Employees at Danish startups will from July 1st no longer have to pay tax annually on gains in the value of shares awarded to them, making it much easier and more attractive for entrepreneurs in Denmark to pay staff in equity.
Under the new rules, employees in entrepreneurial companies and startups with a basic salary of at least DKK 265,300 will in future be able to receive an unlimited number of employee shares, including warrants and options and will only be taxed when they sell the shares.
Jakob Engel-Schmidt, Denmark’s tax minister, argued that the new rules would make it “more attractive to issue employee shares”, giving startup workers a greater stake in companies’ success.
“The hope is that this will strengthen our entrepreneurial culture and that more people will dare to take the leap by becoming co-owners of their company,” he said. “This means that they will also experience financial success if the company experiences financial success.”
The change in the law will also allow Danish entrepreneurs to lower annual salary bills in the startup phase by paying employees partly in shares or share options.
Under Denmark’s existing law on share awards and share options, holders are taxed annually on any paper gains in the value of the shares even if they have not yet realized any gains, making it difficult for startups in Denmark to pay employees with shares, as doing so saddles them with an annual tax liability.
There is also currently a limit on how many shares employees can receive, which will also be removed under the new law.
The share changes were part of the Entrepreneurship Package Denmark’s parties agreed in 2024, but the changes have been delayed pending EU approval.
