Permanent establishment analysis
Does your company’s activity in Denmark create tax obligations?
We will tell you in 20 minutes whether your situation requires a full analysis.
What is permanent establishment (fast driftssted)?
A foreign company can create a permanent establishment in Denmark (known in Danish as a fast driftssted) without intending to. When that happens, the company becomes liable for Danish corporate tax on the profits attributable to its Danish activities, and registration obligations follow immediately.
Under Selskabsskatteloven §2, stk. 1, litra a, a permanent establishment exists when a foreign company carries on business in Denmark through a fixed place of business, through a dependent agent with authority to conclude contracts, or through the provision of services over a sufficient period in certain cases.
Permanent establishment analysis is usually the first question a foreign company should answer before starting Danish operations. The answer determines everything that follows: whether registration is required, which tax obligations apply, and how the workforce deployment should be structured.
The threshold is lower than most companies expect. A single employee with authority to conclude contracts on the company’s behalf can create an agency PE from day one. A construction project in Denmark creates a PE under Danish domestic law if it runs for more than six months, regardless of what the applicable double taxation agreement (DTA) says the threshold is.
The three types of permanent establishment in Denmark
Danish law and the OECD Model Tax Convention recognise three distinct routes to permanent establishment. Each has different criteria. A situation can trigger more than one simultaneously.
Fixed place PE
A fixed place of business through which the company’s activities are wholly or partially carried on. This includes offices, branches, factories, workshops, and construction or installation sites.
For construction and installation projects, Danish domestic law sets the threshold at six months. Most DTAs set it at twelve months. Where a DTA applies, the more favourable threshold from the company’s perspective is typically the DTA threshold, but the start date, aggregation of related projects, and characterisation of preparatory activities all affect the calculation and are frequently disputed.
Activities that are purely preparatory or auxiliary (storage and display of goods, purchasing, information gathering) do not in themselves create a fixed place PE, but only if they are genuinely preparatory and not part of the company’s core business.
Service PE
Where a foreign company provides services in Denmark (consulting, technical support, installation, training) through its own employees or personnel, a service PE may arise if those employees are present in Denmark for more than 183 days in any twelve-month period.
Service PE provisions do not appear in all DTAs. Where the applicable DTA does not include a service PE article, the fixed place and agency PE analyses apply instead. Day counting and the characterisation of the services are both relevant to the assessment.
Agency PE (dependent agent)
A person acting on behalf of the foreign company in Denmark, with authority to conclude contracts in the company’s name, and who habitually exercises that authority, creates an agency PE even if the company has no physical premises in Denmark.
The key distinction is between a dependent agent (who creates PE) and an independent agent acting in the ordinary course of their own business (who does not). The factors are: how much discretion the agent has, whether they work for multiple principals, how risk is allocated between the agent and the company, and the terms of the contractual relationship.
A sales representative, procurement agent, or project manager with genuine contracting authority is typically a dependent agent. The analysis requires a review of the actual relationship, not just the contract wording.
Senior leadership is a particular risk area. In SKM2024.432.SR, issued on the 2nd of September, 2024, the Danish Tax Board confirmed that a chief executive performing 40% of their executive work from a home office in Denmark constituted a permanent establishment for the foreign company, even without any other Danish presence and with no commercial interest in a Danish presence. The bar for C-level employees and board members is stricter than for other employees.
Offshore operations in Danish waters: a stricter rule
For foreign companies carrying out activities on Denmark’s continental shelf (offshore oil and gas, offshore wind, subsea installation, and related services) Danish domestic law applies a broader PE definition than the standard rules.
Companies providing offshore services in Danish waters almost always have a permanent establishment from the first day of operations. The question is not whether PE exists, but how to structure and register correctly from the outset.
If your company operates in the offshore or energy sector and is active in Danish waters, the analysis and the registration steps should be in place before operations begin, not after a SKAT inquiry arrives.
Remote workers and home offices in Denmark
A home office in Denmark can constitute a fixed place of business and therefore a permanent establishment, even if the foreign company has no other presence here. This is one of the most frequently misunderstood PE risks, and one of the most common situations Crossbord is asked to assess.
The question is not simply whether an employee works from home in Denmark. It is whether the home office is effectively at the disposal of the foreign company: whether the work serves the company’s commercial interests in Denmark, and whether the arrangement has the necessary degree of permanence.
Danish administrative practice, developed through a substantial body of Tax Board rulings, applies what is sometimes called the surrogate rule: would the foreign company have needed to lease an office in Denmark if the employee had not worked from home? If the answer is yes, the home office is a surrogate for that office and a permanent establishment arises.
In practice, the following situations typically require analysis:
- A Danish-resident employee is hired by a foreign company and works primarily or entirely from home in Denmark, without a separate office being provided.
- A senior executive, board member, or director with management authority works from a home office in Denmark for a significant proportion of their time. In SKM2024.432.SR, the Danish Tax Board confirmed that a chief executive performing 40% of their work from a Danish home office created a permanent establishment, even where the company had no commercial interest in a Danish presence.
