BUILDING in Denmark A manual for the construction industry - NJORD Law Firm
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
BUILDING in Denmark A manual for the construction industry
Building
in Denmark
Denmark is a country in progress Relative to its size, the level of
with many large infrastructural construction activity in Denmark is
projects and public building pro- very high with a production value
jects well underway and new ones of new construction plants and
being put out to tender such as repairs at DKK 52.6 billion in 2017.
the construction of the Fehmarn Not surprisingly, the Danish con-
Belt Fixed Link – at the planned struction market is experiencing
17.6 km the longest bridge ever an increasing interest from foreign
constructed – six new super hospi- contractors who not only bid for
tals, an addi- tenders but also often win them.
tional line for the Copenhagen Me-
tro, new tram lines around Copen- In addition, it is relatively simple
hagen and much more. to operate in the Danish market
Many projects aim to improve in terms of e.g. construction, ta-
sustainability supporting a busi- xation, and employment law. Ne-
ness environment for innovative vertheless, closely assessing these
construction solutions, includ- matters in a holistic manner, inclu-
ing electrification of the national ding selecting the right corporate,
railway network, reconstructing employment and tax set-up will
waste water treatment plants from allow entities to reduce costs and
energy consumers to producers, risks.
and setting up smart city projects
in the streets of the capital to im-
prove the environment and living
conditions.
Practical hint
www.njordlaw.com
Further information
www.njordlaw.com
2About the guide
This first edition of this guide was information in English on the vari-
the first of its kind (and it remains ous topics.
the only publication), offering
international contractors an over- We endeavour to answer the most
view of the questions that typical- frequently asked questions. Inevi-
ly arise when carrying out con- tably, you may require further in-
struction activities in Denmark. formation, or you may have speci-
Our aim is to address most of the fic concerns and questions, which
main considerations that may be are not addressed in this guide.
relevant, such as invitations to Thus, prior to bids for tender or
tender, construction and working carrying out construction work
environment in Denmark. Web in Denmark, we recommend you
links in the guide provide further seek professional legal advice.
3TABLE OF CONTENTS
1 Invitations to Tender and Construction Contracts in Denmark 7
1.1 Public Invitations to Tender in Denmark 8
1.1.1 Overview of Ongoing Invitations to Tender 8
1.1.2 Obligation to Issue an Invitation to Tender 8
1.1.3 Requirements of the Bid 9
1.1.4 Complaints Procedure in Case of Errors
in the Invitations to Tender 10
1.2 Construction Contracts 11
1.2.1 The AB system 11
1.2.2 Providing Security 12
1.2.3 Payments 12
1.2.4 The Right to Stop Work if Payment is not Effected 13
1.2.5 Extension of Time 15
1.2.6 Liquidated Damages 15
1.2.7 Handing-over 15
1.2.8 Defects and damage 16
1.3. Construction Disputes 16
1.4. Securing Evidence in Danish Construction Disputes 17
2 Establishment in Denmark 18
2.1 Permanent Establishment 20
2.1.1 Choice of corporate form 20
2.1.2 RUT-Register 23
2.2 Corporate Tax 24
2.3 Hiring-out of labour taxation 24
2.4 VAT 26
2.5 Safety on Construction Sites in Denmark 27
2.5.1 Permits Required by Enterprises and Individuals 28
2.5.2 Safety on Construction Sites 29
2.5.3 Insurance Against Accidents at Work 29
3 Motor Vehicles in Denmark 30
3.1
Registration Obligations and Taxes 32
3.1.1 Passenger Cars as Company Cars 32
3.1.2 Commercial Vehicles with “Yellow Number Plates“ 33
3.1.3 ”Special Vehicles” 34
3.1.4 Use of Leased Motor Vehicles 34
3.1.5 Liability and Penalties 35
3.2 Registration Procedure 35
3.2.1 Registration Charge for New and Used Motor Vehicles 35
3.2.2 Calculation of the tax 35
3.2.3 Quarterly Payment in case of Temporary Stay in Denmark 36
3.3 Obligation to Mark Vehicles Transporting Goods 36
44 Working Environment in Denmark 39
4.1 Danish Labour Market 40
4.1.1 Flexicurity - the “Danish Model” 40
4.1.2 Unions and Employers’ Associations 41
4.1.3 Various Categories of Employee 41
4.1.4 Employee Representation and Works Council 42
4.2. Workers (blue-collar) 44
4.2.1 Applicable Law 44
4.2.2 Recruitment Procedure 44
4.2.3 Employment Contract 44
4.2.4 Working Hours 45
4.2.5 Remuneration 45
4.2.6 Vacation 46
4.2.7 Maternity and Paternity Leave 48
4.2.8 Termination of Employment Relationships 48
4.2.9 Mass Redundancies 49
4.3 Employees (white-collar) 50
4.3.1 Applicable Law 50
4.3.2 Recruitment Procedure 51
4.3.3 Employment Contract 51
4.3.4 Working Hours 52
4.3.5 Remuneration 52
4.3.6 Vacation 53
4.3.7 Sickness and Maternity Leave 53
4.3.8 Termination 54
4.3.9 Mass Redundancies 55
4.4. Courts with Jurisdiction for Labour Disputes in Denmark 57
4.5. Resident Permit and Work Permit in Denmark 58
4.6. Social Security Contributions 58
4.6.1 Applicable Law 69
4.6.2 Pension Schemes 60
Pension Schemes Under Collective Agreements 60
Private Retirement Benefits Insurance 60
4.7 Danish Tax System for employees 62
4.7.1 Tax Liability for Individuals 62
4.7.2 Personal Taxation in Denmark 64
4.8. Public Holidays in Denmark 67
NJORD Law Firm 68
56
1
Invitations to Tender
and Construction
Contracts in Denmark
This chapter provides an overview of
the public invitations to tender and
construction contracts in Denmark.
