Franchising in Denmark: Get Your Unit Ready for Tax and Payroll

When an existing business becomes a franchise network, its administrative routines do not automatically transfer to the new franchisee. Your own bookkeeper may have handled registrations, payroll and correspondence from the authorities for years without your involvement. The new unit needs its own working arrangements. Administrative preparation should therefore be a separate task before opening—not something you only investigate when the first wages are due.

1. Map the tasks behind your existing operations

Start by reviewing how your current business handles tax, VAT and payroll. Ask the person who actually does the work to describe the process from a sale or wage payment through to bookkeeping, reporting and payment to the authorities.

The aim is not to copy your entire administrative set-up. It is to identify the tasks that each independent franchisee must be able to handle, and distinguish them from the support the franchisor provides.

Create a task list with four fields:

• Task: What needs to be registered, reported or paid?
• Accountable person: Who is responsible within the franchisee’s business?
• Person carrying out the work: Who handles the task in practice?
• Evidence: How can you check that the task has been completed?

For example, an external bookkeeper may submit a VAT return, while the franchisee must provide supporting documents and ensure payment is made. The franchisor can provide a checklist without taking over the franchisee’s obligations towards the authorities.

This distinction matters in a franchise network: shared support must not create an expectation that head office automatically takes care of everything.

2. Check tax and VAT registrations separately

Denmark has no specific franchise law and no compulsory franchise register. Franchise agreements do not have to be registered with the authorities either. The Danish Contracts Act and general principles of contract law govern the contractual relationship, while tax, VAT and bookkeeping rules, among others, apply to the business’s operations.

Signing the franchise agreement therefore does not mean the unit is administratively ready. Nor does a CVR number—a Danish business registration number—by itself prove that all necessary registrations are in place.

The franchisee should work with their adviser to establish which registrations the business’s activities require. These may include VAT registration, employer registration or other obligations, depending on the services provided and trading activities. VAT-exempt activities may need a different assessment from ordinary VAT-taxable sales.

Use the business’s registration certificate in TastSelv Erhverv, the Danish tax authority’s online self-service portal for businesses, as the basis for your checks. The franchisee can find details of the registrations there. Check both the details and the effective dates, and have any errors corrected before the relevant activities begin.

Also establish a procedure for changes. New employees, changes in activities or a move to new premises may require updates to business details and registrations. The administrative plan must therefore remain in use after opening day.

3. Put access, banking and payment responsibilities in place

Correct registration is only useful if the right people can use the systems. The franchisee must be able to access the business’s online services provided by the authorities and grant the necessary permissions to a bookkeeper or payroll provider, for example. Personal login details should not be shared as a shortcut.

The business must have a NemKonto—a designated bank account for receiving payments from Danish public authorities—for payments such as VAT refunds. According to the Danish Tax Agency, a sole trader can also use the owner’s existing personal NemKonto. A separate account can, however, make it easier to keep business and personal transactions apart.

Agree on a simple pre-opening check:

• The person responsible can find the business’s registration certificate.
• The bookkeeper has the access they need.
• The NemKonto arrangements have been confirmed with the bank and the account is correctly linked.
• A named person monitors correspondence from the authorities and deadlines.
• It is clear who approves and makes payments.

Avoid describing the same task as both “the franchisee’s responsibility” and “handled centrally” without further explanation. Specify exactly what central support covers and what the franchisee must do themselves.

4. Run a test before the first payroll run

If the franchisee hires staff, the business must register as an employer. The employer must handle the withholding, reporting and payment of A-skat, Danish tax deducted at source, and the labour market contribution in accordance with the applicable rules. A payroll provider can help carry out these tasks, but does not take over the employer’s responsibility.

Review the payroll process before the first wages are paid. Who collects the hours worked? Who checks additional payments and absences? When must the information be submitted? Who approves payroll and ensures there are enough funds for both net wages and the associated payments?

Carry out an internal test using dummy data, without submitting an actual return. Follow the information from the staff rota through to payroll calculation and bookkeeping. The test should focus particularly on identifying unclear handovers between the local manager, the franchisee and the payroll provider.

Finally, compile any outstanding points into a brief status report, with a responsible person and deadline for each. The franchisor’s review should be described as practical support—not as official approval or a guarantee of correct tax treatment.

Practical takeaway: Do not let the first customer or wage payment become the test of your administration. Check registrations, access and the allocation of responsibilities before opening, and review the first reporting cycle with the franchisee’s adviser.