- An employee moves to Denmark for personal reasons and continues working for a foreign employer, where the foreign company has a commercial interest in having that employee based in Denmark.
- Multiple employees in Denmark work from home offices, where the aggregate Danish presence represents a meaningful part of the company's operations.
The position is more straightforward where an employee works from home in Denmark purely for personal reasons, the foreign company has no commercial interest in a Danish presence, and the employee has a primary workplace elsewhere. In those cases, Danish practice has generally not found a permanent establishment. But the analysis is fact-specific and the distinction between personal and commercial reasons is not always obvious.
2025 OECD Commentary update
The 2025 update to the OECD Model Tax Convention Commentary introduced new guidance on home offices as fixed places of business, including a 50% working time threshold as one indicator of sufficient permanence. The Danish domestic PE definition is aligned with the OECD framework, and it is expected that SKAT will incorporate the updated guidance into Danish practice. The 2025 update does not, however, specifically address C-level employees and board members, where Danish practice remains stricter than the general framework.
What a permanent establishment analysis from Crossbord covers
We assess your specific situation against Danish domestic law, the relevant DTA, and OECD guidance, and give you a clear determination and a practical recommendation.
Facts gathering
We start with a structured interview covering the activities planned or already underway in Denmark: the physical locations involved, which employees are present and for how long, what contracting authority they hold, how decisions are made, and what the contractual arrangements with Danish counterparties look like. We review any relevant contracts, assignment letters, project plans, and prior correspondence with SKAT.
Legal analysis
We assess your situation under Selskabsskatteloven, identify the applicable DTA, and analyse the specific PE provisions in that treaty. We review published SKAT positions, relevant Danish case law, and OECD guidance on the facts as presented. The output is a written legal analysis memo setting out the position, the risk level, and the strength of the documentation.
Determination and recommendation
We reach one of three conclusions: PE clearly exists, PE clearly does not exist, or the position is uncertain. For each outcome we set out what follows. If PE exists, we move to registration. If PE does not exist, we document the position and establish monitoring safeguards. If the position is genuinely uncertain and the financial stakes are material, we may recommend seeking a binding advance ruling (bindende svar) from SKAT, which provides certainty before operations scale.
Implementation support
Where PE exists, we handle the foreign company registration in Denmark, advise on corporate tax compliance, and coordinate with the employee payroll setup where a workforce is involved. Where PE does not exist, we prepare operational guidelines, employee instructions, and contract templates that maintain the non-PE position and support an audit defence if SKAT raises questions later.
SKAT inquiry response
If SKAT has already raised a PE allegation, the analysis takes on a defensive character. We review SKAT’s position, prepare a counter-argument where the facts support it, and manage the correspondence. Responding to a SKAT inquiry without specialist support significantly increases the risk of an adverse determination.
Binding rulings (bindende svar): certainty from Skattestyrelsen
What a binding ruling is
A binding ruling (bindende svar) is a formal written response from the Danish Tax Agency confirming how Danish tax law applies to a specific, described situation. It is legally binding on Skattestyrelsen for five years, provided the facts remain as described.
A binding ruling is the only mechanism that achieves legal certainty over your PE position. A written adviser opinion or an internal analysis is not binding on the Danish authorities. A binding ruling is. The three home office PE cases from 2022 to 2024 all began as binding ruling applications by foreign companies seeking exactly this certainty.
When a binding ruling is relevant
A binding ruling is worth pursuing when:
- your company is entering a new Danish arrangement and needs to confirm its PE position before the structure is fixed
- an existing home office arrangement involves a senior executive and has not been formally assessed
- your company is in a grey area and the cost of ongoing uncertainty exceeds the cost of obtaining certainty
- you are acquiring a company that has operated in Denmark and need to confirm its historical PE position as part of due diligence.
A binding ruling is not always the right step. For clear-cut situations or where the position is unambiguously low-risk, a written PE analysis from Crossbord may be sufficient. We advise on which route is appropriate after the initial consultation.
The process
Weeks 1 to 2. Initial consultation and fact-gathering. We collect information about the relevant activities, employees, contracts, and the applicable DTA. The facts must be complete and accurately described: the quality of the ruling depends on the quality of the application.
Weeks 2 to 4. Crossbord prepares the ruling application. The application must describe the facts precisely and ask a specific legal question. We draft the application and review it with you before submission.
Submission. We submit the application to Skattestyrelsen on your behalf as your authorised representative.
Processing. Skattestyrelsen typically processes binding ruling applications within three to six months. We monitor progress and respond to any requests for additional information from the Tax Agency.
Delivery. Crossbord reviews the ruling when issued, advises you on what it means for your operations, and retains the ruling in your compliance file.
The fee for a binding ruling application varies depending on complexity. We provide a fixed fee estimate after the initial consultation.
Scope and timeline
Typical timeline
A standard permanent establishment analysis takes three to four weeks from the initial facts-gathering session to the written determination. The timeline depends on the complexity of the factual situation and whether additional documentation is required.
