.
More essential info about Denmark as well as Norway, Sweden, Finland and Iceland can be found in Startup Guide Nordics, which was published in November 2018.
Main photo by Unsplash/@lemurdesign
*This article was originally published on January 9th, 2019 and updated on January 17th, 2019