71.1 Public Invitations to Tender in Denmark
In Denmark, as in the other EU tion projects that are conducted by
member states, there is a funda- the state, municipalities, or other
mental obligation to issue public entities governed by public law.
invitations to tender for construc-
1.1.1 Overview of Ongoing Invitations to Tender
It is relatively easy for foreign site are only available in the Danish
contractors to obtain an overview language.
of public projects in Denmark for Search criteria relevant to one’s
which invitations to tender have own enterprise can be entered on
been issued. The website www. the website. A free e-mail service
udbud.dk/(“udbud” = invitation to provides automatic notification
tender) lists all public invitations to when a new invitation to tender
tender in Denmark. matching one’s own profile is pub-
The website lists both national lished.
and EU invitations to tender and is It is also possible to find other sup-
updated daily. However, the actual pliers via the website in order to
invitations to tender on the web- draw up a joint bid with them.
Practical tip:
The Danish register of invitations to
tender www.udbud.dk lists all public
invitations to tender in Denmark. The
information about relevant invitations
to tender is updated regularly and
provided free of charge via an e-mail
service.
1.1.2 Obligation to Issue an Invitation to Tender
The applicable Danish regulations above ¤ 144,200 and contracts for
on invitations to tender obliges services and purchases of goods
the state, municipalities, and other placed by municipal entities with a
entities governed by public law to volume of ¤ 221,000 or above also
issue a public invitation to tender have to be advertised throughout
for contracts involving a total volu- the EU.
me of ¤ 67,000 and above. The invitation to tender documents
For construction activities, the has to state the criteria according
threshold for this obligation to invi- to which the bidder will be cho-
te to tender is ¤ 5,543,000. sen, i.e. whether the tender will be
Contracts for services and pur- awarded to the least expensive or
chases of goods placed by public the most suitable bid.
entities with a total volume of or
81.1. Requirements of the Bid
The relevant requirements have to This even applies where the evi-
be observed when submitting a dence presented by the bidder is
bid. The authority issuing the invi- better than the evidence required
tation to tender must refuse bids according to the documents of the
that do not meet the requirements invitation to tender. Compliance
set out in the documents of the with the rules on procurement is
invitation to tender. regulated by the Danish Act on
The requirements regarding the the Enforcement of Procurement
precision of a bid are strict. If the Regulations (in Danish: “Lov om
bidder has to provide evidence håndhævelse af udbudsreglerne”)
of the quality of its performance and is monitored at first instance
and provides such evidence in a by the Complaints Board for Public
manner diverging from the requi- Procurement (in Danish: “Klage-
rements established by the autho- nævnet for udbud”).
rity awarding the tender, then that
authority must disqualify the bid-
der.
Practical tip:
A bid should not be drawn up by tech-
nicians alone. The participation of le-
gal experts is recommended as me-
ticulous compliance with the require-
ments regarding bids is essential.
91.1.4 Complaints Procedure in Case of Errors
in the Invitations to Tender
Where a complaint is filed with present their reservations during
the Complaints Board for Public the course of an invitation to ten-
Procurement, the Board will not ex der have to observe the “stand-
officio examine which procurement still” period of 10 days (for electro-
regulations might have been nic communications) and 15 days
breached. (for other written communica-
It is therefore recommendable to tions).
examine the potentially breached The “stand-still” period begins as
procurement regulations carefully soon as the contract is awarded
before filing a complaint and to set in writing. During this period, a
out arguments in detail in the writ- final agreement may not be con-
ten complaint. Complaints should cluded with the preferred bidder;
be worded in the manner of a sta- unsuccessful bidders may ask the
tement of a claim in court procee- Board to grant their complaint
dings and it is important to state suspensive effect, preventing the
the facts and submissions in detail. contract from being awarded. The
It is advisable to consult a lawyer Board then has to decide in a fast-
when preparing a complaint. track procedure whether the final
Where a contract has been award- conclusion of the contract can be
ed based on a breach of procure- postponed.
ment regulations, unsuccessful In its final decision the Complaints
bidders can claim damages. How- Board for Public Procurement can
ever, the enforcement of damages declare a contract null and void
claims often fails because and can even impose fines amoun-
unsuccessful bidders fail to pre- ting to millions on the authority
sent sufficient evidence of the loss that issued the invitation to tender.
incurred.
In cases, where contracts are
awarded on the basis of a breach
of procurement regulations, and
the breach is a breach of funda-
mental procurement rules, the Bo-
ard may declare contracts already
concluded null and void so that the
invitation to tender must be
re-issued.
Unsuccessful bidders wishing to
Practical tip:
During the so-called “stand-still” pe-
riod of 10 or 15 days a complaint filed
to the Complaints Board for Public
Procurement (“Klagenævnet for ud-
bud”) can prevent a contract from
being finally awarded to the preferred
bidder.
101.2 Construction Contracts
Danish law does not contain provi- AB 92, and ABT 93 but these will
sions on construction and engi- all be replaced by the AB-18 sy-
neering contracts. Construction law stem, which public authorities will
is primarily based on – unwritten – be obliged to use from 1 January
general principles of law as expres- 2019.
sed in published arbitral practice. If To a large extent, the AB system
the parties fail to decide on choice relies on and to a lesser extent
of law, Danish law will apply for sets-out general principles of law,
construction in Denmark. which makes it difficult to compre-
In practice, the majority of con- hend by a simple reading. Many
struction contracts in Denmark are provisions are implied, and the
governed by the standard terms correct reading and understanding
for engineering and construction of a clause requires knowledge of
works – called the AB-system. Cur- the underlying general principles of
rently, these comprise of ABR 89, law.
Practical tip:
The vast majority of construction pro-
jects in Denmark are governed by the
standard terms called AB. It is recom-
mended to obtain expert legal advice
to understand the particulars thereof.
An English version of the AB 18 terms
will be available with the Danish Con-
struction Association at
www.danskbyggeri.dk
1.2.1 The AB system
AB (in Danish: “Almindelige betin- Deviations from individual clauses
gelser”, in English: “General Condi- (that do not express mandatory
tions”) are agreed standard terms provisions of law) may be agreed
and not legislation. Thus, they only upon and often occurs – in par-
apply if they are agreed upon the ticular for commercial terms. It
contracting parties though adapta- should be noted, however, that
tion does not need to be express. deviations must generally be clear
in order to be effective.
