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2017-2021 ARCHIVED CONTENT

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EXECUTIVE SUMMARY

Denmark is regarded by many independent observers as one of the world’s most attractive business environments and is characterized by political, economic, and regulatory stability. It is a member of the European Union (EU) and Danish legislation and regulations conform to EU standards on virtually all issues. It maintains a fixed exchange rate policy, with the Danish Krone linked closely to the Euro. Denmark is a social welfare state with a thoroughly modern market economy, heavily driven by trade in goods and services. Exports account for about 55 percent of GDP. Economic conditions in its major trading partners – Germany, the United States, Sweden and the UK – have substantial impact on Danish national accounts.

Denmark is a net exporter of food, fossil fuels, chemicals and wind power, but depends on raw material imports for its manufacturing sector. Within the EU, Denmark is among the strongest supporters of liberal trade policy. Transparency International regularly ranks Denmark as having among the world’s lowest levels of perceived public sector corruption.

Denmark’s underlying macroeconomic conditions are healthy, and the investment climate is sound. Denmark is strategically situated to link continental Europe with the Nordic and Baltic countries. Transport and communications infrastructures are efficient. Denmark is among world leaders in high-tech industries such as information technology, life sciences, clean energy technologies, and shipping.

In mid-March 2020 Denmark committed up to 18% of GDP in fiscal stimulus to blunt the worst of the economic fallout from the COVID-19 pandemic. A protracted recovery is likely, and some business leaders are calling for longer-term measures to stimulate inward investment and support the export sector.

The entrepreneurial climate, including female-led entrepreneurship, is strong. Denmark expects to enact a Foreign Investment Screening mechanism in the fall of 2020 to ensure the integrity of critical infrastructure.

Note:  Separate reports on the investment climates for Greenland and for the Faroe Islands can be found at the end of this report.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2019 1 of 175 http://www.transparency.org/
research/cpi/overview
World Bank’s Doing Business Report 2019 4 of 190 http://www.doingbusiness.org/en/rankings
Global Innovation Index 2019 7 of 129 https://www.globalinnovationindex.org/
analysis
indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2018 USD 13.2 billion http://apps.bea.gov/
international/factsheet/
World Bank GNI per capita 2018 USD 60,140 http://data.worldbank.org/
indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

A small country with an open economy, Denmark is highly dependent on foreign trade, with exports comprising the largest component (55 percent) of GDP. Danish trade and investment policies are liberal. In general, investment policies are forward-looking, aimed at fostering and developing businesses, especially in high-growth sectors. The Economist Intelligence Unit (EIU) ranks it as the world’s second-most attractive business location after Singapore, and the leading nation in the region. The EIU characterizes Denmark’s business environment as among the most attractive in the world, reflecting an excellent infrastructure, a friendly policy towards private enterprise and competition, low bureaucracy and a well-developed digital sector.

Principal concerns include low productivity growth, a high personal tax burden and limited competition in a small group of industries. Overall, however, operating conditions for companies should remain broadly favorable. Denmark scores top marks in various categories, including the political and institutional environment, macroeconomic stability, foreign investment policy, private enterprise policy, financing, and infrastructure.

As of January 2020, the EIU rated Denmark an “AA” country on its Country Risk Service, with a stable outlook. Sovereign risk rated “AA,” and political risk “AAA.” Denmark ranked tenth out of 140 on the World Economic Forum’s 2019 Global Competitiveness Report, fourth on the World Bank’s 2020 Doing Business ranking, and seventh on the EIU 2019 Democracy Index. “The Big Three” credit rating agencies Standard & Poor’s, Moody’s, and Fitch Group all score Denmark AAA. “Invest in Denmark,” an agency of the Ministry of Foreign Affairs and part of the Danish Trade Council, provides detailed information to potential investors. The website for the agency is www.investindk.com .

“Invest in Denmark,” an agency of the Ministry of Foreign Affairs and part of the Danish Trade Council, provides detailed information to potential investors. The website for the agency is www.investindk.com .

Corporate tax records of all companies, associations and foundations that pay taxes in Denmark were made public beginning in December 2012 and are updated annually. The corporate tax rate is 22 percent.

Limits on Foreign Control and Right to Private Ownership and Establishment

As an EU member state, Denmark is bound by EU rules on free movement of goods, capital, persons and certain services. Denmark welcomes foreign investment and does not distinguish between EU and other investors. There are no additional permits required by foreign investors, nor any reported bias against foreign companies from municipal or national authorities.

Denmark’s central and regional governments actively encourage foreign investment on a national-treatment basis, with relatively few limits on foreign control. A foreign or domestic private entity may freely establish, own, and dispose of a business enterprise in Denmark. The capital requirement for establishing a corporation (A/S) or Limited Partnership (P/S) is DKK 400,000 (approx. USD 60,000) and for establishing a private limited liability company (ApS) DKK 40,000 (approx. USD 6,000).

As of 15 April 2019, it is no longer possible to set up an “Entrepreneurial Company” (IVS). The company type was intended to allow entrepreneurs a cheap and simple way to incorporate with limited liability, with a starting capital of only DKK1 (USD 0.16). Due to repeated instances of fraud and unintended use of the IVS, this vehicle was abolished within Denmark, but is still available in Greenland. In 2019, the capital requirements to set up a Private Limited Company were lowered, bringing Denmark more in line with other Scandinavian countries, and to ensure it will continue to be cheap and simple to establish limited liability companies in Denmark. No restrictions apply regarding the residency of directors and managers.

Since October 2004, any private entity may establish a European public limited company (SE company) in Denmark. The legal framework of an SE company is subject to Danish corporate law, but it is possible to change the nationality of the company without liquidation and re-founding. An SE company must be registered at the Danish Business Authority if the official address of the company is in Denmark. The minimum capital requirement is EUR 120,000 (approx. USD 131,000).

Danish professional certification and/or local Danish experience are required to provide professional services in Denmark. In some instances, Denmark may accept an equivalent professional certification from other EU or Nordic countries on a reciprocal basis. EU-wide residency requirements apply to the provision of legal and accountancy services.

Ownership restrictions are applied in the following sectors:

  • Hydrocarbon exploration: Requires 20 percent Danish government participation on a “non-carried interest” basis.
  • Defense materials: The law governing foreign ownership of Danish defense companies (L538 of May 26, 2010) stipulates that the Minister of Justice has to approve foreign ownership of more than 40 percent of the equity or more than 20 percent of the voting rights, or if foreign interests gain a controlling share in a defense company doing business in Denmark. This approval is generally granted unless there are security or other foreign policy considerations weighing against approval.
  • Maritime: There are foreign (non-EU resident) ownership requirements on Danish-flagged vessels other than those owned by an enterprise incorporated in Denmark. Ships owned by Danish citizens, Danish partnerships or Danish limited liability companies are eligible for registration in the Danish International Ships Register (DIS). Ships owned by EU or European Economic Area (EEA) entities with a genuine link to Denmark are also eligible for registration, and foreign companies with a significant Danish interest can register a ship in the DIS.
  • Aviation: For an airline to be established in Denmark it must have majority ownership and be effectively controlled by an EU state or a national of an EU state, unless otherwise provided for through an international agreement to which the EU is a signatory.
  • Securities Trading: Non-resident financial institutions may engage in securities trading on the Copenhagen Stock Exchange only through subsidiaries incorporated in Denmark.
  • Real Estate: Purchases of designated vacation properties, or ‘summer houses’, are restricted to citizens of Denmark. Such properties, located in municipally designated ‘summer house area’ zones, typically coastlines, may not be inhabited year-round. EU citizens and companies from EU member states can purchase any type of real estate, except vacation properties, without prior authorization from the authorities. Companies and individuals from non-EU countries that have been present/resident in Denmark for at least five years in total and are currently resident in Denmark can also purchase real estate, except vacation properties, without prior authorization. Non-EU companies or individuals that do not meet these requirements can only purchase real estate with the permission of the Danish Ministry of Justice. Permission is freely given to people with a Danish residency permit, except for purchases of vacation properties.

Other Investment Policy Reviews

The most recent UNCTAD review of Denmark occurred in March 2013, available here: http://unctad.org/en/PublicationsLibrary/webdiaeia2013d2_en.pdf . There is no specific mention of Denmark in the latest WTO Trade Policy Review of the European Union, revised in December 2019.

The EU Commission’s European Semester documents for Denmark are available here: https://ec.europa.eu/info/business-economy-euro/economic-and-fiscal-policy-coordination/eu-economic-governance-monitoring-prevention-correction/european-semester/european-semester-your-country/denmark_en  while a 2015 private sector investment and taxation review by Deloitte can be found here: http://www2.deloitte.com/content/dam/Deloitte/global/Documents/Tax/dttl-tax-denmarkguide-2015.pdf .

here: http://www2.deloitte.com/content/dam/Deloitte/global/Documents/Tax/dttl-tax-denmarkguide-2015.pdf .

