Prospects for better conditions for entrepreneurs

12 June 2024

There finally seems to be a possibility that the many outcries from Danish entrepreneurs over the past years have been heard. On 12 June 2024, the Government presented a wide range of initiatives to make it easier to be an entrepreneur and an entrepreneurial company in Denmark.

The Government's proposal can be read here. 

The initiatives presented

The Government's proposal for a new entrepreneurship strategy contains a large number of initiatives, and these include:

• Elimination of dividend taxation on unlisted portfolio shares. Today, 15.4% tax is paid on dividends from unlisted portfolio shares. In the proposal, this rule seems to be repealed.
• Rules are introduced to ensure that tax payment may be deferred if a sales price is paid as an ongoing payment.
• It will be possible to opt for realisation tax, instead of the current mandatory taxation of capital gains upon accrual for companies' newly listed portfolio shares for a period of five years after stock exchange listing. However, when the five-year period has expired, the share will be taxed as capital gains upon accrual, whereby the unrealised gains will be taxed in year 5. Therefore, it is only a question of deferring taxation.
• The capital requirement for private limited companies is to be lowered to DKK 20,000.
• The limit for the payment of tax credits will be increased from today up to DKK 5.5 million (loss of DKK 25 million) to DKK 7.7 million (loss of DKK 35 million). At the same time, this must be seen as an expression of the desire to maintain the possibilities for the use of the rules in section 8B and section 8X of the Danish Tax Assessment Act, also taking into account that the intention is also to give entrepreneurs better opportunities to better protect intellectual property rights, while at the same time wanting to improve various support schemes and financing opportunities for entrepreneurs.
• Elimination of the limit on how large a share of the salary that new, smaller companies must be able to offer as income tax-free employee shares. However, a requirement for a basic salary for employees will be introduced.
• Reduction of the salary requirement for the researcher taxation scheme from the current DKK 75,100 (2024) to approx. DKK 60,000 per month.
• Ensure an improved unemployment benefit entitlement for entrepreneurs, including the introduction of better conditions for self-employed people on maternity leave.
• The rules for the application of losses for previous income years (the 60% rule) are improved, so that in the future there will only be a limitation for the use of losses exceeding DKK 20 million.

In addition, the proposal contains a large number of other initiatives to promote entrepreneurship in Denmark by, among other things, increasing the teaching of entrepreneurship, etc., increasing the universities' innovation efforts, while at the same time the Government wants to create more transparency for entrepreneurs by giving them a comprehensive overview of statutory authorisations, permits, deadlines and requirements.

Individuals' taxation of equity income

Private individuals can also look forward to getting something out of the new entrepreneurial strategy. The Government wants to increase the limit for taxation of equity income with 27% in tax to DKK 80,000 (today DKK 61,000).

In addition, the Government wishes to ensure that there is no double taxation of shareholder loans in situations where the same amount is withdrawn and deposited several times in the company. In future, the shareholder will only be taxed once on the highest amount withdrawn from the company.

The Government's proposal has not yet been adopted

Finally, it should be noted that this is the Government's proposal for a new entrepreneurial strategy and that the proposed strategy has not yet been adopted.