Place of Management

Oversigt

How is the place of management assessed?

The assessment of whether a company’s management is located in Denmark depends on a concrete evaluation of the actual circumstances surrounding the company’s decision making.
The primary factor in this assessment is where the day-to-day management is exercised. As a general rule, a company will be considered resident in Denmark if its executive management is based here, or if the company’s head office is located in the country.
If the board of directors is, in practice, responsible for the day-to-day management, the location of the board members will be decisive in determining the company’s connection to Denmark.
The evaluation always focuses on the actual management activities – not merely the formal registration or official address. In other words, greater weight is given to where decisions are truly made and who is actually directing the company, rather than the legal framework. The key question is where decisions are made in practice and who effectively controls the company’s management.
For companies operating across borders, it is crucial to ensure that both corporate structure and management practices are aligned with the desired tax and legal residency. Registration abroad does not protect against Danish tax liability if the actual management is carried out from Denmark.

Holding companies and the risk of unwanted relocation of the place of management

Holding companies often differ from operating companies in having a very limited management structure – in many cases consisting of a single person who both owns and manages the company. The absence of physical operations, employees, and local presence in the country of registration means that tax assessments focus heavily on where the real decision-making authority is exercised. When all significant decisions are concentrated in one person, even moving that person’s private residence – for example, from abroad to Denmark – can result in the place of management being considered relocated.
In such cases, there is a significant risk that the company will be deemed tax resident in Denmark if the central management function is effectively carried out here – regardless of the company’s formal registration. This can lead to full Danish tax liability, reporting obligations, and possible double taxation.
It is therefore essential for holding companies with a narrow management structure to actively address how and where management decisions are made and documented. Particularly when moving between countries, it is important to review the company’s tax residency status and ensure that structure and practices support the desired residency.

Place of management vs. Permanent establishment

The place of management and permanent establishment are two different tax concepts with distinct meanings.

Place of management refers to where the company’s daily and actual management is carried out. If this management is located in Denmark, the entire company is considered tax resident here, resulting in full tax liability. It is the control and decision-making that matters – not where the company is registered.
Permanent establishment refers to where the company physically carries out all or a substantial part of its activity. This could be an office, project site, or home office in Denmark where core business is conducted. In this case, only the income attributable to Denmark is taxed, resulting in limited tax liability.

In short:

Place of management → Full tax liability: the entire company is considered resident in Denmark and taxed here.
Permanent establishment → Limited tax liability: only the part of the activity conducted in Denmark is taxed here.

The distinction depends on where the real decision-making power lies and where the company’s central control actually takes place.

How to avoid unintended relocation of the place of management to Denmark

Many companies only become aware of this issue when the Danish Tax Agency initiates an audit process. This underlines the importance of proactively addressing the question of the place of management.
To avoid unexpected full Danish tax liability, it is crucial to ensure that daily and strategic management continues to be exercised in the country where the company is registered. This requires clear internal guidelines for where decisions are made and how management activities are documented. Hold management meetings abroad, ensure that major decisions are made there, and be aware that even working from home in Denmark can relocate the place of management if it becomes a regular practice.

Clearly document decision-making processes – who makes the decisions and where they are made.
Establish clear guidelines for remote work, especially for management members.
Avoid consistently making strategic decisions from Denmark, even during temporary stays.

SkatteInform can help you and your business navigate the rules, identify risks, and ensure your company avoids unwanted tax pitfalls.

Frequently Asked Questions

Why choose professional advice?

The rules on the place of management are complex and always assessed on a case-by-case basis. Misjudgments can lead to unexpected full Danish tax liability, potentially resulting in significant financial consequences.
SkatteInform can help you and your business navigate the rules, identify risks, and ensure your company avoids unwanted tax pitfalls.
Contact us today for a no-obligation discussion on how we can help you secure your company’s tax residency.

What does “place of management” mean?‍

It refers to the location where the company’s daily and strategic decisions are actually made. The focus is on who has real control and where the management work is physically carried out, not where the company is formally registered.

Why is the place of management important?‍

The place of management determines which country has the right to tax the company’s entire income. It affects taxation, reporting obligations, risk of double taxation, and potential penalties if incorrectly located.

Can a foreign company become fully taxable in Denmark?‍

Yes, if the daily and strategic management is effectively carried out from Denmark, even if the company is registered abroad. This can occur through board decisions, executive meetings, or management activities in Denmark.

What is the difference between place of management and permanent establishment?‍

The place of effective management concerns control and decision-making, and it can trigger full Danish tax liability. A permanent establishment, on the other hand, relates to the physical location where the business carries out its activities and is only subject to taxation on income that can be allocated to Denmark.

How can you avoid an unintended shift of the place of management to Denmark?‍

Ensure that management makes and documents decisions in the country where the company is registered. Hold meetings outside Denmark and set clear guidelines for remote work and strategic decision-making.

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