11Further information:
It is definitely advisable to examine
the terms and conditions in detail pri-
or to entering into a construction con-
tract. The AB system and Danish law
differs from both common and civil
law traditions in several aspects.
1.2.2 Providing Security
Unless otherwise agreed, the amounting to the average amount
contractor shall provide security of three monthly construction
amounting to 15 % of the contract payments and at least 10 % of the
sum. Following the formal accep- contract sum.
tance (or “handing-over”) of the While international contractors
construction work this security is might have experienced similar
reduced to 10 % of the contract security systems, the Danish sy-
sum, and to 2 % one year after for- stem entails a dispute resolution
mal acceptance. method, which allows either party
The security provided by the con- to challenge the other party’s call
tractor ends definitively after 5 on the guarantee (or use of other
years. These reductions only ap- security). Further, AB performance
ply if the employer does not raise bonds do generally not have fixed
claims prior to the reduction. expiration dates, which often cau-
At the request of the contractor, ses trouble for international banks.
the employer shall provide security
Practical tip:
Consult your bank before security
is to be provided to make sure they
understand the particulars of the
Danish construction guarantees.
1.2.3 Payments
The default rule under the AB-sy- materials and against additional
stem (from 2019) is bi-monthly security.
payments based on progress. No The provisions concerning pay-
advance payment takes place, ment are often modified by
though there is an option for clai- employers.
ming such payment for ordering
121.2.4 The Right to Stop Work if
Payment is not Effected
The contractor is entitled to stop
construction work if due payments
are not paid with a prior written
notice of 3 working days for pri-
vate employers and 5 for public
employers.
The discontinuation of work always
entails the risk that the contractor
will be considered in wilful default
of the contract, leaving the
contractor liable without limitation
to the employer.
Practical tip:
The legal and commercial risks in-
volved in stopping the work are so
great that this is generally conside-
red a last resort.
1314
1.2.5 Extension of Time
The AB system for extension of sions cover delays due to unusual
time is more complex than it ap- weather conditions on lost days,
pears. which allows for a certain num-
Generally, both parties are entitled ber of days where work cannot be
to extensions of time in case of: carried out. Costs of variations are
• Variations assumed to cover delay costs, whe-
• Force majeure reas force majeure extends time for
• Unusual weather conditions both parties with-out liability for
• Circumstances attributable to the either and so on.
other party Delay analysis is at an early stage
• Public orders or bans imposed by in Denmark and even in complex
public authorities projects, detailed delay analysis for
The legal effect of the cause of the claims remain relatively uncommon
delay differs. The specific provi- and may not be understood.
1.2.6 Liquidated Damages
Liquidated damages, which is or inconvenience resulted from
sometimes misleadingly translated the delay. The market standard for
as daily fines or penalties (as is the liquidated damages is 1‰ of the
direct translation), apply when ag- contract sum per working (not ca-
reed and will be the sole and exclu- lendar) day.
sive remedy for delays. Strict notice requirements apply in
The liquidated damages do not relation to liquidated damages and
need to be a pre-estimate of the additional requirements apply to
actual daily costs of the employer liquidated damages for exceeding
though disproportionate liquida- interim deadlines.
ted damages may be reduced and Caps on liquidated damages are ra-
liquidated damages may be set rely below 10% of the contract sum.
aside if it is apparent that no loss
1.2.7 Handing-over
Immediately before completion, the not the date of completion, but the
contractor has to send a comple- date on which the conformity of
tion notice to the employer, indica- the works (defects) are established.
ting the exact date of completion. It is presupposed that there will be
The employer shall then convene defects that will need rectification,
a meeting for formal acceptance and do not prevent handover. Only
within 10 days of completion. material defects that prevent the
Failure to issue an invitation to a employer from taking the works
meeting for formal acceptance into use, such as lack of occupa-
means that the construction pro- tion permit, entitles the employer
ject will be deemed accepted on to reject the works.
that date. The handing-over date is
151.2.8 Defects and damage
When the work has not been a period for rectification shall be
performed in accordance with the set. If the defects are not rectified
contracts or where it does not cor- with-in this period, the employer
respond with recognized technical is generally entitled to have a third
standards it is considered defective party undertake the rectification
– there is an implied, but limited, work.
fitness for purpose obligation. If Inspections of the of the work also
the defective work causes damage takes place 1 year and 30 days be-
to other parts of the building, this fore 5 years after handing-over. The
is considered a product liability defects notification period general-
(and insurance) issue. ly expires after 5 years.
Defects and product liability are The Contractor is not entitled to re-
separate issues governed by se- pair damage caused to other works
parate rules though the remedial or a pre-existing building. The
works required are often overlap- liability for such damage is gene-
ping leaving substantial grey areas. rally limited to the agreed liability
Defects established must ascertai- insurance sum.
ned at handing-over at which time
1.3 Construction Disputes
In Denmark, it is a long-standing The arbitration court will general-
tradition that construction disputes ly be composed of a legal expert
are decided by the Building and – usually a judge at a Danish high
Construction Arbitration Board (in court– and two technical
Danish: “Voldgiftsnævnet for byg- experts with long industry expe-
ge- og anlægsvirksomhed”). The rience. Decisions handed down by
Board has offices in Copenhagen the Arbitration Board are final and
but it may convene where it finds binding – no appeal is possible. All
it appropriate. Another particular decisions may be published in ano-
attribute of Danish construction nymous form.
disputes is that normally evidence In conjunction with the above rules,
is secured by inspection and survey it is also possible to submit certain
by an independent expert – see disputes to an urgent decision or
section 1.4 below. a decision concerning security and
With the new AB-system dispu- retentions. Such decisions are ge-
tes between the parties will follow nerally binding, but not final.
rather complex set of rules.
First, the project managers should
try to settle the dispute within five
days. Afterwards, the representati-
ves of the company management
also have five days to settle the
dispute. If this does not settle the
case, the dispute must be submit-
ted to mediation. Only when this
has failed, may the parties submit
the dispute to arbitration.
