The Companies Act

The Companies Act regulates how businesses are established, run, and dissolved in Denmark. 

It includes rules for company forms such as sole proprietorships, private limited companies (ApS), and public limited companies (A/S). It is important to choose the right company form, as it affects your personal liability and the tax rules for your business.

• Sole proprietorship: This is the simplest form, where you are the only owner and fully responsible for the business. Your personal assets can be at risk if the business fails, but the setup is simple and inexpensive.
• Private limited company (ApS): In an ApS, the company is a separate legal entity from you as the owner. You are only liable for the amount you invest in the company, and your personal assets are protected. This structure is more formal and requires a minimum capital investment.
• Public limited company (A/S): Similar to an ApS but larger in scale, an A/S allows shares to be publicly traded. This structure is often used for larger businesses and also protects personal assets, but it involves more complex legal and financial requirements.

This legislation is relevant for small business owners when deciding how to structure their business and understand their responsibilities in terms of liability and taxes.

Tax Legislation

As a business owner in Denmark, there are several different tax laws you need to be aware of, depending on the structure of your business. The most important laws include: 

• The Danish Taxation of Business Income Act (Virksomhedsskatteloven): This allows business owners to defer taxes on retained earnings and deduct expenses.
• The Personal Tax Act (Personskatteloven): This governs the taxation of sole proprietorships and partnerships, where the business income is taxed as personal income. 
• The Corporation Tax Act (Selskabsskatteloven): This applies to companies such as private limited companies (ApS) and public limited companies (A/S), where the company pays tax on its profits. 
• The Danish VAT Act (Merværdiafgiftsloven): This regulates how businesses must charge and pay VAT (Value-Added Tax) on goods and services. 
• The Tax Assessment Act (Ligningsloven): This contains special rules for tax deductions and other taxable matters. 

It is important to understand which legislation applies to your business and how to correctly report taxes and VAT to avoid penalties. However, tax laws can be complex and vary depending on your specific circumstances, so it is always recommended to consult your own accountant to ensure you are following the correct rules and making the best financial decisions for your business. 

The Bookkeeping Act

The Bookkeeping Act (Bogføringsloven) regulates how you have to keep records for your business. 

As a business owner, you are required to accurately record all income and expenses and keep receipts and documentation for at least five years. Proper bookkeeping is the foundation for preparing your annual financial statements and reporting taxes.

New rules for digital bookkeeping have also been introduced. From 2024, many businesses are required to keep digital records, meaning that your receipts, invoices, and financial data must be stored digitally and in a format accessible to authorities. This requirement ensures greater transparency and accuracy in bookkeeping and makes it easier to share data with accountants and tax authorities.

It is important to be aware of these new digital requirements and ensure your business is complying, so you avoid penalties for non-compliance.

The Anti-Money Laundering Act  

The Anti-Money Laundering Act is designed to prevent money laundering and the financing of terrorism. As a small business owner, particularly if you handle cash or work with subcontractors, this law can affect how you operate. Banks are required to monitor transactions closely, and this means that businesses dealing in cash or working with multiple subcontractors may face additional scrutiny.

You will need to ensure that your financial records are clear, especially for cash transactions, and that you can provide documentation for your subcontractors. If your business deals with large or unusual payments, or if there are concerns about fraud, your bank may request additional information to verify that your activities comply with the law.

By following the rules set out in the Anti-Money Laundering Act, including having procedures to identify and report suspicious activity, you can maintain a good relationship with your bank and avoid any disruptions to your financial services or potential penalties.

The Working Environment Act   

If you have employees, you must follow the rules set out in the Working Environment Act (Arbejdsmiljøloven). This law ensures that the workplace is safe and healthy for your employees. This means you are responsible for providing good working conditions and ensuring that the workplace meets safety standards. The Danish Working Environment Authority may conduct inspections to check if the rules are being followed.

The Marketing Practices Act   

The Marketing Practices Act (Markedsføringsloven) regulates how businesses advertise and market their products. 

It protects consumers from misleading or aggressive marketing, ensuring that advertising is truthful, clear, and not deceptive. Special rules apply to discounts, requiring genuine reductions, and to the collection of personal data, which must comply with GDPR.

On social media, businesses must clearly label sponsored content, and influencer collaborations and paid posts must be transparent. Misleading tactics or improper data use for targeted ads can lead to fines or penalties.

The General Data Protection Regulation (GDPR)    

The General Data Protection Regulation (GDPR) governs how you handle personal data. 

If your business collects, stores, or processes personal data about customers or employees, you must comply with GDPR rules. This ensures that personal data is protected and that individuals are informed about how their data is used.

The Consumer Contracts Act    

If you sell goods or services to private consumers, you must comply with the Consumer Contracts Act (Forbrugeraftaleloven). It contains rules about cancellation rights, delivery terms, and consumer rights. This is especially important to understand if you run an online shop or sell directly to consumers.

Key points to be aware of include:

• Right of Withdrawal: Consumers can cancel purchases within 14 days, especially for online or distance sales.
• Clear Terms: You must clearly state product prices, delivery conditions, and refund policies.
• Refunds and Exchanges: Consumers are entitled to refunds or exchanges under certain conditions.