In mid 2013, the UN published its World Report on Happiness, in which a ranking of 156 countries were ranked according to the happiness of its inhabitants. Whether it is due to their high safety rates, high salaries (the highest in the world), the enviable management and quality of its public services or the excellent taste of their cookies, Denmark is considered today the happiest country.
Perhaps this general happiness is what has led in recent years to a significant increase in direct foreign investment in the country. Or, the palpable reality in the field of business which is derived from some of the following data at a European level:
In addition, as reflected in data from the World Bank, Denmark is considered the 4th in the world in terms of ease offered to foreign investors to do business within their borders:
Denmark is an attractive country for investment … now what? Is it necessary to establish a subsidiary there to operate? It depends on the business case of each company. But not so fast…
A standard internationalization process does not start by direct implementation of a subsidiary in the country. As a preliminary step, organizations that are immersed in processes of this calibre begin to establish a remote presence: by exporting the product or service offered, once this process is established, it is a prelude to a possible effective implementation.
So, in this post we will focus on this first step, analysing what requirements are imposed by the Danish administration on Spanish companies that have decided to carry out a temporary project in Denmark.
As a company within the scope of the European Union, a Spanish company is entitled to provide services in Denmark temporarily. That means it is not necessary to establish a permanent business in the country, nor a subsidiary. Still, there are a number of requirements in Denmark that must be met by European foreign companies listed below:
- Registration of Foreign Service Providers (RUT)
Foreign companies that want to provide a service in the country must complete a notice in the Register of Foreign Service Providers (RUT).
Who should apply for RUT?
- Foreign companies that send workers into the country to perform temporary work.
- Self-employed foreigners.
- Temporary employment agencies.
- Specific rules governing RUT can be applied in the construction, agriculture, cleaning and gardening sectors.
When to notify? Before the start of the worker’s activity
Authorisation: Once the worker has the RUT number, this is the proof that the employee is able to perform the activity.
- VAT and other taxes
Companies established abroad and that carry out a temporary service in Denmark are subject to the obligation to pay taxes and VAT in the country.
Who is liable to pay VAT?
- Foreign companies that provide services to private individuals in Denmark.
- Foreign companies that provide services to a company registered in Denmark.
- Outsourcing Danish companies that support the realization of the service.
How to register the VAT?
- By accessing the following link: http://businessindenmark.danishbusinessauthority.dk/register-as-a-foreign-company for registration as a foreign company providing a service in Denmark.
- Registration must be at least eight days before the date of the commencement of service.
- A confirmation of registration (SE-number) will be sent to the address of the applicant.
- Not registering for the payment of VAT implies possible economic sanctions on foreign companies.
How to register the VAT? By means of the application with which the certificate was obtained, the SKAT offers the company an access to a virtual platform with the necessary information that is required for calculating the VAT fee.
How to pay the VAT? By international transfer, following the instructions and the bank account provided by the SKAT.
When a foreign company provides a service in Danish territory it will be required to pay tax in Denmark when:
- They perform construction work, construction, assembly or installation for a temporary period of time. This varies between 6 and 12 months, depending on the agreement that they signed with the respective country. After this time, if the service continues the company will be legally regarded as a resident in Denmark.
- The provision of labour for a temporary period is available to a Danish company.
In Denmark, Corporate Tax (analogous to the tax on Spanish companies) for 2015 is 23.5% and it will go down until 2016. You can view existing taxes in Denmark by accessing the following document
- Safety and Health at Work
Danish legislation on safety and health emanates from the Framework Directive, therefore there are no differences of great significance regarding the Spanish legislation.
The Danish Environment Authority (WEA) is the agency responsible for the inspection of working conditions in the establishments of the country. During inspections the establishment is analysed for possible violations of the rules. A RUT number is also a common requirement for foreign workers employed at the facility.
Main documents required:
- Risk assessment (known as APV in Denmark)
- OHS Training
- Work instructions for the use of machinery, equipment, and hazardous substances.
- Written policy banning the consumption of tobacco on the company premises.
When will there be an inspection by the WEA?
This inspection body has a strong team of inspectors and their views are not a strange phenomenon for organizations in the country.
In addition to the occurrence of an accident or of the complaint of an individual, one of the most common assumptions that motivate a visit by a labour inspector is the recent acquisition of the RUT number.
The Danish legislation on safety and health attaches administrative and criminal liability to the entrepreneur.
- Social security and insurance compensation
Foreign companies that have one or more employees working on Danish soil with a local contract are obliged to pay the corresponding contributions in social security, in accordance with Danish law in this area.
What obligations exist concerning social security?
- Payment of ATP quote: gives worker the right to access the social security system of the country. The cost for the employer’s contribution is up to € 290/year/worker.
- Contribution to labour market fund (AES).
- Occupational accident insurance: every worker must be insured by law.
- Payment of benefits by the employer in case of illness.
What to do to comply with the Social Security obligations?
The first step is the one mentioned above: registering the company as a foreign company that provides services in the country. (http://businessindenmark.danishbusinessauthority.dk/register-as-a-foreign-company)
How to declare and pay the ATP and AES?
The company must declare the ATP contribution to the SKAT through its virtual platform. Once the ATP has been declared and the amount paid (as indicated in the application) an AES bill is sent to the company. The amount of AES is variable and linked to the amount of ATP paid.
Work accident insurance
The employer established in Denmark, whether permanent or temporary, is obliged to insure their staff against accidents and occupational infirmities. To do this, you can resort to the services of a private insurer.
A worker not being insured can bring about a substantial penalty, which will be accompanied by charges for the time when the workers were uninsured.
- Official authorization
For certain professionals and the development of certain work, obtaining an authorization is required by the competent authority. In the case of health and safety coordinators, for example, the need for this authorization varies depending on the timing of the jobs.
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