16Further information:
See the website of the Danish
Building and Construction Ar-
bitration Board
https://voldgift.dk/?lang=en
1.4 Securing Evidence in
Danish Construction Disputes
At any time, either party may perts) is quite unique to Denmark
request the Building and Construc- and generally requires that the par-
tion Arbitration Board to appoint ties obtain local legal advice.
an independent expert to perform It must be noted that evidence
inspection and survey, establish obtained by other means than
factual conditions and when rele- through an expert survey may be
vant render a technical assessment disregarded, when an expert
of these facts. The procedure invol- inspection and survey could have
ved, where the parties ask questi- been performed.
ons of the expert (or ex-
172
Establishment
in Denmark
Participation in construction work
in Denmark will – as a main rule –
constitute a permanent establish-
ment with corporate tax liability
and registration requirements. For
this reason, it will be necessary to
corporate regulation and the tax
regulation of this legal entity. This
choice of corporate form will be
explained further below, see sec-
tion 2.1.1.
Foreign service providers not
choose a corporate form, when having a permanent establishment
the business activity constitutes in Denmark may anyway have to
a permanent establishment. Here, register in the so-called “RUT- Re-
the choice of corporate form will gister”, see section 2.1.2.
be highly dependent on both the
1819
2.1 Permanent Establishment
A permanent establishment for tax tion project will constitute a per-
purposes is constituted when a manent establishment for Danish
business activity is carried out from tax purposes from the first day. If
a fixed place of business and such no double tax treaty exists, doub-
activity has a certain degree of le taxation issues may arise. If a
permanency. double tax treaty exists this should
As a main rule, a construction site be reviewed carefully to assess the
or the participation in a construc- most expedient way to proceed.
Subcontracts:
Even though a sub contract in In addition, if the subcontractor is
relation to a construction project is only performing part of the project,
entered into between two foreign the main rule of permanent esta-
entities, the main rule of perma- blishment will still apply. However,
nent establishment will still apply if the performance of the project is
– also for subcontractor - if the solely based on the manpower, the
performance of the contract is in regulation on hiring-out of labour
Denmark. will apply, see section 2.3.
Exceptions:
There are a few exceptions to this As a matter of principle, each indi-
main rule, in which case a perma- vidual construction activity is se-
nent establishment does not arise parately appraised when assessing
with regard to: whether a permanent establish-
• Facilities used exclusively in order ment with tax liability in Denmark
to store, display or deliver goods, exists. Where there is an economic
• Business facilities used exclusively or geographical connection bet-
in order to purchase goods or to ween the construction activities
obtain information for the enter (e.g. construction of a group of ter-
prise, and raced houses), however, the work
• Business facilities used exclusi- in its entirety will be appraised.
vely for advertising purposes, to
provide information or for similar
activities.
2.1.1 Choice of corporate form
When the business activity in Den- 1. A branch (permanent establish
mark is regarded as a permanent ment); or
establishment, there is an obliga- 2. A limited company
tion to register for tax purposes. As an exemption to this main rule
For this reason, it is necessary to a construction project of limited
consider the most suitable corpo- duration does not have to register
rate form, which can be one of the a branch for corporate purposes,
following: only for tax purposes.
20Branch vs. limited company:
In general, there are two main dif- 2. Liability: For a branch office, the
ferences between a branch and a head office – being the foreign
limited company: company – is fully liable for the
1. Tax transparency: A branch is tax obligations of the branch. The
transparent, which means that liability for a company (A/S or
the branch is taxed in both Den- ApS) is limited to the value of
mark and in the country of the shares subscribed, which can be
parent entity. either DKK 50,000 (ApS) or DKK
500,000 (A/S). Although partici-
On one hand, some foreign pating in construction projects
contractors prefer such tax trans- often requires issuing of gua-
parency in order to deduct expen- rantees, such guarantees are of-
ses in their home country during ten limited to certain amounts
the construction period. On the and to certain parties. Accor-
other hand, double taxation may dingly, the limitation of liability in
have adverse consequences if no a company will be effective to-
double tax treaty is in force. wards all other creditors in rela-
tion to the project.
If so, relief of double taxation can Furthermore, establishing a com-
only be granted according to a pany is usually much faster and
general credit rule. This means that simpler compared to the establish-
taxes paid in the home country can ment of a branch. A new company
be deducted in the Danish tax. can be registered and ready to do
Depending on the circumstances, business within a few hours,
it may be more efficient to esta- whereas the registration process of
blish a Danish company. Such a a branch may take several weeks
company will only be taxed on the and be costlier. In addition, there
Danish income and no double tax are no requirements to the resi-
will occur. dency of the members of the local
management of a company.
Practical tip:
A limited company is easy to esta-
blish from day to day and no local
management is required.
Establishing a limited company in
Denmark is both cost- and tax ef-
ficient compared to the establish-
ment of a branch.
21Joint venture
A joint venture may be established 2. Limited partnership (partner-
between the foreign and a Danish selskab – P/S or kommandit-
construction firm or between two selskab – K/S): A limited
or more foreign enterprises. partnership is transparent for
The following main types of joint tax purposes the same way as a
venture entities may be used: general partnership. However, the
1. General partnership (interessent- participants are only liable up to
skab – I/S): A general partner- an agreed amount equivalent to
ship is transparent for Danish tax their share of the limited
purposes. The foreign entity will partnership.
be deemed to participate 3. A company (A/S or ApS): If the
through a permanent establish- joint venture is structured as a
ment (branch) as described company, no double taxation
above. The participants of the occur, as the company is a
joint venture will be jointly and separate tax entity. The
severally liable for all obligations liability of the participants is
of the joint venture. limited to their shares in the
company.
222.1.2 RUT-Register
If the foreign enterprise has esta- market. Businesses entered in the
blished a branch or a company in register are also vetted by the
Denmark, the RUT-registration is Danish authorities more often than
not required. Danish enterprises.
