Denmark: EOR or a Danish entity
Last reviewed
The short answer
An Employer of Record employs staff in Denmark on a company's behalf without incorporation, while a Danish entity gives the company its own legal presence and puts the employment obligations directly on its own books.
Denmark inverts the usual argument: incorporating an ApS is cheap and quick at DKK 20,000 of share capital, so the case for an Employer of Record rests not on setup cost but on who carries the collective-agreement decision, the permanent-establishment exposure and the running compliance load.
Aspirock runs the Employer of Record route into Denmark for companies that are not ready to incorporate and supports the transfer of employment to a client's own entity when that point arrives.
What is the real difference in Denmark?
Not the setup cost, which is where this comparison usually starts and where Denmark makes it useless.
In most markets the argument for an Employer of Record leans on how slow, expensive and capital-hungry incorporation is. Denmark removes that argument. A private limited company, an anpartsselskab or ApS, needs DKK 20,000 of share capital, half what it needed until 2025, when the requirement was cut as part of the government's entrepreneurs package. Registration is an online filing with the Danish Business Authority. Judged on the barrier to entry alone, incorporating in Denmark is about as easy as it gets in Europe.
So the decision has to be made on what happens after the company exists, not on what it takes to create one. That comes down to three things: who carries the collective-agreement judgement, who carries the tax exposure created by having people working in Denmark and who runs the monthly compliance cycle for as long as the arrangement lasts.
| Item | Employer of Record | Own Danish entity |
|---|---|---|
| Time to a compliant first hire | Days for an EU or EEA national; one to three months where a permit is needed | Indicative: registration is quick, but banking and employer registration set the pace |
| Capital required | None | DKK 20,000, paid up before the CVR number issues |
| Legal employer | The Employer of Record | The company's own Danish entity |
| Collective-agreement position | Depends on the arrangement, worth settling before signing | Sits with the company |
| Danish corporate tax | Not created by the employment itself | 22% on Danish profits |
| Payroll and eIndkomst reporting | Run by the Employer of Record | Run by the company or its payroll provider |
| Annual accounts and filings | None for the client | Required, for as long as the company exists |
| Cost shape | Typically a flat fee per employee per month | Largely fixed running cost, rising slowly with headcount |
| Exit | Notice under the agreement | Formal liquidation, or maintaining a dormant company |
The cost-shape row is the one that decides most cases. An Employer of Record is typically priced per person, so its cost tends to rise broadly in line with headcount. A Danish company costs much the same to run whether it employs two people or ten, rising in steps rather than in line with headcount as payroll, pension and audit obligations grow, so its cost per head falls. Somewhere between those lines there is a crossover and where it sits depends far more on the running compliance cost a company is willing to absorb internally than on the share capital it has to find at the start.
What does setting up a Danish company actually involve?
Less than most people expect at the registration stage and more than most people expect once it exists.
- 01
Share capital deposited
DKK 20,000 for an ApS, paid up before the company can be registered. It is capital, not a fee: it stays in the company. It is commonly held through a lawyer's or auditor's client account until the registration completes.
- 02
Company registered and CVR number issued
Filed online with the Danish Business Authority. The CVR number is the company's identifier for everything that follows and it is issued once the capital is confirmed as paid up.
- 03
Registered as an employer and for any other duties
A separate step from incorporating. The company registers as an employer, and for VAT where it will trade, before it can run a compliant Danish payroll.
- 04
Payroll, income register and contribution cycle started
Monthly reporting to the income register, eIndkomst and quarterly Samlet Betaling invoices covering ATP, the education contribution, Barsel.dk, the financing contribution and the AES occupational-disease contribution. Statutory work-accident cover is a separate mandatory policy bought from a commercial insurer.
- 05
Annual accounts filed, every year, permanently
A Danish company files annual accounts for as long as it exists, whether or not it traded. Closing it down is a formal process rather than simply ceasing to use it.
The step that surprises companies is the last one. An entity is a permanent obligation, not a one-off transaction. A project that ends after eighteen months leaves behind a company that still has to be filed for or formally wound up and the cost of that tail is rarely counted at the point the decision is made.
What risks does having people in Denmark create either way?
