Business succession in Denmark 2026: rules, tax and employee ownership

Business succession (generationsskifte in Danish) is when ownership of a business passes to the next generation of owners — usually children or other relatives, employees or the management team. It differs from an ordinary sale to an outside buyer: there is often an element of gift, the buyer rarely has the full price available, and Danish tax law offers special ways to defer the tax. Since 1 January 2026 there is also a new model that lets employees take over the business without the seller paying tax on the gain at the time of transfer.

This guide covers the three main routes — family, employees and management — and the rules that usually decide what a succession costs: tax succession, gift and inheritance tax, valuation and financing. If you are selling to an unrelated buyer instead, start with tax on selling a business.

Three ways to pass on a business

Whoever takes over, the transfer is built from the same blocks: a price (market value, or a lower value with a gift element), a form of payment (cash, a promissory note, a vendor loan or a gift) and a tax treatment (ordinary capital gains tax or tax succession). What separates the three routes is mainly who is allowed to take over with succession and how the price can be financed.

What is tax succession?

Normally the seller is taxed on the gain when a business or shares change hands. With tax succession (skattemæssig succession) the seller is not taxed. Instead the recipient steps into the seller’s tax position — as if the recipient had bought the assets at the seller’s original price and on the seller’s original date. The tax does not disappear; it is deferred until the recipient sells.

Succession is available both for sole proprietorships (section 33 C of the Danish Withholding Tax Act) and for shares (section 34 of the Capital Gains on Shares Act). A company whose main activity is passive investment — a so-called cash-box company (pengetank) — cannot be transferred with succession, and surplus cash that the business does not need is not covered either. Before a succession it is therefore often necessary to clean up the company, for instance by distributing or separating out securities and surplus cash.

Who can take over with succession?

• Family: children, grandchildren, siblings and siblings’ children and grandchildren — and, under certain conditions, a cohabiting partner. Children-in-law are not included.
• Close employees: an employee who, within the last five years, has worked the equivalent of at least three years full-time in the business. The test is objective; education and job title do not matter.
• Employee-owned vehicle: from 1 January 2026, also an employee-owned A.M.B.A. or F.M.B.A. — see below.

The deferred tax liability

Because the recipient takes over the seller’s low tax base, the recipient also takes over a future tax bill. This latent tax (passivpost) may be deducted from the market value when the price or the gift is calculated. For gifts, the deduction under section 33 D of the Withholding Tax Act can be set at 22% of the deferred gain for shares and companies and 30% for sole proprietorships. Alternatively, it can be based on the value of the actual tax liability taken over (section 33 C).

Passing the business to family: gift and inheritance tax

If your children receive the business wholly or partly as a gift, Danish gift tax is payable on the part of the value that is a gift. If the transfer happens on death, estate duty applies instead. What matters is the value used and whether the business meets the conditions for the reduced rate.

• Tax-free amount: In 2026 you can give up to DKK 80,600 per recipient in your closest family without gift tax. For children-in-law the limit is DKK 28,200.
• Standard gift tax: 15% of the amount above the tax-free amount.
• Reduced rate for operating businesses: 10% when the conditions are met. The rate applies to gifts made on or after 1 October 2024 and was introduced by Act no. 369 of 9 April 2025.
• On death: Estate duty is also 10% for operating businesses that meet the conditions. Heirs outside the close family may pay an additional 25% estate duty on top.

Conditions for the 10% rate

1. The business must qualify for succession. Cash-box companies are excluded, and surplus cash does not count.
2. Ownership period: The giver must have owned the business — directly or through a company — for at least one year immediately before the transfer.
3. Active participation: The giver or a close relative must have taken an active part in running the business for a continuous period of at least one year. For companies this means sitting on the board or in management; for sole proprietorships the starting point is 50 hours a month.
4. The recipient must keep the business for three years. If it is sold in whole or in part within three years, the rate rises to 15% — reduced proportionally for the part of the period that has passed.

Example: a gift at the reduced rate

An example with round numbers: a mother gives her daughter shares with a market value of DKK 2.5 million. After deducting the deferred tax liability, the taxable gift is DKK 2,000,000. Deducting the tax-free amount of DKK 80,600 leaves DKK 1,919,400, and 10% of that is DKK 191,940 in gift tax. At the standard 15% the tax would have been DKK 287,910. The example is simplified; the actual calculation must be made by an accountant.

Valuation: market value or schematic value

The starting point is that the business must be transferred at market value — the price an independent buyer would pay. Since Act no. 369 of 9 April 2025, parties transferring an operating business to close family can instead choose a schematic valuation (section 12 a of the Estate Duty Act), which the tax authorities must accept when the conditions are met. Goodwill is then calculated by capitalising the business’s excess earnings at the capital return rate plus 8 percentage points over a lifetime of no more than 15 years, based on the last five years of accounts.