Where SKAT has already issued an inquiry, the response timeline is determined by SKAT’s deadline. We advise engaging as early as possible.
A SKAT binding advance ruling typically takes three to six months from submission to determination. We prepare and manage the submission on your behalf.
What drives complexity
The following factors affect the scope and cost of the analysis:
- Multiple physical locations or activity types in Denmark
- An unusual or non-standard DTA with specific PE provisions
- Offshore or continental shelf activities
- SKAT inquiry already in progress (defensive posture)
- Multiple related entities with overlapping Danish activities
For a straightforward situation (a single project, a standard DTA, no prior SKAT contact) the analysis is scoped and priced at a fixed fee. Complex or multi-factor situations are scoped following the initial consultation.
Who this analysis is for
We carry out permanent establishment analyses for foreign companies across a range of sectors and situations. The following are the most common.
Construction and engineering companies starting projects in Denmark and needing to establish whether the six- or twelve-month threshold applies and when the clock starts.
Offshore and energy sector companies providing services in Danish waters, where the stricter continental shelf rules apply and PE typically exists from day one.
Technology and consulting companies whose employees work regularly from Danish client sites or who have individuals in Denmark with authority to commit the company commercially.
Manufacturers and distributors with warehouse facilities, sales offices, or agents in Denmark, where the distinction between a dependent and an independent agent determines whether PE exists.
Companies responding to a SKAT inquiry alleging PE where the position has not been documented and a formal response is required.
Foreign companies with Danish-resident remote workers where one or more employees work from home in Denmark and the question of whether a permanent establishment exists has not been formally assessed.
M&A due diligence where an acquisition target may have unrecognised Danish PE exposure that will transfer with the transaction.
The earlier the analysis, the more options you have
A permanent establishment that is identified before operations begin can often be structured around or registered correctly from the outset. One that surfaces after a SKAT inquiry is significantly more constrained. If you are planning Danish operations or have employees active in Denmark, we can give you an initial assessment of your exposure.
Frequently asked questions
We already have an adviser in our home country. Do we still need a Danish analysis?
Your home country adviser can advise on your domestic tax position, but Danish PE is determined by Danish domestic law and the specific double taxation agreement between Denmark and your country. The analysis requires someone who works with Danish tax authority practice day to day. An adviser who does not regularly deal with SKAT is unlikely to know how SKAT interprets the rules in practice, which is often more restrictive than the treaty text alone.
We have had employees in Denmark for a while without doing this analysis. Is it too late?
It is not too late, but the options narrow as time passes. If a permanent establishment exists and has not been registered, the exposure includes back taxes, interest, and potentially penalties. The earlier you establish the position, the more you can do about it: either register correctly and manage the liability going forward, or document why PE did not exist and build an audit defence. Waiting for SKAT to raise the question significantly limits both.
Our employee is only in Denmark part of the time. Does that change anything?
Partial presence reduces but does not eliminate the risk. The relevant questions are how many days the employee is in Denmark, what they do there, whether they have authority to commit the company commercially, and whether the company has a commercial interest in having them based in Denmark. A sales representative who spends two days a week in Denmark visiting clients may well create a permanent establishment. An employee who occasionally works from a Danish home office for personal reasons, with their primary workplace abroad, is less likely to. The analysis is always fact-specific.
We have a construction project starting in Denmark. When does PE arise?
Under Danish domestic law, construction, installation, and assembly projects create a permanent establishment from the first day of work on site. This is stricter than the OECD Model Tax Convention, which sets the threshold at twelve months. However, most double taxation agreements follow the OECD model rather than Danish domestic law, so if a treaty applies between Denmark and your company’s home country, the twelve-month threshold typically governs. Preparatory work, mobilisation, and planning phases can count toward the threshold depending on how they are characterised. The clock also does not necessarily reset between related projects.
What does a permanent establishment analysis actually cost?
A standard analysis (single project, straightforward facts, no prior SKAT contact) is scoped and priced at a fixed fee following the initial consultation. We give you the fee before you commit. Complex situations involving multiple entities, offshore activities, or an active SKAT inquiry are scoped on the same basis but the fee reflects the additional work involved. We do not charge for the initial consultation.
If PE exists, what do we have to register?
The registration requirements depend on the type of permanent establishment and the nature of the activities. In most cases a foreign company with PE in Denmark must register for corporate tax with SKAT, register with the Danish Business Authority (Erhvervsstyrelsen) as a branch or registered foreign entity, obtain an SE number for payroll purposes, and report employee income via eIndkomst. Where employees are present, payroll withholding obligations apply from the first payslip regardless of whether registration is complete. We manage the full registration process.
What typically follows a PE analysis
Foreign company registration in Denmark
Where PE is confirmed, registration obligations follow. We handle CVR and SE number registration and advise on the correct registration type
Cross-border payroll
Where employees are deployed in Denmark as part of the activities that trigger PE, payroll and eIndkomst reporting obligations apply from the first payslip.
Tax brief
PE creates Danish corporate tax liability. We advise on the tax return obligations, profit attribution, and SKAT reporting requirements that follow.