Denmark: A Top Choice for Startups in Northern Europe (2024)
When comparing startup ecosystems across Europe, particularly in Northern Europe, Denmark stands out as an exceptionally attractive destination for entrepreneurs in 2024. Denmark is not only the home to Europe’s most valuable company, it is also an attractive place for small businesses, startups and expats. Despite its reputation as a high-tax country, Denmark offers a unique combination of benefits that make it a prime location for launching and growing innovative businesses. In this article we will discuss concrete reasons why Denmark is emerging as a leader among its European counterparts in attracting startup talent and investment.
Breaking the High-Tax Myth
While many European countries are known for high taxation, Denmark distinguishes itself with policies that are surprisingly business-friendly, especially for startups and foreign entrepreneurs.
Competitive Corporate Tax Rate in Denmark
Contrary to popular belief, Denmark offers a highly competitive corporate tax rate of 22%, which is below the OECD average. This rate positions Denmark favorably among its European neighbors, providing businesses with a significant advantage in terms of retaining profits for reinvestment and growth.
| Country | Corporate tax rate |
|---|---|
| Germany | 29.9% |
| United Kingdom | 25% |
| France | 25.8% |
| Italy | 27.8% |
| Spain | 25% |
| Portugal | 31.8% |
| Ireland | 12.5% |
| the Netherlands | 19-25.8% |
| Belgium | 25% |
| Sweden | 20.6% |
| Norway | 22% |
| Denmark | 22% |
| Finland | 20% |
Denmark’s Attractive Tax Rules for Expats
One of Denmark’s most appealing features for foreign entrepreneurs, is its special taxation scheme for high-salaried expats. It is comparable to schemes in Sweden and the Netherlands. This scheme allows qualified individuals to pay a reduced income tax rate of just 27% for up to seven years. This significant tax break can be a game-changer for entrepreneurs looking to maximize their personal income during the critical early years of their startup.
Denmark’s Unique Tax Incentives for Startups
Denmark’s tax system is designed to foster innovation, research, and development – key ingredients for startup success. Here are some of the standout tax incentives that make Denmark an attractive destination for entrepreneurs in the European landscape:
Full Deduction for Patents and Expertise in Denmark
In a move that greatly benefits tech startups and innovative companies, Denmark offers full deduction of patents and expertise in the year of acquisition. This policy encourages companies to invest in intellectual property and knowledge acquisition, crucial elements for staying competitive in today’s fast-paced European business environment.
R&D Expense Deductions in Denmark
Research and Development are the lifeblood of many startups. Recognizing this, Denmark allows for the deduction of R&D expenses in the year they are incurred. This policy provides immediate financial relief for startups investing heavily in innovation, setting Denmark apart from many of its European counterparts.
Denmark’s Cash Reimbursement for R&D Losses
In an unprecedented move to support R&D-intensive startups, Denmark offers a cash reimbursement of 22% of losses related to R&D costs, up to a maximum tax value of DKK 25 million. This safety net can be crucial for startups in their early stages when R&D costs often outstrip revenue, making Denmark a uniquely attractive option in Northern Europe.
Beyond Taxes: Why Denmark Shines for Startups in Europe
While the tax benefits are substantial, Denmark’s appeal to entrepreneurs extends far beyond its fiscal policies. Here are additional factors that make Denmark an ideal location for startups in the European context:
- Access to the Danish welfare system
- No capital duty or wealth taxes (unlike for example neighbouring Norway)
- Favorable dividend policies
- Virtually unlimited loss carry forward
The Danish Startup Ecosystem in the European Landscape
Beyond the financial and tax incentives, Denmark offers a vibrant and supportive ecosystem for startups that competes with the best in Europe:
- Highly Educated Workforce in Denmark
- Denmark’s Advanced Digital Infrastructure
- Denmark’s Renowned Work-Life Balance
- Denmark’s International Business Environment
When comparing startup destinations across Europe and particularly in Northern Europe, Denmark emerges as a top contender. Its unique combination of favorable tax policies, supportive business environment, and high quality of life make it an incredibly attractive option for entrepreneurs in 2024. By looking beyond the surface-level perception of high taxes, startup founders can discover in Denmark a hidden gem that offers all the ingredients necessary for entrepreneurial success in the European market.
Further reading:
Patent boxes and R&D subsidies
Guide on where to start a business in Europe
Invest in Denmark (national investment agency)
Talk to our advisers and find out if Denmark is a good choice for you