• The schematic method cannot be used if the business has had commercial sales for less than three years, or if it mainly consists of intangible assets that are not yet generating a return.
• If you choose the schematic value, it must be applied consistently — you cannot mix methods.
• The schematic value applies to gift and estate duty only. Where there is no succession, market value still applies to the seller’s capital gains tax.
• An interest-free demand promissory note issued by the recipient for part of the price is normally accepted at face value.

Whichever method you use, get an independent valuation. Sitavo’s valuation gives a first price range based on key figures and sector, and the valuation chapter of the seller guide explains the methods. See also our guide to goodwill, often the largest item in a succession.

New in 2026: transfer to an employee-owned vehicle

Since 1 January 2026, owners of a Danish ApS or A/S can transfer the company to an employee-owned vehicle (medarbejderejevirksomhed) with tax succession. The model resembles the UK employee ownership trust: employees do not hold the shares directly but through a common entity, and the price can be paid over time out of the company’s future profits. The rules are in the Danish Act on Certain Commercial Undertakings (chapter 5 c) and the Capital Gains on Shares Act (sections 35 G–35 K), and the Danish Business Authority (Erhvervsstyrelsen) has published guidance.

How the model works

• The vehicle must be a cooperative (A.M.B.A.) or association (F.M.B.A.) with limited liability. It acquires the shares in the operating company — or in a holding company above it.
• More than one third: The vehicle must acquire more than one third (at least 33.4%) of the capital and votes. The capital may not be split into classes that limit its rights.
• Offer to everyone: The offer must go to all employees who have had Danish ATP pension contributions paid for at least three consecutive months and are at least 16 years old. Anyone holding 5% or more is excluded.
• Take-up: More than half of the eligible employees — and at least five — must join. The response period is at least ten weeks (July does not count).
• Valuation report: Independent valuers must confirm that the company is worth at least the price. The report may be no more than four weeks old when the offer is made.
• Profit sharing: in equal shares, or by length of service, working hours or salary — or a weighted combination. Other keys are not allowed.
• Independent board: at least three members, the majority of whom are not current or former owners of 5% or more, nor their close relatives.

Tax for the seller and the employees

An individual seller is not taxed on the gain. Instead the vehicle takes over a transferor tax on the deferred gain, calculated at the corporate tax rate — 22% in 2026 — on the difference between market value and the seller’s tax base. The transferor tax is paid down over time: if dividends to the vehicle exceed 8% of the transfer value, 22% of the excess must be paid. Voluntary repayments can be made at any time.

The Danish Business Authority’s own example: with a transfer value of DKK 10 million, 8% is DKK 800,000. If the company pays out DKK 1.2 million in a year, 22% of the DKK 400,000 above the threshold — DKK 88,000 — must be paid.

• If the shares are sold below market value, the vehicle is not taxed on the gift and the employees are generally not taxed either. If the transfer targets selected individuals rather than a broad group of employees, gift tax may apply.
• If the operating company becomes a cash-box company within five years, or the vehicle no longer holds more than one third at the end of two consecutive income years, the shares are treated as disposed of at market value and the deferred tax falls due.
• The parties must notify the tax authorities that the scheme is being used no later than the seller’s tax return deadline.

Selling to management or a single employee

A management buy-out — where the managing director or a few key people buy — usually looks like an ordinary deal. The buyers rarely have enough equity, so financing typically combines a bank loan, possibly with a guarantee from EIFO (the Danish state’s export and investment fund), a vendor loan and sometimes an earn-out. If the employee meets the three-years-of-full-time-work-within-five-years test, the transfer can be made with succession, so the seller pays no tax now and the buyer can deduct the deferred tax from the price.

Be aware that a price below market value to an employee may be treated as salary or other taxable income for the employee. Keep the price at arm’s length and document it.

Plan well ahead

Most successions take several years to prepare. The group structure often needs to change — for example by inserting a holding company — and a tax-free share exchange made without a permit requires the holding company to keep the shares for three years. The cash-box rules must be met on the transfer date, and the successor needs time to get ready to lead.

• I know who should take over, and that they want to.
• My accountant has assessed whether the business qualifies for succession (cash-box test, surplus cash).
• We have a valuation — market value and, if relevant, schematic value.
• We have calculated gift tax at 10% and 15%, and we understand the three-year rule.
• Financing is settled: gift, demand note, vendor loan, bank or future profits.
• There is a plan for my role after the transfer and for handing over customers and suppliers.
• A lawyer has reviewed the purchase agreement — see the share purchase agreement.

If no one in the family or among the staff can take over, a sale to an outside buyer is the way forward. See how to sell your business on Sitavo, and find a Sitavo adviser — accountant, lawyer or broker — if you want help with the process. You can invite the adviser into the deal with exactly the access you grant.