However, if the foreign enterprise The Danish Business Authority
provides manpower only or for (in Danish: “Erhvervsstyrelsen”)
other reasons does not have to is responsible for maintaining the
establish a branch or a company, register.
the foreign enterprise must register The following information must be
in the RUT-Register. filed with the RUT-Register:
The RUT-Register is a separate • Name and address (registered
register for foreign enterprises office) of the foreign enterprise
that provide services in Denmark for which the registration is
without having a registered busi- required
ness in Denmark (in English: “Regi- • CVR number (Commercial
ster of foreign service providers”, in Register No.) or SE-number (tax
Danish: “Register for udenlandske number), if applicable
tjenesteydere”). • Date on which activities in
In addition to the registration of Denmark are to commence and
the foreign enterprise, the indivi- date on which they are expected
dual employees employed by the to end
enterprise for the work to be per- • Location where services are to be
formed in Denmark also have to be provided
entered by name in the RUT-Re- • Contact person in Denmark at the
gister. In case of failure to register enterprise requiring registration
in the RUT-Register, a fine of mini- • European “NACE code” =
mum DKK 10,000 (¤ 1,350) may be (Nomenclature générale des
imposed. activités économiques dans les
The RUT-Register is publicly ac- Communautés Européennes)
cessible and is used by the Danish • Identity of employees posted and
unions as a “checklist” for foreign duration of work in Denmark
enterprises entering the Danish
Practical tip:
Registration in the
RUT-Register can only
be done online at
www.virk.dk
232.2 Corporate Tax
The permanent establishment group with a permanent establish-
(branch) or Danish company is ment or a company in Denmark is
subject to corporate tax at the obliged to follow the Danish trans-
rate of 22 %. Deduction of busi- fer pricing rules. In Denmark, the
ness expenses and depreciations transfer pricing regulation in accor-
on certain assets may reduce the dance with the OECD-guidelines.
effective tax rate. According to Small and medium-sized enterpri-
specific rules, taxation of profit re- ses are exempt from documenta-
lating to construction projects may tion requirements, but not from ap-
be postponed until the project is plying the arm’s length principle. If
completed. the taxpayer is considered a “large
As opposed to many other coun- group”, meaning that the group on
tries, there is almost no social a consolidated basis has (i) more
security contribution to be paid by than 250 employees and (ii) as-
employers (only ¤ 1,000 per year sets of more than DKK 125 million
per employee). In most countries, (approximately ¤ 16.8 million) or a
the social security contribution is turnover of more than DKK 250
often up to 30 % of the salary paid million (approximately ¤ 33.6 milli-
to the employee. on) full transfer pricing documen-
Intercompany transactions and tation is required.
ascertaining revenue within a
Practical tip:
Several brochures on tax issues are available in
English on the website of the Danish Tax Admi-
nistration “SKAT”:
www.skat.dk/SKAT.aspx?oId=213873&lang=US
2.3 Hiring-out of labour taxation
Hiring-out of labour taxation is pay a service charge to the foreign
mainly applicable when there is no enterprise. The foreign enterprise
legal entity in Denmark, meaning will continue to pay the local sala-
when the business activity of the ry to the employee. Such activity
foreign enterprise is of such a does generally not create a perma-
nature that no permanent nent establishment in Denmark for
establishment is considered the foreign enterprise.
established in Denmark. However, the employee will in such
This special regulation applies in cases be subject to the Danish hi-
Denmark to employees who are ring-out of labour tax if working in
hired out by foreign enterprises di- Denmark up to 6 months.
rectly to the company in Denmark. This will imply that the customer
The customer undertakes all rights must withhold the hiring-out of
to instruct the employee and will labour tax at the amount of 30 %
2425
plus social security totalling 35.6 paid taxes does not apply.
%. This must be withheld from the To avoid these adverse consequen-
payment of the service charge to ces, it is often recommended that
the foreign enterprise, unless the the foreign enterprise establish
actual salary paid to the employee a Danish branch or company to
is disclosed. perform the operation. In such case
The hiring-out of labour tax may the hiring-out of labour tax will
result in a double taxation as the generally not apply.
employee will also be taxed lo- The hiring-out of labour tax does
cally of salary paid by the foreign not apply to subcontractor agree-
enterprise. Further, the hiring-out ments if they are considered by the
of labour tax is regarded as a final Danish authorities as “independent
Danish tax and no deductions will subcontractor agreements”. This
be granted. Accordingly, the gene- will depend on the circumstances.
ral Danish rule of credit for foreign
2.4 VAT
Enterprises selling goods or ser- The “reverse charge” provision
vices in Denmark are subject to an does not apply if the foreign enter-
obligation to register for VAT. VAT prise performs other activities in
is charged at the rate of 25 % in Denmark that are subject to VAT,
Denmark. i.e. sells to private individuals.
Even if a construction enterprise In practice, the “reverse charge”
does not have a “business provision means that the invoice
establishment” in Denmark (section for work in Denmark has to be
2.1.), the work carried out in Den- issued by the foreign construction
mark is subject to VAT as a matter enterprise without Danish VAT. In
of principle. return, the VAT ID No. (in Danish:
However, the “reverse charge” pro- “momsnummer”) of the Danish
vision applies to construction work principal has to be indicated on
carried out by foreign enterprises, the invoice. The invoice also has to
which do not have a business esta- contain the statement: “The sale is
blishment in Denmark for tax pur- subject to reverse charge. The reci-
poses. This means that the Danish pient is liable for the VAT”.
principal and not the foreign con-
struction enterprise has to charge
the VAT.