Denmark ranked first out of 180 in Transparency International’s 2019 Corruption Perceptions Index. It received a ranking of 4 out of 190 for “Ease of Doing Business” in the World Bank’s 2020 Doing Business Report, placing it first in Europe. In the World Economic Forum’s Global Competitiveness report for 2019, Denmark was ranked 10 out of 141 countries.

The World Intellectual Property Organization’s (WIPO) Global Innovation Index ranked Denmark 7 out of 129 in 2019.

Business Facilitation

The Danish Business Authority (DBA) is responsible for business registrations in Denmark. As a part of the Danish Business Authority, “Business in Denmark” provides information on relevant Danish rules and online registrations to foreign companies in English. The Danish business registration website is www.virk.dk . It is the main digital tool for licensing and registering companies in Denmark and offers a business registration process that is clear and complete.

Registration of sole proprietorships and partnerships is free of charge, while there is a fee for registration of other business types: DKK 670 (USD 100) if the registration is done digitally and DKK 2150 (USD 323) if the registration form is sent by e-mail or post.

The process for establishing a new business is distinct from that of registration. The Ministry of Foreign Affairs “Invest in Denmark” program provides a step-by-step guide to establishing a business at https://investindk.com/-/media/invest-in-denmark/publications/business-conditions/investindk-fact-sheet-step-by-step-web.ashx, along with other relevant resources which can be found here: www.investindk.com/Downloads . The services are free of charge and available to all investors, regardless of country of origin.

Processing time for establishing a new business varies depending on the chosen business entity. Establishing a Danish Limited Liability Company (Anpartsselskab – ApS), for example, generally takes four to six weeks for a standard application. Establishing a sole proprietorship (Enkeltmandsvirksomhed) is simpler, with processing generally taking about one week.

Those providing temporary services in Denmark must provide their company details to the Registry of Foreign Service Providers (RUT). The website (www.virk.dk ) provides English guidance on how to register a service with RUT. A digital employee’s signature, referred to as a NemID, is required for those wishing to register a foreign company in Denmark. A CPR number (a 10-digit personal identification number) and valid ID are needed to obtain a NemID. Danish citizenship is not a requirement.

In the Danish Financial Statements Act no. 1580 of 10 January 2015 section 7(2), small enterprises are defined as enterprises with fewer than 50 employees and whose annual turnover does not exceed DKK 89 million (approx. USD 13.3 million) or annual balance sheet total does not exceed DKK 44 million (approx. USD 6.6 million). Medium-sized enterprises are defined as enterprises with fewer than 250 employees and either have an annual turnover that does not exceed DKK 313 million (approx. USD 46.9 million) or annual balance sheet total does not exceed DKK 156 million (approx. USD 23.4 million).

Outward Investment

Danish companies are not restricted from investing abroad, and Danish outward investment has exceeded inward investments for more than a decade.

2. Bilateral Investment and Taxation Treaties

The United States and Denmark have shared a Friendship, Commerce, and Navigation Treaty since 1961 that, among other things, ensures National Treatment, Most-Favored Nation status, transparency of the regulatory process, and competitive equality with state-owned enterprises. Denmark has concluded investment protection agreements with the following 47 countries (including Hong Kong): Albania, Algeria, Argentina, Bangladesh, Belarus, Bosnia and Herzegovina, Bulgaria, Chile, China, Croatia, Egypt, Ethiopia, Ghana, Hungary, Indonesia, Kuwait, Laos, Latvia, Lithuania, Macedonia, Malaysia, Mexico, Mongolia, Montenegro, Morocco, Mozambique, Nicaragua, North Korea, Pakistan, Peru, the Philippines, Russia, Serbia, Slovakia, Slovenia, South Korea, Sri Lanka, Tanzania, Tunisia, Turkey, Uganda, Ukraine, Venezuela, Vietnam, and Zimbabwe. Denmark has signed investment protection agreements with Brazil, Cuba, Kyrgyzstan and Paraguay, but these currently await ratification. There has been little change to the status of these investment protection agreements since the enactment of the European Union’s Lisbon Treaty, which moved competency to the EU Commission.

The U.S.-Danish Bilateral Convention for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income has been in force since 2000. In May 2006, an amending protocol was signed; the most important aspect relates to the elimination of withholding tax on cross-border dividend payments. On November 19, 2012, the United States and Denmark signed an Intergovernmental Agreement (IGA) to implement the Foreign Account Tax Compliance Act (FATCA).

3. Legal Regime

Transparency of the Regulatory System

The judicial system is extremely well-regarded and considered fair. The legal system is independent of the legislative branch of the government and is based on a centuries-old legal tradition. It includes written and consistently applied commercial and bankruptcy laws. Secured interests in property are recognized and enforced. The World Economic Forum’s (WEF) 2019 Global Competitiveness Report, which ranks Denmark as the world’s tenth most competitive economy and fourth among EU member states, characterizes it as having among the best functioning and most transparent institutions in the world. Denmark ranks high on specific WEF indices related to macroeconomic stability (1st), labor market (3rd), business dynamism (3rd), Institutions (7th), ICT adoption (9th) and Skills (3rd).

To facilitate business administration, Denmark maintains only two “legislative days” per year—January 1st and July 1st—as the only days on which new laws and regulations affecting the business sector can come into effect. Danish laws and policies granting national treatment to foreign investments are designed to increase FDI in Denmark. Denmark consistently applies high standards to health, environment, safety, and labor laws. Danish corporate law is generally in conformity with current EU legislation. The legal, regulatory and accounting systems are relatively transparent and in accordance with international standards.

Bureaucratic procedures are stream-lined and transparent, and proposed laws and regulations are published in draft form for public comment. Public finances and debt obligations are transparent.

As of December 19, 2012, the Ministry of Taxation made all companies’ corporate tax records public, and it updates and publicizes them annually. The publication is intended to increase transparency and public scrutiny of corporate tax payments. Greenland and the Faroe Islands retain autonomy with regards to tax policy.

The government uses transparent policies and effective laws to foster competition and establish “clear rules of the game,” consistent with international norms and applicable equally to Danish and foreign entities. The Danish Competition and Consumer Authority works to make markets well-functioning so businesses compete efficiently on all parameters. The Authority is a government agency under the Danish Ministry of Industry, Business and Financial Affairs. It enforces the Danish Competition Act. The purpose of the Act and Danish consumer legislation is to promote efficient resource allocation in society, to prevent the restriction of efficient competition, to create a level playing field for enterprises and to protect consumers.

Publicly listed companies in Denmark must adhere to the Danish Financial Statements Act when preparing their annual reports. The accounting principles are International Accounting Standards (IAS), International Financial Reporting Standards (IFRS) and Danish Generally Accepted Accounting Principles (GAAP). Financial statements must be prepared annually. The Danish Financial Statements Act covers all businesses.

Private limited companies, public limited companies and corporate funds are obliged to prepare financial statements in accordance with accounting classes determined by company size:

  • Small businesses (Class B): Total assets of DKK 44 million (USD 6.7 million), net revenue of DKK 89 million (USD 13.5 million), average number of full-time employees during the financial year of 50.
  • Medium-sized enterprises (Class C medium): Total assets of DKK 156 million (USD 23.7 million), net revenue of DKK 313 million (USD 47.5 million), average number of full-time employees during the financial year of 250.
  • Large companies (Class C large): Companies that are neither small nor medium companies.

According to the Danish Financial Statements Act, personally owned businesses, personally owned general partnerships (multiple owners) and general funds are characterized as Class A and thus have no requirement to prepare financial statements unless the owner voluntarily chooses to do so.

All government draft proposed regulations are published at the portal for public hearings, “Høringsportalen” (www.hoeringsportalen.dk ), to solicit input from interested parties. After receiving feedback and possibly undergoing amendments, proposed regulations are published at the Danish Parliament’s website (www.ft.dk). Final regulations are published at www.lovtidende.dk  and www.ft.dk . All ministries and agencies are required to publish proposed regulations. Denmark has a World Bank composite score of “4.75” for the Global Indicators of Regulatory Governance, on a 0 – 5 scale. With respect to governance, the World Bank suggests the following areas for improvement:

  • Affected parties cannot request reconsideration or appeal adopted regulations to the relevant administrative agency
  • There is no existing requirement that regulations be periodically reviewed to see whether they are still needed or should be revised.

International Regulatory Considerations

Denmark adheres to the WTO Agreement on Trade-Related Investment Measures (TRIMs); no inconsistencies have been reported.

Legal System and Judicial Independence

Since the adoption of the Danish constitution in 1849, decision-making power in Denmark has been divided into the legislative, executive and judicial branches. The principle of a three-way separation of power and the independence of courts of law help ensure democracy and the legal rights of the country’s citizens. The district courts, the high courts and the Supreme Court represent the three basic levels of the Danish legal system, but the legal system also comprises a range of other institutions with special functions.

