Permanent establishment

A permanent establishment is a fixed place of business where work is performed or from where the business is managed.

Examples of establishment

The establishment may be:

• an office, a branch, a factory, a workshop or an area of land

• an office belonging to an agent with authority to enter into agreements on behalf of the business

• a building, development, installation or assembly project or activities involving planning, supervision, consultancy or other ancillary staff functions in connection with such project.

No permanent establishment

A business does not have a permanent establishment if it only operates through a broker, commission agent or other independent representative.

Work of a preparatory or auxiliary character, which is not revenue generating, does not create a permanent establishment, including warehouses, a purchasing office or a postal address with an adviser.

The work must have a certain degree of permanency. This is usually around six months, but no fixed minimum period has been established. A permanent establishment may exist if the activity has only been carried out for a short period of time, if all the business activities are carried out at the place of business.

If work is performed at the place of business at different times, these periods must be added up. This includes, for example, seasonal work.

Special rules apply to construction and development. For a permanent establishment to exist, the activities must have a duration of at least six or 12 months, depending on the agreement between Denmark and the home country.

• If a building contractor from Germany, Poland or Romania is charged with a project lasting more than 12 months, it will have a permanent establishment.

• If the contractor is from Estonia, Latvia or Lithuania, it will have a permanent establishment if the project lasts more than six months.

• If Denmark does not have an agreement with the home country, the building contractor will have a permanent establishment from the first day in Denmark. This applies to, for example, France and Spain.

More information is available in Danish in sections C.F.8.2.2.5.1 and C.D.1.2.2. of our legal guide.

Example 1

A foreign building contractor operated from abroad is building several houses in Denmark. Each project lasts a few months at different locations in Denmark.

All in all, the employees work in Denmark for 200 days per year.

Since the building sites are located at different locations, and each project only takes a few months, the business will not have a permanent establishment.

Employees staying in Denmark for more than 183 days within a 12-month period must be registered with the Danish Tax Agency (Skattestyrelsen) and pay tax on the pay earned in Denmark.

Example 2

If the business registers a postal address with an accountant in Denmark and registers a branch at this address, but does not carry out any business there, it will not have a permanent establishment.

Example 3

If a foreign cleaning business has a permanent contract for the cleaning of a building in Denmark, it will have a permanent establishment.