Practical tip:
An English-language brochure on
VAT issues is available on the web-
site of the Danish Tax Administration
“SKAT“.
www.skat.dk/SKAT.aspx?o-
Id=213873&lang=US
262.5 Safety on Construction Sites in Denmark
Considerable importance is at- committee on a construction site
tributed to safety regulations on with upwards of a certain number
construction sites in Denmark. of workers (section 2.5.2) and the
Whereas commercial activities in provisions on insurance against ac-
Denmark do not in principle re- cidents at work (section 2.5.3.) also
quire a commercial permit, certain diverge from the corresponding
activities on construction sites regulations in other EU member
are subject to a permit. The Da- states.
nish provisions requiring a safety
Practical tip:
The Council on Safety at Work in
the Construction Industry (in Danish:
“Branchearbejdsmiljørådet for Bygge
& Anlæg”), in cooperation with the
Danish Working Environment Autho-
rity (in Danish: “Arbejdstilsynet”), has
prepared an English-language manu-
al on safety at work in the construc-
tion industry which is available free
of charge at http://haandbogen.info
Further information in English can be
obtained at www.byggesikkerhed.dk
272.5.1 Permits Required by Enterprises and Individuals
In principle, there is freedom of tra- additional training or 2 years of
de in Denmark. However, in skilled practical experience. The Working
trades special permits apply to the Environment Authority (in Danish:
performance of electrical, sanitary “Arbejdstilsynet”) is responsible
and gas installation work. A permit for issuing permits. The following
for the performance of such work tasks are among those requiring a
must be obtained from the Danish permit:
Safety Technology Authority (In • Work involving asbestos
Danish: “Sikkerhedsstyrelsen”). • Erection of scaffolding
A certificate of good conduct has • Installation of elevators
to be provided in addition to proof • Operation of fork-lift trucks
of a certified quality management • Operation of cranes
system (e.g. ISO certification). • Work involving refrigerants
Work involving safety conside- • Work involving boiler systems
rations may only be carried out • Welding work
following presentation of proof of • Fire approval
Practical tips:
The website of the Danish Safety
Technology Authority (“Sikker-
hedsstyrelsen”) contains informa-
tion in English about the relevant
obligations to obtain permits, at
www.sik.dk. English version at
www.sik.dk/Global/English
282.5.2 Safety on Construction Sites
Companies with more than 10 information about safety measures,
employees are under an obligation and to monitor compliance with
to establish a safety committee them. The Working Environment
(“sikkerhedsudvalg”) comprised Authority (“Arbejdstilsynet”) con-
of representatives of the employer ducts inspections of workplaces
and employee representatives in and construction sites in order to
order to ensure safety at work. verify compliance with the safety
It is the responsibility of the safe- measures required by law.
ty committee to plan and provide
Practical tip:
The website of the Working
Environment Authority (“Ar-
bejdstilsynet”) offers several
brochures in English, German,
Polish, and Lithuanian concer-
ning safety on construction
sites: http://engelsk.arbejds-
tilsynet.dk/en
2.5.3 Insurance Against Accidents at Work
The employer is liable for the con- full-time employees, for example,
sequences of sickness affecting the are as follows:
employee in case of accidents at • Construction worker ¤ 1,300
work and is under a legal obligation • Joiner/carpenter ¤ 1,100
to take out corresponding insuran- • Bricklayer ¤ 1,000
ce. Insurance packages are offered • Plumber or gas fitter ¤ 900
by Danish insurance companies. • Painter ¤ 700
The annual insurance premiums • Electrician ¤ 600
depends on the specific activity For EC-law purposes, this manda-
performed by the employee. The tory insurance scheme is conside-
approximate annual premiums for red a social benefit.
293
Motor Vehicles
in Denmark
Viewed from the international per-
spective, the taxes for registering a
motor vehicle in Denmark are very
high (up to 150 % of the value of
the vehicle). Strict laws ensure that
the taxes are actually paid.
As a rule, in order to use a motor
vehicle in Denmark the vehicle
its use must be issued. A person
residing in Denmark must obtain
a permit for the use of his or her
vehicle within 14 days of having
imported it into the country.
The regulations are complicated
and in the majority of cases, the
substantial Danish registration tax
must be registered in the Danish has to be paid.
Register for Motor Vehicles (“Mo- For cash flow reasons leasing is
torregistret”) and a permit for often more cost-efficient.
3031
3.1 Registration Obligations and Taxes
3.1.1 Passenger Cars as Company Cars
It is generally impossible to obtain A person who is entered into the
an exemption from motor vehicle Danish Civil Registration System
registration in Denmark based on (in Danish: “Det Centrale Person-
the information that the vehicle register”), and who therefore has
used is a “company car” with a a Danish personal ID number (in
foreign owner or a foreign user. Danish: “CPR-nummer”), has his or
Where the owner of a motor ve- her place of residence in Denmark
hicles is a resident or has its seat in based on the entry in the Civil Re-
Denmark the vehicle has to be re- gistration System alone.
gistered in the Danish Register for A person who is not entered into
Motor Vehicles (in Danish: “Motor- the Danish Civil Registration Sy-
registret”). This also applies where stem will nevertheless be conside-
the owner, e.g. a contractor, does red a resident in Denmark if he or
not have its seat in Denmark but she has spent at least 185 days in
for tax purposes is considered to Denmark during the last 12 months.
operate a business establishment Consequently, the vast majority
there. of company cars made available
Furthermore, the registration obli- to employees who are resident in
gation also applies where the user, Denmark are subject to the Danish
and not the owner of the vehicle, registration charges.
has his or her place of residence, The obligation to register foreign
seat or business establishment in vehicles in Denmark arises 14 days
Denmark. The “user” of the motor after the vehicle is imported into
vehicle is the person who uses it – Denmark for the first time.
even for short-term use only.
323.1.2 Commercial Vehicles with “Yellow Number Plates”
It is possible to register motor The registration tax for vans with
vehicles with a total weight of no yellow number plates amounts to
more than 4 tonnes with so-called 50 % of the value of full registration
“yellow number plates” (in Danish: tax in excess of DKK 17,500 (ap-
“gule plader”). A reduced registra- prox. ¤ 2,350).
tion tax is paid for such vehicles. For vans with a total weight of
The motor vehicle has to be fitted more than 2.5 tonnes the regi-
specifically for transportation of stration charge is 30 % of the full
goods, e.g. as a delivery van. The registration tax in excess of DKK
motor vehicle has to clearly display 34.100 (approx. ¤ 4,600), if:
the name and the CVR number of • the van is an open vans (pick-up)
the user, which is usually the owner (in Danish: “er åben”), or
of the vehicle. • the van is not manufactured with
The precise use of the motor vehic- a window behind the driver, in the
le has to be stated when applying left side of the vehicle.
for yellow number plates. Where The same applies to a vehicle with
the vehicle is also to be used pri- a total weight between 3 and 4
vately, a separate and additional tonnes, however, the registration
tax for the private use has to be tax cannot exceed DKK 56.800
paid. (approx. ¤ 7,650).