For further information please see: https://domstol.dk/om-os/english/the-danish-judicial-system/ 

https://domstol.dk/om-os/english/the-danish-judicial-system/ 

Laws and Regulations on Foreign Direct Investment

The government agency “Invest in Denmark” is part of the Danish Trade Council and is situated within the Ministry of Foreign Affairs. The agency provides detailed information to potential investors. The website for the agency is www.investindk.com . The Faroese government promotes Faroese trade and investment through its website https://www.faroeislands.fo/economy-business/ . For more information regarding investment potential in Greenland, please see Greenland Holding at www.venture.gl  or the Greenland Tourism & Business Council at https://visitgreenland.com/ .

As an EU member state, Denmark is bound by EU rules on the free movement of goods, capital, persons and certain services. Denmark welcomes foreign investment and does not distinguish between EU and other investors. There are no additional permits required of foreign investors, nor any reported biases against foreign companies from municipal or national authorities.

The Danish government plans to introduce legislation to establish a foreign investment screening mechanism, late in 2020. The screening mechanism would be in line with the EU investment screening framework encouraging member states to screen foreign investments in critical infrastructure and strategic sectors.

Competition and Anti-Trust Laws

The Danish Competition and Consumer Authority (CCA) reviews transactions for competition-related concerns. According to the Danish Competition Act, the CCA requires notification of mergers and takeovers if the aggregate annual turnover in Denmark of all undertakings involved is more than DKK 900 million and the aggregate annual turnover in Denmark of each of at least two of the undertakings concerned is more than DKK 100 million; or the aggregate annual turnover in Denmark of at least one of the undertakings involved is more than DKK 3.8 billion and the aggregate annual worldwide turnover of at least one of the other undertakings concerned is more than DKK 3.8 billion. Where a merger is a result of the acquisition of parts of one or more undertakings, the calculation of the turnover referred to shall only comprise the share of the turnover of the seller or sellers that relates to the assets acquired. The merger control provisions are contained in Part four of the Danish Competition Act  and in Executive Order on the Notification of Mergers . Turnover is calculated in a accordance with Executive Order on the calculation of turnover in the Competition Act.  

A full notification of a merger must include the information and documents specified in the full notification form; cf. Annex 1 – Information for full notification of mergers.  A simplified notification of a merger must include the information and documents specified in the simplified notification form; cf. Annex 2 – Information for simplified notification of mergers.   From 1st August 2013 merger fees are payable for merger notifications submitted to the Competition and Consumer Authority. The fee for a simplified notification amounts DKK 50,000. The fee for a full notification amounts 0,015 per cent of the aggregate annual turnover in Denmark of the undertakings involved, however maximum DKK 1,500,000. If the merger has already been notified through a simplified notification and the payment of DKK 50,000, but the Competition and Consumer Authority has required a full notification, a full notification shall be submitted together with a fee amounting 0,015 per cent of the aggregate annual turnover in Denmark of the undertakings involved, less DKK 50,000, however maximum DKK 1,500,000.

Further information concerning the notification of mergers is available in the Guidelines to the Executive Order on Notification of Mergers and on Merger Fees , and further information concerning Danish merger control in general in the Merger Guidelines – currently under revision. 

A merger or takeover is subject to approval by the CCA. Large scale mergers also require approval from EU Competition authorities.

Expropriation and Compensation

By law, private property can only be expropriated for public purposes, in a non-discriminatory manner, with reasonable compensation, and in accordance with established principles of international law. There have been no recent expropriations of significance in Denmark.

Dispute Settlement

ICSID Convention and New York Convention

There have been no major disputes over investment in Denmark in recent years. Denmark has been a member of the World Bank-based International Center for the Settlement of Investment Disputes (ICSID) since 1968. ICSID offices have also been extended to the Faroe Islands and Greenland. Denmark is a party to the 1958 (New York) Convention on the Recognition and Enforcement of Foreign Arbitral Awards, meaning local courts must enforce international arbitration awards that meet certain criteria. Subsequent Danish legislation makes international arbitration of investment disputes binding in Denmark. Denmark declared in 1976 that the New York Convention applies to the Faroe Islands and Greenland. Denmark is a party to the 1961 European Convention on International Commercial Arbitration and to the 1962 Agreement relating to the application of this Convention. Denmark adopted the UNCITRAL Model Law on International Commercial Arbitration in 1985.

Bankruptcy Regulations

Monetary judgments under the bankruptcy law are made in freely convertible Danish Kroner. The bankruptcy law addresses creditors’ claims against a bankruptcy in the following order: (1) costs and debt accrued during the treatment of the bankruptcy; (2) costs, including the court tax, relating to attempts to find a solution other than bankruptcy; (3) wage claims and holiday pay; (4) excise taxes owed to the government; and (5) all other claims. In the World Bank’s 2020 Doing Business Report, Denmark ranks 6th in “resolving insolvency.”

4. Industrial Policies

Investment Incentives

Performance incentives are available both to foreign and domestic investors. For instance, foreign and domestic investors in designated regional development areas may take advantage of certain grants and access to preferential financing. Investments in Greenland may be eligible for incentives as well. Foreign subsidiaries located in Denmark can participate in government-financed or subsidized research programs on a national-treatment basis.

Foreign Trade Zones/Free Ports/Trade Facilitation

The only free port in Denmark is the Copenhagen Free Port, operated by the Port of Copenhagen. The Port of Copenhagen and the Port of Malmo (Sweden) merged their commercial operations in 2001, including the free port activities, in a joint company named CMP. CMP is one of the largest port and terminal operators in the Nordic Region and one of the largest Northern European cruise-ship ports; it occupies a key position in the Baltic Sea Region for the distribution of cars and transit of oil. The facilities in the free port are mostly used for tax-free warehousing of imported goods, for exports, and for in-transit trade. Tax and duties are not payable until cargo leaves the Free Port. The processing of cargo and the preparation and finishing of imported automobiles for sale can freely be set up in the Free Port. Manufacturing operations can be established with permission of the customs authorities, which is granted if special reasons exist for having the facility in the Free Port area. The Copenhagen Free Port welcomes foreign companies establishing warehouse and storage facilities.

Performance and Data Localization Requirements

Performance requirements are applied only in connection with investment in hydrocarbon exploration, where concession terms normally require a fixed work program, including seismic surveys and in some cases exploratory drilling, consistent with applicable EU directives. Performance requirements are mostly designed to protect the environment, mainly through encouraging reduced use of energy and water. Several environmental and energy requirements are systematically imposed on households as well as businesses in Denmark, both foreign and domestic. For instance, Denmark was the first of the EU countries, in January 1993, to introduce a carbon dioxide (CO2) tax on business and industry. This includes certain reimbursement schemes and subsidy measures to reduce the costs for businesses, thereby safeguarding competitiveness.

Performance requirements are governed by Danish legislation and EU regulations. Potential violations of the rules governing this area are punishable by fines or imprisonment.

Performance requirements are applied uniformly to domestic and foreign investors.

The Danish government does not follow “forced localization” policies, nor does it require foreign IT providers to turn over source code and/or provide access to surveillance. The Danish Data Protection Agency, a government agency, the Ministry of Justice and the Ministry for Culture are the entities involved with data storage.

5. Protection of Property Rights

Real Property

Property rights in Denmark are well protected by law and in practice. Real estate is chiefly financed through the well-established Danish mortgage bond credit system, the security of which compares to that of government bonds. To comply with the covered bond definition in the EU Capital Requirements Directive (CRD), the Danish mortgage banking regulation was amended effective July 1, 2007. With the amended Danish mortgage banking regulation, commercial banks now have the same opportunities as mortgage banks and ship-financing institutions to issue covered bonds. Only issuers that have been granted a license from the Danish Financial Supervisory Authority (FSA) are able to issue Danish covered bonds.

Secured interests in property are recognized and enforced in Denmark. All mortgage credits in real estate are recorded in local public registers of mortgages. Except for interests in cars and commercial ships, which are also publicly recorded, other property interests are generally unrecorded. The local public registers are a reliable system of recording security interests. Denmark is ranked 11th in the World Bank’s Doing Business 2020 Report for its ease of “registering property.” Denmark ranked 13th out of 129 countries in the Property Rights Alliance’s International Property Rights Index 2019, and 7th in its region.

Intellectual Property Rights

Intellectual property rights (IPR) in Denmark are well protected and enforced. Denmark has ratified and adheres to key international conventions and treaties concerning protection of IP rights, including the World Trade Organization (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) and a number of treaties administered by the World Intellectual Property Organization (WIPO), including the Berne Convention, the Paris Convention, the Patent Cooperation Treaty (PCT), the WIPO Copyright Treaty, and the WIPO Performances and Phonograms Treaty. In 2019, the Property Rights Alliance ranked Denmark 13th out of 131 countries overall in their International Property Rights Index and 7th in Western Europe.

