The seat of management refers to the main business address or the place where a company’s management makes key decisions. The seat of management is important for determining the company’s tax residence and thus where the company must pay tax. Determining the seat of management can be complex, which is why we recommend seeking advice.
Frequently Asked Questions About the seat of management
What does the term “seat of management” mean?
The term seat of management refers to the place where the actual decisions about the company’s day-to-day management are made.
Why is the seat of management important?
It is important because it determines whether a company (or similar legal person) is considered resident in Denmark and therefore fully tax liable here.
If the seat of management is in Denmark, the company may be subject to Danish tax liability, even if the company also has its registered office in the country of incorporation.
Which factors are assessed when determining the seat of management?
Several factors are assessed together based on the actual circumstances, including for example:
- Where the day-to-day management is carried out
- Where management and key decision-makers actually work from
- Where board and management decisions are prepared and made
- Whether there is staff, premises and local presence in the country of registration
For holding companies without active operations, the absence of employees and local presence in the country of registration means that the tax authorities will in particular look at where the real decision-making power is exercised.
Can a private move change the seat of management?
When all key decisions are concentrated in one person, even a private move to Denmark can mean that the seat of management is considered to have moved.
Even if the executive management or board formally has its head office abroad, the holding company may be considered to have its seat of management in Denmark if the central decisions are in fact made here.
What applies to companies without day-to-day management?
For companies without day-to-day management, such as holding companies or investment companies, the assessment focuses on where the other management decisions are made.
Decisions on amendments to the articles of association, financing and the use of the company’s funds can be decisive.
Are formalities alone enough to determine the seat of management?
No. Formalities alone are not enough. It is the actual decisions, and where they are made, that are decisive.
For example, board meetings can formally be held abroad, even though the decisions are actually made in Denmark.
The real place of work of the executive management or the chairman of the board, and where the day-to-day management is carried out, is of great importance.
What are the tax consequences if the seat of management is in Denmark?
If the seat of management is considered to be in Denmark, this typically leads to full tax liability to Denmark.
The company will be taxed on all of its global income under Danish rules and will be subject to Danish reporting requirements.
Can there be double residence due to the seat of management?
Yes. If the company meets the criteria for residence in several countries, double residence can arise.
In such cases, the double taxation treaties (often based on the OECD Model) determine which country has the taxing right. Here, the assessment of where the real management – the seat of management – is located plays a central role.
Disclaimer
As the above is for guidance purposes only, we accept no liability for decisions that may be made based on the above without prior individual advice. We accept no liability for errors and omissions.