333.1.3 ”Special Vehicles”
Team vehicles are motor vehicles • Towing Vehicles (in Danish:
constructed and fitted for the “trækkraft for køretøjer eller
transport of people and materials. arbejdsredskaber”)
The driver’s cab has to be fitted for • Towing vehicles are primarily
at least 4 passengers, with at least equipped to tow other motor
one seat behind the front seats. vehicles or implements, and to be
The driver’s cab has to be separa- used as towing vehicles for other
ted from the cargo compartment. vehicles that are subject to
The cargo compartment has to be registration.
bigger in size than the driver’s cab. • Implements (“arbejdsredskab”)
The vehicle may only be used to • Implements are motor vehicles
transport materials and tools to the fitted primarily as implements
workplaces of the enterprise or to and used exclusively in that
transport people who work in the capacity. Gritting vehicles are an
enterprise of the vehicle owner or example of such “implements”.
user. The motor vehicle may not be • Other Construction Machinery
used for the transport of private • Construction machinery and
passengers. The name and CVR cranes with a maximum speed
number of the enterprise has to be of 30 km/h do not fall under the
clearly displayed on the vehicle. obligation to pay the motor
vehicle registration tax.
3.1.4 Use of Leased Motor Vehicles
In principle, leased motor vehicles Danish by an authorised
must be registered in Denmark translator. Furthermore, the
under the same rules as other agreement is required by law to
vehicles. This also applies to motor contain certain terms and
vehicles leased from foreign leasing conditions.
enterprises. The registration charge is determi-
However, upon a prior applica- ned on the basis of the value of the
tion the Danish Tax Administration motor vehicle for which the char-
(“SKAT”) can authorize payment of ge is payable. Depending on the
a proportional registration tax for age of the motor vehicle, 2 % (0-3
leasing vehicles intended for use months), 1 % (3-36 months) or 0.5
in Denmark for a limited period of % (36+ months) of the total regi-
time, during the term of the lease. stration tax is payable each month.
The requirement is that If the parties wish to renew the
• the vehicle is owned by a leasing leasing contract, the Tax Office has
enterprise, to be notified accordingly at least
• the vehicle is leased to a person 14 days before the term of the lea-
or company in Denmark for a se expires, and at that time a new
limited period of time, and contract for the renewal period has
• a corresponding written to exist.
agreement exists The rules are very complicated, and
• The agreement must be in it is definitely advisable to obtain
Danish or translated into advice on the specific procedure.
343.1.5 Liability and Penalties
The owner and the user are jointly payable in addition to the registra-
and severally liable for any fines tion tax. Furthermore, the vehicle
imposed. will be impounded.
Failure to comply with the regula- It is evident that the failure to com-
tions leads to a fine amounting to ply with the regulations leads to
twice the registration tax imposed, harsh penalties.
3.2 Registration Procedure
Liability insurance has to be taken tion tax, during which the identity,
out with a Danish insurance com- the mileage, equipment and gene-
pany in order to register a foreign ral condition of the motor vehicle
vehicle in Denmark. are established.
In addition, a Danish vehicle The vehicle then has to be entered
inspection centre has to conduct a electronically into the central Regi-
technical check and an inspection ster for Motor Vehicles (in Danish:
in order to determine the registra- “Motorregistret”).
3.2.1 Registration Charge for New and Used Motor Vehicles
For a new motor vehicle, the regi- The Danish Tax Administration
stration tax is calculated on the ba- (“SKAT”) calculates the registration
sis of the purchase price. A motor tax for used motor vehicles on the
vehicle is “new” if it has been dri- basis of the market price where
ven for less than 2,000 kilometres. the vehicle is sold to a consumer in
Vehicles that have been driven for Denmark. This price is then compa-
more than 2,000 kilometres are red against the original price for a
considered used vehicles – the age new vehicle and the loss in value.
of the vehicle is irrelevant.
3.2.2 Calculation of the tax
Generally, the registration tax Furthermore, the registration tax
amounts to 105 % of the value of for motor vehicles with a low fuel
the motor vehicle up to the amount consumption is deducted. The re-
of DKK 82.800 (approx. ¤ 11,100) gistration charge will be deducted
and 150 % of the amount exceeding with DKK 4,000 (approx. ¤ 550)
that figure. for every km exceeding 16 km/l
When calculating the value de- petrol (18 km/l for diesel).
ductions can be made for safety
equipment etc.
353.2.3 Quarterly Payment in case of
Temporary Stay in Denmark
On request, the Tax Office may
permit quarterly payment of the
registration charge for motor ve-
hicles registered in Denmark for
a limited period of time. The pre-
requisite for this is that the motor
vehicle is owned by a foreigner and
is used by that person solely during
a temporary stay in Denmark.
Together with payment of the first
quarterly instalment, a deposit in
the amount of one quarterly instal-
ment also has to be paid.
The registration tax is determined
based on the value of the motor
vehicle for which the tax is payable.
Depending on the age of the motor
vehicle, 2 % (0-3 months), 1 % (3-36
months) or 0.5 % (36+ months)
of the total registration charge is
payable each month.
The obligation to register a motor
vehicle ends as soon as the tem-
porary stay in Denmark ends; the
Tax Office will return the deposit
and reimburse any excess amounts
paid.
3.3 Obligation to Mark Vehicles
Transporting Goods
Motor vehicles that transport
goods, with a total weight of less
than 4 tonnes and used exclusively
for commercial purposes have to
be clearly marked on the side with
the name or logo of the enterprise
and the enterprise’s CVR number.
This also applies to leased motor
vehicles.
Failure to comply with this obliga-
tion is punishable by a fine amoun-
ting to DKK 5,000 (¤ 670), and by
increased fines in case of repeated
offences.
3637
38
4
Working Environment
in Denmark
Denmark has the most flexible
recruitment legislation in the EU
and on many areas the Danish la-
bour market differ from the labour
market in other EU member states,
especially when it comes to the
interactions between the unions,
employer’s associations and the
Danish state, e.g. regarding the
social security contribution and the
so-called “flexicurity” model. This is
explained in more detail below.
