DENMARK Law and Practice Contributed by: Poul Guo, Martin Søndergaard, Patricia Rasch and Jonas Miller Rasmussen, Moalem Weitemeyer
stage companies. The deduction rates for R&D expenses are set at: • 108% in 2025; • 114% in 2026; • 116% in 2027; and • 120% in 2028. Tax-Free Dividends on Unlisted Portfolio Shares Recent regulatory changes have abolished taxa - tion on dividends from unlisted portfolio shares (where a company owns less than 10%). Previ - ously, these dividends were subject to a 15.4% tax (calculated as 22% of 70%). This change eliminates the disparity between capital gains and dividend taxation on such shares. As a result, companies receiving divi - dends from unlisted portfolio shares are no long - er subject to the 15.4% tax, aligning dividend and capital gains taxation. 4.3 Government Endorsement The Danish government has launched substan - tial initiatives to increase equity financing activ - ity. In May 2024, the government introduced 41 new initiatives aimed at improving business framework conditions and fostering talent devel - opment. These initiatives are part of a broader strategy to enhance the investment climate and support start-ups and innovative companies.
• Vesting agreements – equity ownership is earned over time, ensuring alignment with the company’s sustained success. If a founder leaves prematurely, vesting provisions may limit their ability to retain their full share allo- cation, protecting other stakeholders. • Employee equity incentive plans (ESOPs) – many venture-backed companies imple - ment ESOPs, allowing founders and key employees to acquire a greater stake in the company. These plans may be structured as stock options or share purchase schemes, with vesting tied to time-based schedules or performance milestones (KPIs). 5.2 Securities To incentivise founders and employees, Danish companies typically use equity-based instru - ments such as warrants and stock options, granting rights to acquire shares in the future, contingent on specific conditions or timeframes. Standard terms include: • (reverse) vesting – rights are earned over a set period; and • exercisability – defines when and how options/warrants can be exercised, usually aligning with an exit event. Implementing these plans early ensures flexibil - ity for future investors. 5.3 Taxation of Instruments Denmark offers favourable tax treatment under Section 7P of the Danish Tax Assessment Act. If certain conditions are met (eg, compensa - tion not exceeding 10%–20% of an employee’s annual salary), taxation is deferred until the sale of shares, at which point gains are taxed as capi - tal income (up to 50%). This provides a signifi - cant advantage over standard income taxation.
5. Employment Incentives 5.1 General
In Denmark, the long-term commitment of founders and key employees is typically secured through the following.
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