What Is a Holding Company in Denmark

WHY IS IT WORTH TO OWN A HOLDING COMPANY IN DENMARK?

A holding company is a type of limited liability company that owns shares in other companies, which are referred to as operating companies. The structure of a holding company is typically denoted by A/S or ApS, and a sole proprietorship cannot be a part of a holding company. Holding companies are often not required to register for VAT, and their main activity is managing the property of other companies. The number of shares a company has in other companies is not significant in determining whether it is a holding company, but it affects the tax rules that apply. Holding structures offer benefits such as lower taxation on dividends and profits from share sales, and the ability to distribute the deficit between companies for profit under a common tax regime. Additionally, holding companies can carry forward profits as dividends, which helps protect them from legal claims or lawsuits.

IS IT NECESSARY TO INCLUDE PHASE „HOLDING” IN THE NAME OF THE COMPANY?

It is not necessary to include the word "holding" in the name of a company for it to be considered a holding company. The important factor in determining whether a company is a holding company is the scope of its activities, rather than its name. Even without the term "holding" in its name, a company that holds shares in other companies and engages in managing their assets is still considered a holding company.

WHAT INCOME WILL THE HOLDING COMPANY HAVE?

A holding company generates income in two main ways. The first is through dividends received from the operating companies that it holds shares in. The second is through the profits earned from the sale of shares in different companies that the holding company owns.

WHAT COSTS WILL THE HOLDING COMPANY INCUR?

Typically, the costs incurred by a holding company are limited to accounting or banking fees. However, there may be cases where the holding company experiences losses due to the decrease in value of the shares it holds, or losses resulting from the sale of those shares.

WHAT IS THE AMOUNT OF TAX PAID FROM PROFITS?

In Denmark, holding companies are subject to a corporate income tax rate of 22%, which is the same as that paid by other limited liability companies. However, profits resulting from the sale of shares in different companies are generally exempt from taxation.

WHAT PORTFOLIO SHARES EXACTLY ARE?

If a holding company owns less than 10% of another company, the shares it owns are referred to as portfolio shares. For these shares, there are specific tax rules that apply to private companies. Typically, 70% of dividends generated from these shares are subject to taxation, but gains from the sale of these shares are not subject to tax.

WHAT AMOUNT OF TAX HAS TO BE PAID ON DIVIDENDS RECEIVED FROM OPERATING COMPANIES?

• 4% tax rate applies when a holding company owns less than 10% of a private company (portfolio shares), and only 70% of dividends are taxed at the standard corporate income tax rate of 22%.
• 22% tax rate applies when a holding company owns 10% or more shares of a public company.
• 2% tax rate applies when a holding company owns less than 10% of the shares of a public company (public portfolio shares).

WHAT AMOUNT OF TAX DO YOU PAY WHEN SELLING SHARES AT A PROFIT?

• 0% tax rate applies when a holding company owns 10% or more shares in a private company.
• 0% tax rate applies when a holding company owns less than 10% of shares in a private company (portfolio shares).
• 22% tax rate applies when a holding company owns 10% or more shares of a public company.
• 22% tax rate applies when a holding company owns less than 10% of the shares in a public company (public portfolio shares).

IS DEDUCTION OF LOSSES POSSIBLE ON THE SALE OF SHARES?

• No publication of financial statements is required when a holding company owns 10% or more shares in a private company.
• No publication of financial statements is required when a holding company owns less than 10% of the shares of a private company (portfolio shares).
• Publication of financial statements is required in the case of owning 10% or more shares of a public company.
• Publication of financial statements is required when holding less than 10% of shares in a public company (public portfolio shares).

PURCHASE PRICE OR INTRINSIC VALUE

In Denmark, if a company owns more than 50% of another company, it becomes the administrator of the joint taxation system for both companies. This joint taxation system is required when both companies are located in Denmark and are registered with SKAT Erhverv within one month of the start of joint taxation. In some cases, a joint taxation system can also be chosen when the location of the companies is in different countries.

LIABILITY UNDER JOINT TAXATION

Under joint taxation in Denmark, companies share liability with the holding company in the operating companies. Liability is also shared with the different operating companies, which are taxed jointly with the holding company. Liability can be fully shared when the company is 100% owned by the holding company, or partially shared when the company is partially owned by the holding company.

IS IT POSSIBLE TO REGISTER MY HOLDING COMPANY WITH THE SAME 20,000 DKK THAT WAS USED TO START MY OPERATING COMPANY?

Yes, it is possible to register both companies at the same time with the same 20,000 DKK. This is called "working capital."

IS IT POSSIBLE TO FORM A HOLDING COMPANY AFTER THE ESTABLISHMENT OF MY OPERATING COMPANY?

Yes, it is possible to form a holding company after the establishment of an operating company. However, it can be complicated, and it is important to consider the tax consequences if you plan on transferring your own shares in the operating company to the holding company.

HOW TO PAY A SHAREHOLDER A DIVIDEND?

Dividends are paid to shareholders at meetings, either an annual general meeting or an extraordinary general meeting.

CAN A HOLDING COMPANY HAVE A DIFFERENT TAX YEAR THAN AN OPERATING COMPANY?

If companies are jointly taxed, they must use the same tax year. Generally, it is the operating company that will have to align its tax year with that of the holding company.