394.1 Danish Labour Market
4.1.1 Flexicurity - the “Danish Model”
Denmark is proud of having in- within the context of collective ag-
vented the Danish model of “fle- reements and monitor those con-
xicurity” (composed of the terms ditions. One of the purposes of this
“flexibility” and “security”). The model is to provide stability, which
composite term describes a trium- is created when the unions negoti-
virate between the unions, emplo- ate the working conditions instead
yers’ associations and the state: the of legislation, since the labour
unions and the employers’ associa- regulation will be independent of
tions provide flexible employment changing government. Hence, the
opportunities with rapid hiring and unions view working conditions
firing. In return, the state provides a that are not agreed by parties to
stable social-welfare safety net and collective agreements in Denmark
further training opportunities for skeptically.
employees, who have been fired.
In relation to the social-welfare, it is
worth mentioning that there is vir-
tually no social security contribu-
tion for the employer to pay on top
of the salary as is the case in other
countries. In most other countries,
the social security contribution is
up to 30 %. This is also relevant to
know, when you are bidding on a
public invitation to tender in Den-
mark, as you should not calculate
with a high social security contri-
bution in your cost base of a ten-
der.
In Denmark, the unions thus accept
a “hire and fire” concept, since -
generally speaking - this creates a
flexible labour market with better
employment opportunities. There is
no legislation on protection against
dismissal in Denmark.
The “Danish Model” can only func-
tion if the parties to collective
bargaining agreements negotia-
te reasonable working conditions
404.1.2 Unions and Employers’ Associations
In principle, neither the employ- ments” with a union.
er nor the employee is under an 70 % of all employees in Denmark
obligation to join an employers’ are members of a union. Whereas
association or a union respectively. almost all blue-collar workers are
Hence, the terms of employment covered by the terms of collective
can be freely negotiated. agreements, the same does not
However, parties to collective apply to white-collar staff.
agreements, especially the unions, The Danish Construction Asso-
have an interest in achieving a high ciation (“Dansk Byggeri”) is the
degree of organization. Employers principal employers’ association
can either join one of the emplo- for the construction industry. The
yers’ associations – thus being dominant union on the side of wor-
directly covered by the terms of kers in the construction industry is
collective agreements – or may en- Fælles Fagligt Forbund (so-called
ter into their own “company agree- “3F”).
Practical tip:
The website of Dansk Byg-
geri, www.danskbyggeri.dk/
english contains further infor-
mation in English about mem-
bership in the employers’ asso-
ciation.
4.1.3 Various Categories of Employee
In Denmark, a distinction is made The employees to whom
between blue-collar workers, whi- the legislation gover-
te-collar employees, and other ning employees applies
members of staff. are determined by a list
As a rule, detailed collective agree- contained in the legi-
ments apply to blue-collar workers. slation, according to
Employees are governed by spe- which office workers
cific legislation, the Danish Act on and persons who
Salaried Employees (in Danish: supervise and issue
“Funktionærloven”), and - insofar instructions to other
as agreed - by the provisions of a employees fall within
collective agreement. the ambit of the le-
The legislation governing employ- gislation. In the con-
ees (the Salaried Employees Act) struction industry, this
is the most important legal instru- would cover the site
ment in labour and employment manager, for example,
law. Most of the provisions are but not the site fore-
mandatory where the employment man.
relationship of an employee is con-
cerned.
41Further information:
A precise definition of the
employee in the sense of Danish
law can be found in Sec. 1 of the
legislation governing employees
(the Danish Salaried Employees
Act).
Other staff members, for example Based on the principle of equal
are managing directors, who are treatment, temporary employees
not covered by the laws gover- (in Danish: “vikarer”) enjoy the
ning employees or by collective same rights as other employees.
agreements. Such executive staff
members enjoy broad freedom of
contract.
4.1.4 Employee Representation and Works Council
In larger enterprises, employee company have a board of directors.
representatives (in Danish: “til- For a limited company (ApS), it is
lidsrepræsentanter”) with special possible to establish a company
rights under the relevant collective with only an executive board, and
agreements are also elected via the hence no board of directors, which
unions. would entail no employee repre-
Under Danish law, employees in sentation entitlement.
corporate entities are entitled to Please note that the employee
elect half of the members of the representatives mentioned above
supervisory body (e.g. the supervi- enjoy a special protection against
sory board) if the corporate entity dismissal as long as they are
had at least 35 employees during occupying the position as
the last three years and only if the employee representative.
4243
4.2 Workers (blue-collar)
4.2.1 Applicable Law
The applicable law is first of all may not be placed in a position
dependant on the kind of employ- worse than under the mandatory
ment, in particular whether the provisions applicable in the country
worker is seconded or is locally where he or she usually performs
employed. his or her work. However, there are
Seconded workers are initially sub- hardly any mandatory statutory
ject to the law applicable to their provisions applicable to workers in
original contract. However, if the Denmark.
worker subsequently works perma- The unions in Denmark therefore
nently in Denmark, the mandatory attempt to enforce their local
provisions of Danish law will govern collective agreements to the best
him or her. possible extent for all workers
Another choice of law than Danish engaged in Denmark.
law cannot be agreed. A worker
4.2.2 Recruitment Procedure
A criminal record certificate (in • Pregnancy (and relevant plans)
Danish: “straffeattest”) can be re- • Religious beliefs and sexual
quired at the time of recruitment. It orientation, political views
lists all offences under the Danish • Number of days taken off sick
Criminal Code for a period of 5 • Sickness unless it is relevant to
years. The following questions are the specific position
not permitted during an interview • Financial situation unless it is
for employment: relevant to the specific position
4.2.3 Employment Contract
Under Danish law, it is a require- law, but are regulated in the collec-
ment that all workers are provided tive agreements in force. Whether
with an employment contract. Due such collective agreements must
to the special nature of the Danish be observed, depend on whether
labour law system, most employ- or not you are a party to such col-
ment issues are not regulated by lective agreements.
44You can also read