For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ .

A list of attorneys in Denmark known to accept foreign clients can be found at https://go.usa.gov/xmkME . This list of attorneys and law firms is provided by the American Embassy as a convenience to U.S. citizens. It is not intended to be a comprehensive list of attorneys in Denmark, and the absence of an attorney from the list is in no way a reflection on competence. A complete list of attorneys in Denmark, Greenland and the Faeroe Islands may be found at the Danish Bar Association web site: www.advokatnoeglen.dk.

6. Financial Sector

Capital Markets and Portfolio Investment

Denmark has fully liberalized foreign exchange flows, including those for direct and portfolio investment purposes. Credit is allocated on market terms and freely available. Denmark adheres to its IMF Article VIII obligations. The Danish banking system is under the regulatory oversight of the Financial Supervisory Authority. Differentiated voting rights – A and B stocks – are used to some extent, and several Danish companies are controlled by foundations, which can restrict potential hostile takeovers, including foreign takeovers.

The Danish stock market functions efficiently. In 2005, the Copenhagen Stock Exchange became part of the integrated Nordic and Baltic marketplace, OMX Exchanges, which is headquartered in Stockholm. Besides Stockholm and Copenhagen, OMX also includes the stock exchanges in Helsinki, Tallinn, Riga and Vilnius. In order to increase the access to capital for primarily small companies, the OMX in December 2005 opened a Nordic alternative marketplace – “First North” – in Denmark. In February 2008, the exchanges were acquired by the NASDAQ-OMX Group. In the World Economic Forum 2019 report, Denmark ranks 11th out of 141 on the metric “Financial System”.

The Danish stock market is divided into four different branches/indexes. The C25 index contains the 25 most valuable companies in Denmark. Other large companies with a market value exceeding USD 1.1 billion (EUR 1 billion) are in the group of “Large Cap,” companies with a market value between USD 170 million (EU 150 million) and USD 1.1 billion belong to the “Mid Cap” segment, while companies with a market value smaller than USD 170 million belong to “Small Cap” group.

Money and Banking System

The major Danish banks are rated by international agencies, and their creditworthiness is rated as high by international standards. The European Central Bank and the Danish National Bank reported that Denmark’s major banks have passed stress tests by considerable margins.

Denmark’s banking sector is relatively large; based on the ratio of consolidated banking assets to GDP, the sector is three times bigger than the national economy. Before 2020, the total of Danish shares valued DKK 3,190 billion, (USD 778 billion) and were owned 51.3 percent by foreign owners and 48.7 percent by Danish owners, including 12.5 percent held by households and 5,4 percent by the government. The assets of the three largest Danish banks – Danske Bank, Nordea Bank Danmark, and Jyske Bank – constitute approximately 75 percent of the total assets in the Danish banking sector.

Denmark’s biggest systemically important bank, Danske Bank, with assets that are roughly 1 1/2 times Denmark’s total GDP, is under criminal investigation in several jurisdictions amid accusations an Estonian branch became a European hub for money launderers from Russia. The bank has admitted that a significant part of about EUR 200 billion (USD 230 billion) that flowed through the non-resident portfolio of its tiny Estonian branch between 2007 and 2015 could have illicit origins. The scandal has led to significant tightening of financial regulation, including increasing penalties by up to 700 percent and increased funding for the Financial Supervisory Authority.

The primary goal of the Central Bank (Nationalbanken) is to keep the peg of the Danish currency to the Euro – with allowed fluctuations of 2.25 percent. It also functions as the general lender to Danish commercial banks and controls the money supply in the economy.

As occurred in many countries, Danish banks experienced significant turbulence in 2008 – 2009. The Danish Parliament subsequently passed a series of measures to establish a “safety net” program, provide government lending to financial institutions in need of capital to uphold their solvency requirements, and ensure the orderly winding down of failed banks. The Parliament passed an additional measure, the fourth Bank Package, in August 2011, which sought to identify systemically important financial institutions, ensure the liquidity of banks which assume control of a troubled bank, support banks acquiring troubled banks by allowing them to write off obligations of the troubled bank to the government, and change the funding mechanism for the sector-funded guarantee fund to a premiums-based, pay-as-you-go system. According to the Danish Government, Bank Package 4 provides mechanisms for a sector solution to troubled banks without senior debt holder losses but does not supersede earlier legislation. As such, senior debt holder losses are still a possibility in the event of a bank failure.

On October 10, 2013, the Danish Minister for Business and Growth concluded a political agreement with broad political support which, based on the most recent financial statements, identified specific financial institutions as “systemically important” (SIFI). The SIFI in Denmark at the end of 2019 were Danske Bank A/S, Nykredit Realkredit A/S, Jyske Bank A/S, Nordea Kredit Realkredit A/S, Sydbank A/S, Spar Nord Bank A/S and DLR Kredit A/S. These were identified based on three quantitative measures: 1) a balance sheet to GDP ratio above 6.5 percent; 2) market share of lending in Denmark above 5 percent; or 3) market share of deposits in Denmark above 3 percent. If an institution is above the requirement of any one of the three measures, it will be considered systemically important and must adhere to the stricter requirements on capitalization, liquidity and resolution. The Faroese SIFI are P/F BankNordik, Betri Banki P/F and Norðoya Sparikassi, while Grønlandsbanken is the only SIFI in Greenland.

Experts expect a revision of the Danish system of troubled financial institution resolution mechanisms in connection with a decision to join the EU Banking Union. The national payment system, “Nets” was sold to a consortium consisting of Advent International Corp., Bain Capital LLC, and Danish pension fund ATP in March 2014 for DKK 17 billion (USD 2.58 billion). Nets went public with an IPO late 2016.

Foreign Exchange and Remittances

Foreign Exchange

Exchange rate conversions throughout this document are based on the 2019 average exchange rate where Danish Kroner (DKK) 6.6703 = 1 USD (USD)

There are no restrictions on converting or transferring funds associated with an investment into or out of Denmark. Policies in place are intended to facilitate the free flow of capital and to support the flow of resources in the product and services markets. Foreign investors can obtain credit in the local market at normal market terms, and a wide range of credit instruments is available.

Denmark has not adopted the Euro currency. The country meets the EU’s economic convergence criteria for membership and can join if it wishes to do so. Denmark conducts a fixed exchange rate policy with the Danish Krone linked closely to the Euro within the framework of ERM II. The Danish Krone (DKK; plural: Kroner, in English, “the Crown”) has a fluctuation band of +/- 2.25 percent of the central rate of DKK 746.038 per 100 Euro. The Danish Government supports inclusion in a European Banking Union, as long as it can be harmonized with the Danish Euro opt-out and there is a guarantee that the Danish mortgage finance system will be allowed to continue in its present form.

The Danish political reservation concerning Euro participation can only be abolished by national referendum, and Danish voters have twice (in 1992 and 2000) voted it down. The government has stated that in principle it supports adopting the Euro, but no referendum is expected for the foreseeable future. Regular polling on this issue shows a majority of public opinion remains in favor of keeping the Krone. According to the Stability and Growth Pact, a Euro country’s debt to GDP ratio cannot exceed 60 percent and budget deficit to GDP ratio cannot exceed 3 percent. Denmark’s debt to GDP ratio was 33.2 percent by the end of 2019, down from 33.9 percent in 2018. Denmark ran a budget surplus of 3.7 percent in 2019 and of 0.7 percent in 2018, well within Stability & Growth Pact parameters.

Sovereign Wealth Funds

Denmark maintains no sovereign wealth funds.

7. State-Owned Enterprises

Denmark is party to the Government Procurement Agreement (GPA) within the framework of the World Trade Organization (WTO). State owned entities (SOEs) hold dominant positions in rail, energy, utility and broadcast media in Denmark. Large scale public procurement must go through public tender in accordance with EU legislation. Competition from SOEs is not considered a barrier to foreign investment in Denmark. As an OECD member, Denmark promotes and upholds the OECD Corporate Governance Principals and subsidiary SOE Guidelines.

Privatization Program

Denmark has no current plans to privatize its SOEs.

8. Responsible Business Conduct

As an OECD member, Denmark promotes, through the Danish Business Authority, the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights. Denmark’s National Contact Point can be reached at: https://mneguidelines.oecd.org/National-Contact-Points-Website-Contact-Details.pdf 

From January 1, 2016, the largest companies, cf. the Danish Financial Statements Act section 99 a, must account for their responsible business conduct, including with respect to human rights and to reducing the climate impact of the company’s activities. At the same time, cf. section 99b target figures for the gender composition of the Board of Directors, as well as policies for increasing the proportion of the underrepresented gender at the company’s management levels, must be reported. From January 2018, the mandate also applies to medium sized businesses (exempting small- and micro- companies).