Three and they are separate from each other. A company can be exposed to any one of them without triggering the others, which is why they are so often conflated.
| Trigger | What it is | Who carries it |
|---|---|---|
| Permanent establishment | A fixed place of business in Denmark. A home office used by an employee can be enough, depending on what is done there | The foreign company, at 22% corporate tax on the Danish profits attributed to it |
| Hiring out of labour | Staff of a non-Danish enterprise made available to a Danish enterprise, doing work that forms an integral part of that Danish business | Withheld by the Danish hirer at 35.6%, being 30% hiring-out tax plus the 8% labour-market contribution |
| Employment without withholding | A foreign employer with no Danish legal venue is not required to withhold Danish tax on salary | The employee, who pays their own preliminary tax in ten instalments across the year |
The middle row catches out companies that thought they had avoided the question by contracting rather than employing. The hiring-out-of-labour rules look at what the work actually is, not at what the contract calls it: if the people are integrated into a Danish business and that business directs and benefits from their work, the 35.6% withholding can apply even though the employer is foreign and even though it is registered for VAT in Denmark. The rules do not apply where the work is genuinely a separate, clearly delimited service delivered by the foreign enterprise.
What an Employer of Record moves off the company
The employment relationship itself and with it the Danish payroll registration, the withholding, the monthly income-register reporting, the contribution cycle and the holiday administration.
Where the collective-agreement position lands is a separate question and it is one to settle in the agreement rather than to assume. It turns on how the arrangement is characterised in Danish law, so it is worth putting to any provider before signing.
What it does not move
Permanent-establishment risk arising from what the company itself does in Denmark. If a person is negotiating and concluding contracts on the company's behalf from Denmark, or the company operates a fixed place of business there, that is a question about the company's own activity and no employment structure answers it.
That second column is where the comparison stops. An Employer of Record resolves the employment position cleanly. It does not decide the corporate tax position of a company that has chosen to run part of its business from Denmark.
When is each route the right answer?
An Employer of Record fits a first hire, a small team or a fixed-term deployment. It needs no capital, no registration and no filing history, so an EU or EEA national can start in days rather than after a registration and banking cycle. A third-country national still needs a Danish work permit whichever route is used and the immigration authority's published service goals for work-based permits run one to three months. It suits a company testing whether Denmark works commercially before committing to a presence, an engineering or energy business mobilising people onto a Danish project with a defined end date and any situation where the company wants the collective-agreement position settled explicitly in the agreement rather than left open. It also suits the case where the headcount is one or two and always will be, because a Danish company's running cost does not shrink to match.
A Danish entity fits a company that needs to be Danish for reasons beyond employment. If it has to invoice Danish clients in its own name, hold Danish contracts, tender for work, register for VAT, or build a local brand and a permanent management presence, then it needs the entity regardless of how it employs people. Headcount matters too: at some point per-employee fees exceed the fixed cost of running a company and beyond that point the entity is simply cheaper.
The case for waiting is stronger in Denmark than elsewhere, because the entity stays cheap to create. In markets where incorporation is slow and capital-intensive, there is an argument for doing it early to avoid repeating a painful process. Denmark removes that pressure: DKK 20,000 and an online filing will be just as available in a year. A company can therefore employ through an Employer of Record while the commercial case is still uncertain and incorporate at the point the case is proven, without having paid a penalty for the delay.
For the statutory detail on employing in Denmark, including contracts, working time, holiday, termination and permits, see the complete guide to hiring employees in Denmark. For what an Employer of Record covers in this market, see the Denmark hub.
The provider
About Aspirock
Aspirock is an Employer of Record and payroll provider operating across 70+ countries from six global offices, founded on more than 22 years of operational EOR experience and supporting more than 5,000 workers. Every client works with a named account team that owns the deployment end to end, so contracts, payroll, visas, and compliance filings in each market are handled by people accountable for the outcome.
For deployments into Denmark that means written terms issued inside the statutory seven-day deadline, Danish payroll with monthly reporting to the income register, the quarterly Samlet Betaling employer contributions, holiday administration under the concurrent-accrual rules and work-permit and researcher-scheme coordination for specialists arriving from outside the EU.
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General guidance on Denmark employment rules, reviewed 3 August 2026. Rates and rules change. This is not legal or tax advice for a specific situation.