The Danish Business Authority published a National Action Plan to advance Corporate Social Responsibility (CSR) and Responsible Business Conduct (RBC) in Denmark in 2012, covering the 2012 – 2015 period. It contained 42 initiatives focusing on business-driven CSR. In October 2019, the government launched a public hearing process to “to investigate how reporting can be made more comparable and create more transparency for the benefit of society and the companies themselves. The purpose is to increase transparency about whether companies are living up to their corporate social responsibility, that sustainable companies have better access to investment and that companies experience a positive value from their CSR reporting.” The government expects the process to result in recommendations by fall 2020.The government hosts https://www.csrkompasset.dk/ , (English language version https://www.csrcompass.com/ ) a free online tool that can help companies implement responsible supply chain management. The tool is targeted at small and medium-sized production, trade and service companies. The structure of the CSR Compass and its advice and guidelines are in line with national and international trends and best practice standards, including the UN Global Compact, OECD’s guidelines for multinational companies, Business for Social Responsibility (BSR), Business Social Compliance Initiative (BSCI), the Danish Ethical Trading Initiative (DIEH) and the Danish Council on Corporate Social Responsibility’s guidelines for responsible supply chain management.

9. Corruption

Denmark is perceived as the least corrupt country in the world according to the 2019 Corruption Perceptions Index by Transparency International, which has local representation in Denmark. The Ministry of Justice is responsible for combating corruption, which is covered under the Danish Penal Code. Penalties for violations range from fines to imprisonment of up to four years for a private individual’s involvement and up to six years for a public employee’s involvement. Since 1998, Danish businesses cannot claim a tax deduction for the cost of bribes paid to officials abroad.

Denmark is a signatory to the OECD Convention on Combating Bribery, the UN Anticorruption Convention, and a participating member of the OECD Working Group on Bribery. In the Working Group’s 2015 Phase 3 follow-up report on Denmark, the Working Group concluded “that Denmark has partially implemented most of its Phase 3 recommendations. However, concerns remain over Denmark’s enforcement of the foreign bribery offence.”

Resources to Report Corruption

Resources to which corruption may be reported:

The Danish State Prosecutor for Serious Economic and International Crime,
Kampmannsgade 1
1604 København V.
Phone: +45 72 68 90 00
Fax: +45 45 15 01 19
Email: saoek@ankl.dk

Ministry of Foreign Affairs of Denmark’s development assistance agency DANIDA to report any knowledge of corruption within DANIDA projects or among staff or DANIDA partners.

http://um.dk/en/danida-en/about-danida/Danida-transparency/anti-corruption/report-corruption/ 

“Watchdog” organization:

Transparency International Danmark
c/o CBS
Dalgas Have 15, 2. sal, lokale 2c008
2000 Frederiksberg

The Secretariat is manned by Julian Bøje Ekberg and Rosa Bisgaard who can be reached at sekretariatet@transparency.dk

Contact at Embassy Copenhagen responsible for combating corruption:

Aaron Daviet
Political Officer
U.S. Department of State
Dag Hammarskjolds Alle 24, 2100 Copenhagen, Denmark
+45 3341 7100
CopenhagenICS@state.gov

10. Political and Security Environment

Denmark is a politically stable country. Incidents involving politically motivated damage to projects or installations are very rare. This is reflected in the EIU’s “AAA” rating of Denmark in terms of political risk.

11. Labor Policies and Practices

The Danish labor force is generally well-educated and efficient. English language skills are good, and English is considered a natural second language among a very high proportion of Danes. The labor market is stable and flexible. U.S. companies operating in Denmark have indicated that Danish rules on the hiring and firing of employees generally enable employers to adjust the workforce quickly to changing market conditions.

The Danish labor force amounted to approximately 3 million people at the end of 2019. Of these, 891,000 (Q4, 2019) are employed in the public sector. Denmark’s OECD-harmonized unemployment rate was 4.8 percent in March 2020, relative to the EU-28 6.2 percent and OECD 5.56 percent averages.

The public sector in Denmark is large and accounts for about 25 percent of the employment at full-time equivalence. The labor force participation rate for women is among the highest in the world. In 2019, 76.1 percent of working-age women participated in the labor force and the employment rate was 72.0 percent. The male labor force participation rate and employment rate were 82.0 percent and 78.0 percent, respectively.

The Danish labor force is highly organized, with approximately 75 percent belonging to a union. Labor disputes and strikes occur only sporadically. In general, private sector labor/ management relations are excellent, based on dialogue and consensus rather than confrontation. Working conditions are laid down in a complex system of legislation and organizational agreements, where most aspects of wage and working conditions are determined through collective bargaining rather than legislation.

The contractual workweek for most wage earners is 37 and 1/2 hours. By law, employees are entitled to five weeks of paid annual leave. In practice, most of the labor force has the right to six weeks of paid annual leave, gained through other labor market agreements.

Denmark has well-functioning unemployment insurance and sick-pay schemes, self-financed or financed by the state. Maternity leave in Denmark is 52 weeks, 18 of which are reserved for the mother (4 weeks prior to birth, 14 after) and two for the father, while the remainder may be divided between the parents as they see fit. Employers are obliged to pay salary for at least 14 weeks, while the government supports the remainder of the leave. Forthcoming EU legislation will reserve 8 of the weeks’ leave to fathers. The legislation is expected to be enacted in member states before 2022.

Danish wages are high by international standards and have prompted the use of capital-intensive technologies in many sectors. Some investors report that the high average wage level is detrimental to Danish competitiveness. Although high wages and generous benefits including time off reduce competitiveness, high productivity and low direct costs to employers can result in per employee costs that are lower than in other industrialized countries. Nominal wages increased by 2.2 percent from Q4 2018 to Q4 2019, while inflation was 0.8 percent in 2019, unchanged from 2018, enhancing real wage increases. Nominal wages were forecast to increase significantly annually towards 2022, but the current situation makes forecasts highly uncertain.

Generally, personal income tax rates in Denmark are among the highest in the world. However, foreign employees making more than an amount specified annually by the Danish Immigration Service and certain researchers may choose to be subject to a 27 percent income tax rate, plus a labor market contribution amounting to 32.84 percent income tax in the first seven years of working in Denmark. Certain conditions must be fulfilled for key employees to be eligible for the 27 percent tax scheme: for example, since January 1, 2020, wages must total at least DKK 68,100 (USD 10,2000) per month before the deduction of labor market contributions, and after Danish labor market supplementary pension contributions. There are also limits based on an individual’s previous work history in the Danish labor market. Compared with the general Danish progressive income tax system, this is an attractive incentive. Further information can be obtained from Danish embassies or from the Danish Immigration Service (www.nyidanmark.dk ).

Danish work permits are not required for citizens of EU countries. U.S. companies have reported that in general, work permits for foreign managerial staff may be readily obtained. However, permits for non-managerial workers from countries outside the EU and the Nordic countries are granted only if substantial professional or labor-related conditions warrant. Special rules detailed by the Danish Immigration Service in its “Positive List Scheme” apply to certain professional fields experiencing a shortage of qualified manpower. The list is updated twice annually. Foreigners who have been hired in the designated fields will be immediately eligible for residence and work permits. The minimum educational level required for a position on the Positive List is a Professional Bachelor’s degree, e.g. pedagogue. In some cases, a Danish authorization must be obtained. This is explicitly stated on the Positive List. (E.g., non-Danish trained doctors must be authorized by the Danish Patient Safety Authority.) Professions covered by the Positive List Scheme included engineers, scientists, doctors, nurses, IT specialists, marine biologists, lawyers, accountants and a wide range of other master’s or bachelor’s degree positions. As of 2020, the Pay Limit Scheme extends to positions with an annual pay of no less than DKK 436,000 (USD 65,370), regardless of the field or specific nature of the job. Persons who have been offered a highly paid job have particularly easy access to the Danish labor market through the Pay Limit Scheme. The length of work and residence permits granted under the Pay Limit Scheme depends on the length of the employment contract in Denmark. For permanent employment contracts, work permits are granted for an initial period of 4 years. After this period the permit can be extended if the same job is held. There are several other schemes meant to make it easier for certified companies to bring employees with special skills or qualifications to Denmark. These schemes vary in duration and requirements.

Danish immigration law also allows issuance of residency permits of up to 18 months duration based on an individual evaluation, using a point system based on education, language skills and adaptability.

Denmark has ratified all eight ILO Core Conventions and been an ILO member since 1919.

12. U.S. International Development Finance Corporation (DFC) and Other Investment Insurance Programs

As a high-income country, Denmark does not generally qualify for DFC support for projects. However, the European Energy Security and Diversification Act of 2019 permits DFC support for qualified European energy projects, as well as projects designed to preempt or counter efforts by a strategic competitor of the United States to secure significant political or economic leverage or acquire national security-sensitive technologies or infrastructure in a country that is an ally or partner of the United States.

DFC programs may also be used by at least 95 percent U.S.-owned subsidiaries in Denmark to support their investments in qualifying countries. Denmark is a member of the World Bank Group’s Multilateral Investment Guarantee Agency (MIGA).

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical source* USG or international statistical source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount  
Host Country Gross Domestic Product (GDP) ($M USD) 2019 $337 billion 2018 $355 billion www.worldbank.org/en/country 
Foreign Direct Investment Host Country Statistical source* USG or international statistical source USG or international Source of data:
BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) 2019 $16,410 million 2018 $13,205 million BEA data available at
https://www.bea.gov/international/
direct-investment-and-multinational-
enterprises-comprehensive-data
 
Host country’s FDI in the United States ($M USD, stock positions) 2018 $25,030 million 2017 $19,150 million BEA data available at
https://www.bea.gov/international/
direct-investment-and-multinational-
enterprises-comprehensive-data
 
Total inbound stock of FDI as % host GDP N/A N/A 2018 32.6% UNCTAD data available at

https://unctad.org/en/Pages/DIAE/
World%20Investment%20Report/
Country-Fact-Sheets.aspx
 
 

Table 3: Sources and Destination of FDI
Direct Investment from/in Counterpart Economy Data
From Top Five Sources/To Top Five Destinations (US Dollars, Millions)
Inward Direct Investment Outward Direct Investment
Total Inward 139,745 100% Total Outward 222,159 100%
Netherlands #1 23,130 16.6% Sweden #1 31,813 14.3%
Sweden #2 18,675 13.4% UK #2 28,050 12.6%
UK #3 13,839 9.9% Germany #3 24,043 10.8%
Luxembourgh #4 12,808 9.2% Switzerland #4 19,612 8.8%
Norway #5 12,335 8.8% United States #5 17,619 7.9%
“0” reflects amounts rounded to +/- USD 500,000.
Table 4: Sources of Portfolio Investment  
Portfolio Investment Assets 
Top Five Partners (Millions, current US Dollars) June 2019 
Total  Equity Securities  Total Debt Securities 
All Countries    532,250  100%    All Countries    318,853     100%    All Countries    213,397     100%   
United States  164,386  30.9%    United States    127,655     40%    Germany  50,529     23.7%   
Germany  61,152  11.5%    Luxembourg  37,325     11.7%    United States    36,731  17.2%   
Luxembourg  40,526  7.6%    Ireland    23,004     7.2%    Sweden    19,097  8.9%   
Ireland  30,292  5.7%    United Kingdom  20,143     6.3%    France  11,079  5.2%   
United Kingdom    29,076  5.5%    Japan  11,535     3.6%    Netherlands    9,585  4.5%   

14. Contact for More Information

Aaron Feit
Economic Officer
U.S. Embassy Denmark

Dag Hammarskjolds Alle 24,
2100 Copenhagen, Denmark
Email: CopenhagenICS@state.gov

 

Other Areas in the Kingdom of Denmark

GREENLAND

Greenland is a self-governing region within the Kingdom of Denmark, and geographically a part of the North American continent. Along with Denmark, Greenland was an EU member from 1973. In 1985, however, Greenland left the union and has not been a member since. The Greenlandic government is actively working to attract investments to Greenland to diversify the economy and integrate it into the world economy.

Two-thirds of Greenland lies within the Arctic Circle, and its northern tip is less than 500 miles from the North Pole. Its land area is over 50 times that of Denmark but has the lowest population density in the world, with approximately 56,000 inhabitants (or 1/100th the population of mainland Denmark). Greenland can be reached by air from Denmark or Iceland. There are currently no direct commercial flights to or from the United States. Transportation infrastructure in Greenland is focused on air and sea, due to the climate and geography. Greenland has no railroads or roads to connect towns and settlements, and passengers and goods are transported between regions by sea or air only.

Greenland’s GDP is estimated at DKK 19.6 billion (USD 2.94 billion) in 2019. A large proportion of the Greenlandic labor market consists of public jobs in municipalities or with the Government of Greenland (GoG) or companies wholly-owned by the GoG. Denmark’s annual block grant equals roughly 20 percent of GDP.

Fishing is Greenland’s single most important commercial industry, and is dominated by two companies, the GoG-owned Royal Greenland and the privately owned Polar Seafood. The government is promoting development of tourism and mineral extractives sector.

Greenland’s status within the Kingdom of Denmark is outlined in the Self Rule Act (SRA) of 2009, which details the Greenlandic government’s right to assume a number of additional responsibilities from the Danish government, including the administration of justice, business and labor, aviation, immigration and border control, as well as financial regulation and supervision. Greenland had already acquired control over taxation, fisheries, internal labor negotiations, natural resources, and oversight of offshore labor, environment, and safety regulations. Denmark continues to have control over the Realm’s foreign affairs, security, and defense policy, in consultation with Greenland and the Faroe Islands. Denmark also retains authority over border control issues, including immigration into Greenland. Greenland is not a part of the EU or Schengen Area, and special rules apply for foreigners arriving from a Schengen country. Denmark provides Greenland with an annual block grant of DKK 3.8 billion — roughly USD 605 million — that accounts for about 20 percent of Greenland’s GDP and half of the Greenlandic government’s revenue.

The Greenlandic government seeks to increase economic growth and government revenues by promoting greater development of fisheries, extractive resources, and tourism, and by trimming the public sector through privatization of enterprises currently owned by the government. Key initiatives include improving access to financing for new businesses and enhancing Greenland’s corporate tax competitiveness. Rising prices for fish and shellfish, the predominant Greenlandic exports, have generated strong earnings for large parts of the fisheries sector in recent years. Catches of prawn, by far the most important single species, have increased following years of declines.

Capital city Nuuk and Ilulissat, Greenland’s primary tourist destination, have seen extensive construction activity in recent years and the planned expansion of their respective airports will lead to further growth and facilitate expansion of tourism. Other efforts to develop tourism include increases in accommodation (hotel rooms), a reduction in passenger tax for cruise ships, and a focus on promoting foreign language education to create a more multilingual workforce. The government is calling for stricter safety requirements for navigation in Greenlandic waters.

In the mineral extractives sector, two smaller mines (ruby and anorthosite) are in production. One company was granted an exploitation license to restart a gold mine in southern Greenland. Two other companies applied for permission to extract rare earth elements in southern Greenland. The resources in both of these projects are globally significant, and each would rank in the top five worldwide if they were developed. One of the projects also contains uranium. The government endorses maintaining the previous government’s relaxation on a ban on uranium mining, and states that all IAEA and EURATOM standards must be met. The issue of uranium mining in Greenland remains sensitive, however, and further public consultation processes would be required.

Greenlandic Economic Outlook

Greenland was enjoying an economic upswing with GDP growth projected at 3.8 percent for 2020 prior to the COVID-19 pandemic. The Greenlandic economy has exhibited strong growth in recent years, mainly driven by large catches and high prices of fish and shellfish, but also supported by consumption, investments and recently the resource extraction industry. The Greenlandic Economic Council (GEC) – an independent advisory council – estimated that real GDP grew on average by 2.4 percent annually from 2014 to 2018. The Council estimated that GDP grew by 2.2 percent in 2019 and was expected to accelerate to 3.8 percent in 2020. The strong economy led to labor shortages, both geographically and by sector, increasing the risk that the economy could overheat, especially in connection with large construction projects. The Council estimated unemployment declined from about 10 percent in 2014 to below 4 percent in 2019, while the Bank of Greenland calculated the ratio of job-ready job-seekers to only around 3 percent of the total workforce, but with major regional variations and low geographic mobility. Currently, 70 percent of all available jobs are in the capital Nuuk, and 90 percent of all available jobs are in just three locations: Nuuk, Sisimiut, and Pituffik (Thule Air Base).

The long-term health impact of the COVID-19 pandemic is currently unknown, but Greenland has had a very limited number of infected citizens. Its lock-down initiatives – which included the suspension of commercial flights into Greenland beginning March 20 – will have a detrimental economic impact, with tourism and exports expected to decline. Global prices for shrimp had declined by up to 30 percent from the end of 2019 to early May 2020, and the Bank of Greenland had previously predicted that a global price drop in seafood values of 20 percent would reduce annual government revenue by $34 million (DKK 232 million). The GEC estimated that the lock-down initiatives alone, in 2020, will lead to a contraction of GDP for the whole year between 3 percent and 7.4 percent depending on the severity and persistence of the pandemic. This does not account for the decline in global seafood prices, other global impacts, changed tourism patterns or secondary effects. Growth and employment are expected to decline.

The public budget has exhibited surpluses since 2015. The Greenlandic economy continues to be buttressed by a yearly block grant from the Danish Government which amounted to about half of the Greenlandic government budget and 20 percent of Greenland’s (estimated) DKK 19.6 billion (USD 2.94 billion) GDP in 2019. The Greenlandic economy is characterized by the unusual condition of having higher public than private consumption. Consequently, government consumption is of proportionally greater importance to economic growth. For instance, public consumption in Greenland was 43 percent of GDP in 2016, compared to 25 percent in Denmark.

The Greenland Parliament (called “Inatsisartut”) and the Government of Greenland (“Naalakkersuisut”) adopted a Budget Law in 2016 which mandates that the budget is not in deficit over a four-year period. The 2020–2023 budget barely upheld the Budget Law requirement. Recent years’ budget surpluses have been used to consolidate the public coffers and the municipalities, the government and government-owned enterprises have had a gross debt of approximately 19.5 percent of GDP in 2018, down from 22 percent of GDP by the end of 2017.

The GEC reported in 2017 that “projections for the public finances show a major sustainability problem.” The Council has reaffirmed that finding in subsequent reports. The GEC has warned of the effects of increasing public expenditures as larger portions of the population age into retirement, resulting in fewer wage earners in the labor market. The GEC has also noted that a realistic plan to close the gap between expected expenditures and revenues could require the Government to cut social spending. For Greenland to become a more self-sufficient economy, the GEC asserted that the extractive and tourism sectors would need further development. The GEC noted that the Greenland has not sufficiently addressed its sustainability challenges and estimated that the public budget will need to be reinforced by DKK 1 billion annually by 2040 to accommodate the increasing number of elders in the Greenlandic society. Activity in natural resource exploration has increased only gradually since the global industry downturn in 2015. The two mines currently in operation, however, have generated optimism that more small-scale mining operations could follow.

Greenland exported DKK 5.208 billion (USD 780 million) in 2019, which is the first year that Greenland had a trade surplus with the rest of the world, though it is partly due to a change in how the data is calculated. Greenland imported DKK 4.984 billion (USD 746 million) worth of goods in 2019. Some 93 percent of Greenlandic exports, measured in local currency, were fish products, with the remainder being mainly raw materials and machinery. The vast majority of Greenlandic exports and imports pass through Denmark to and from the rest of the world but are reported as trade between the two. Greenlandic exports are dominated by seafood, with Royal Greenland and Polar Seafood being the two main exporters. Royal Greenland’s largest country market is China, and one-third of its revenues are generated in Asia, half in Europe, and 10 percent in North America. Polar Seafood has its main markets in Scandinavia, China and Japan. Similarly Greenland imports goods from all over the world, primarily through Denmark and to a lesser extent via Iceland.

Due to its vast geographic expanse, Greenland’s physical and telecommunications infrastructure is less interconnected and developed than in other parts of the Kingdom of Denmark. Greenland’s government-owned telecommunications company predominantly uses Ericsson equipment and announced that it will continue to do so for future upgrades, including 5G.

Establishing a Company in Greenland

In order to conduct business in Greenland, Danish business (CVR) registration is required. This must be performed digitally on: https://indberet.virk.dk/. Furthermore, companies planning to have employees must register as an employer with the employer register Sulinal: https://sulinal.nanoq.gl. In July 2018, an updated Companies Act entered into force which opened up new ways of establishing a company, e.g., with reduced share capital requirements with the possibility of partial payment of the share capital, the possibility of establishing entrepreneur companies with a share capital of DKK 1 (USD 0.15), etc. Foreign companies may start their businesses in Greenland either through a subsidiary (both ApS and A/S type companies) or via a registered branch office.

ApS and A/S

An ApS (private limited company) or A/S (public limited company) is a separate legal entity with limited liability for its shareholders. The main difference between a private (ApS) and a public (A/S) limited company is that the shares of a private limited company cannot be issued publicly. An ApS can therefore not be subject to listing, or otherwise issue shares to the public to secure more capital. In addition, there are a few differences in relation to capital and management requirements. Under the Companies Act, the minimum share capital requirement for an ApS is DKK 40,000 (USD 5,800). The minimum share capital requirement for an A/S is DKK 400,000 (USD 58,000). However, under the Danish Companies Act, it is possible to incorporate an A/S and only pay 25 percent of this amount (i.e., DKK 100,000 or USD 15,000), leaving the company with a receivable on the shareholders for the outstanding amount (i.e., DKK 300,000 or USD 44,000). A founder of a company may be both foreign or Greenlandic individuals or corporate entities. Both types of company can be registered via the Danish Business Authority’s online system. No registration fees are required.

Registered Branch Office

A foreign company may normally establish a registered branch office in Greenland instead of establishing a Greenlandic company. A branch of a foreign company may be created through application with the Danish Business Authority. Companies within the EU and European Economic Area (EEA) may set up a branch in Greenland and Denmark without further approval from the Danish Business Authority. However, companies outside of the EU/EEA must obtain approval before registering.

A foreign company can do business in Greenland in a consecutive or non-consecutive 90-day period over 12 months without being required to register as a business.

Greenland Tax

The Greenlandic tax system is based on a flat-rate taxation of business profit for both resident and non-resident corporations. The Greenlandic tax system is based on a net income principle, where the taxable income is calculated as a total net amount after deductions. The net income principle means that all income is treated equally, regardless of whether the income comes from employment, self-employment, investment income or pensions, etc. The rules of taxation of businesses can be complicated, thus it is recommended to retain guidance from the Greenlandic Tax Authorities or professional consultants.

Greenland has double taxation agreements with Denmark, the Faroe Islands, Iceland, and Norway. Greenland has signed a Foreign Accounts Tax Compliance Act (FATCA) agreement with the United States.

The corporate income tax rate is 25 percent (down from 30 percent in 2019); an additional surcharge of six percent of the tax payable brings the total corporate tax rate to 26.5 percent.

Taxation of royalty payments is 30 percent. Greenland has no value added tax (VAT) system, property tax, sales tax, or similar taxes. There are, however, some payable duties, such as taxes for cruise liners, ports duties, etc. There are four types of depreciation in the Greenlandic tax law. Buildings can be depreciated five percent annually. Ships, planes, and hydrocarbon prospecting can be depreciated 10 percent annually. Mineral licenses can be depreciated 25 percent each year for four years, and operating equipment can be depreciated at a rate of 30 percent annually. Assets with a cost of less than DKK 100,000 (USD 15,170) may be depreciated in the year of acquisition.

Greenlandic permanent establishments of foreign companies are taxed under the same rules and rates as Greenlandic resident companies. There is no branch profits remittance tax or other similar tax on branch profits. If a foreign company has more than one location or permanent establishment in Greenland, these are treated as separate taxable entities with no possibility of consolidation.

Greenland Labor

The Greenlandic labor force was 27,231 persons in 2018. Average unemployment for 2018 was 5.8 percent – higher than the OECD average of 5.3 percent, though a decrease from 10.3 percent in 2014. Unemployment has decreased significantly since, especially in Nuuk, however, more than a third of 16 to 25-year-olds are neither employed nor in school. According to Statistics Greenland, 47.4 percent of the Greenlandic workforce in 2018 have an education beyond primary school. Of the workforce, 26.8 percent have a vocational education, while 14.6 percent have a tertiary education. For the non-employed part of the workforce, however, 84 percent have no education beyond primary school.

In December 2012, Greenland passed legislation known as the “Large Scale Act,” which allows companies to use foreign labor during the construction phase of development when project costs exceed DKK 5 billion (USD 759 million) and workforce requirements exceed the local labor supply. The Act is intended for potential mining or infrastructure projects in Greenland. The Act lays out the framework for politically negotiated Impact Benefit Agreements (IBA) for the Government of Greenland and the employer to agree on the exact conditions of employment for foreign labor. The scale of Greenlandic labor utilized will be negotiated for each project and will vary depending on local capacity and the negotiated agreement for each project.

Foreign workers enjoy the same legal protections as Greenlandic workers, including the same USD 13.85 per hour minimum wage and retention of the right to strike. However, employers may deduct up to USD 180 from foreign workers’ pay each week to cover the cost of company-provided lodging, food, and clothing.

Investment in Natural Resources

Greenland possesses sizable discovered and undiscovered mineral resource potential. Some deposits are among the largest in the world. The country’s resources include iron and ferro-alloys (iron, nickel, molybdenum, tungsten and others), base metals (copper, zinc and lead), specialty metals (rare earth elements, uranium, niobium, tantalum and others), precious metals (platinum, gold and others) and gemstones (diamonds, rubies, and sapphires). Mining industry experts anticipate that Greenland’s retreating ice will make the island’s rich stores of raw materials more easily accessible, but exploration and exploitation projects will still face higher costs because of remote locations, lack of infrastructure, harsh climate, and distance to world markets. .

In October 2013, the Greenlandic Parliament abolished the country’s 25-year “zero-tolerance” policy towards uranium and other radioactive minerals, lifting the ban on mining where uranium is present. This decision will facilitate the exploitation of certain rare earth mineral deposits, which are often found co-mingled with radioactive minerals in Greenland.

With the 2009 SRA, Greenland gained rights to its mineral and hydrocarbon resources, and it acquired the regulatory authority over these on January 1, 2010. The SRA also created a revenue mechanism: if exploitation of Greenland’s natural resources becomes commercially viable, Greenland will keep the first DKK 75 million (USD 11.38 million) in annual revenues derived from these resources, with further revenues split equally between the Danish and Greenlandic Governments. Denmark’s share will be transferred by deducting the equivalent amount from the annual block grant to Greenland of DKK 3.8 billion (approximately USD 605 million). Once the full value of the block grant is reached, any additional revenue will be subject to negotiations between the Danish and Greenlandic governments. The Greenlandic Government welcomes this scenario but remains aware of the potential adverse impacts that a rapid influx of wealth from these activities could have on Greenlandic society.

Most of Greenland’s identified rare earth deposits are licensed by the Mineral License and Safety Authority and some have reached advanced stages of exploration. In 2019, Greenland rose globally to 41st out of 76 jurisdictions n the annual mining survey from Canadian Fraser Institute. Despite being the lowest ranked European jurisdiction, Greenland increased its rankings from 69th (of 83) in 2018 in terms of investment attractiveness. Challenges cited in the industry survey include regulatory duplication and inconsistencies and the availability of local labor.

Greenland General Business Information

Information about the Greenlandic Government can be found at http://naalakkersuisut.gl/en . Information from the Greenlandic Government on natural resource exploration and extraction can be found at http://www.govmin.gl . Information about doing business in Greenland can be found at https://www.businessingreenland.gl/en . Statistics on Greenland can be found at http://www.stat.gl/default.asp?lang=en .

By law, private property can only be expropriated for public purposes in areas where the Greenlandic government has the competencies, in a non-discriminatory manner, and with reasonable compensation. There have been no recent expropriations of significance in Greenland.

In Greenland it is not possible to acquire private ownership of land, but a right of use may be sold for an area, e.g., if you buy property, you own the building, not the land on which it sits.

There have been no major disputes over foreign investment in Greenland in recent years. While it is common that disputes are settled in Greenlandic courts, the Danish Supreme Court remains the highest appeals court for disputes in Greenland. If a dispute is very specialized and within the purview of the Danish Administration of Justice Act, the parties involved can choose the Danish Maritime and Commercial Court as a court of first instance.

While Greenland’s democratic institutions and legal framework in general are strong, there have been some concerns about legislation being passed by parliament without significant hearing processes and public input.

Contact for More Information on Greenland

Sung Choi
Principal Officer
U.S. Consulate Nuuk, Greenland
Email: USConsulateNuuk@state.gov

THE FAROE ISLANDS

The Faroe Islands have an open economy and multiple trade agreements with other countries. For more than two centuries the Faroese economy has relied on fisheries and related industries. Fisheries (including agriculture, hunting and forestry) account for 22 percent of domestic factor income in the Faroe Islands. About 94 percent of goods exports are fisheries. Salmon alone accounts for 42 percent of exports. As a non-EU member, the Faroe Islands continue to have open access to the Russian market despite Russia’s retaliatory trade embargo on certain food imports from the EU. This has allowed the Faroese to sell increased quantities of salmon to the Russian market at higher than normal prices, even while prices have dropped significantly in the European market.

The Islands exported DKK 9,539.6 million (USD 1.43 billion) worth of goods in 2019, 93.7 percent of which were fish products, with the remainder being marine vessels, and aircraft resales. In recent years, construction, transportation, banking, and other financial services sectors have grown, and offshore oil and gas exploration is developing, though commercially viable finds have not been made. In 2019, the majority of goods exports went to Russia (23.4 percent), followed by Denmark (11.1 percent), the United State (10.1 percent) and the UK (9,1 percent). Goods imports totaled DKK 8,147.6 million (USD 1.222 billion) in 2019. The vast majority of imports came from Europe in 2019; 1.4 percent originated in the United States. Denmark provided 36.5 percent of imports, Germany 10.4 percent, Norway 7.5 percent, China 6.1 percent, and the Netherlands 5.2 percent. Imports consist of input to industry (Machinery and transport equipment, 30.1 percent, Mineral fuels, lubricants and related materials 15.4 percent), items for household consumption (Food and live animals 16.3 percent, Manufactured goods 25.1%).

The Faroe Islands’ small, open, but non-diversified economy makes it highly vulnerable to changes in international markets. The Faroe Islands have full autonomy to set tax rates and fees, and to set levels of spending on the services they provide. Denmark upholds an annual block grant of DKK 642 million – roughly USD 96 million.

The closure of the Faroe Islands as a result of the COVID-19 pandemic can be seen in the Faroese unemployment figures. In mid-April, 3,812 workers received support through the special COVID-19 scheme. To this should be added the 384 persons who already received regular unemployment benefits. A total of 4,196 persons, corresponding to 15 percent unemployed. As early as the beginning of May, however, there is a large decline in the number of COVID-19 related unemployment, which now represents 2,866 employees.

On April 15, 2020, the Minister of Finance presented a note on the financial impact on the Faroe Islands as a result of COVID-19. In light of the Faroe Islands’ strong economic growth since 2013, low public debt, and historically low unemployment, the Ministry concluded that the Faroese economy is well equipped to cope with a period of economic decline as a result of COVID-19 in 2020 and possibly 2021. The Minister expects a deficit of DKK 800 million (USD 118 million) in 2020 and a somewhat smaller deficit in 2021, compared to the budgeted surplus for the Finance Act 2020 of just under DKK 200 million (USD 29.4 million). If the economy can be restarted in a short period of time, and if the world economy starts to grow at the same time, Faroese GDP is estimated to fall by 3-5 percent in 2020. With a protracted process, the Faroese economy may experience a 10 percent fall in GDP in 2020. The Ministry estimates that the public debt will increase to 23 – 30 percent of GDP from 18 percent currently.

In 2013, the Faroese economy began a strong recovery, after several years of stagnation. Official statistics list 2017 as the most recent year available for GDP figures, at DKK 18,708 million (USD 2,837 million). However the Economic Council for the Faroe Islands, together with Statistics Faroe Islands, estimate that nominal GDP rose 6.9 in 2016 followed by estimated growth of 3.3 percent in 2017, 3.0 percent in 2018 and 9.0 percent in 2019. The estimate for 2019 reflects an unexpectedly high salmon harvest. The growth in salmon farming is the result of new farming methods. The Economic Council estimated 7.0 percent GDP growth for 2020 (?) prior to the COVID-19 pandemic According to the Danish Central Bank, the strongest underlying drivers are substantial price increases for farmed salmon and larger catches of mackerel and herring in particular. These two factors have boosted incomes and led to higher private and public sector demand. Employment has risen notably, which has pushed down unemployment. The need for labor has increasingly been met via high net immigration, which has prolonged the economic upswing. However, the many new inhabitants have put the housing market under pressure, especially in and around Tórshavn. Growth in employment continued in the 1st half of 2019. Unemployment has fallen to just above 1 per cent of the labor force, which is the same low level as immediately before the financial crisis in 2008. During the current upswing, fiscal policy has also contributed to growth and hence to increasing labor market pressures. Wage growth has accelerated as spare resources in the economy have shrunk. All the same, wage growth remains moderate and lower than during the most recent boom. The low wage growth should be seen in the light of an expanded labor force and subdued consumer price inflation.

Since 2013, real wages have increased by almost 20 per cent. Investment in 2016-2018 is estimated to total DKK1.7 billion (USD 258 million) or 10.2 per cent of GDP. Construction of the Eysturoy and Sundoy tunnels, with an expected cost of approximately DKK 2.64 billion (USD 400 million) or 16 percent of GDP are planned for completion by 2021. According to Moody’s the infrastructure project reached an important milestone in June 2019 with the breakthrough of the tunnel construction. Although the project has a low risk profile, the progress of the construction and milestone reached reduces materially the related construction risk. The Economic Council has repeatedly called for long-term planning of public investments to more effectively balance the business cycles.

Announcement of these enormous investments resulted in the Danish Systemic Risk Council issuing an unprecedented official warning of the increase of systemic risk on the Faroe Islands in the fall of 2016. By April 2018, the Council recommended increasing the banking sectors’ countercyclical capital buffer from 1 percent to 3 percent by 2020. The Economic Council for the Faroe Islands estimates that a permanent fiscal improvement of 5 percent of GDP will be required to stabilize government debt, which is currently at a low level. On August 16, 2019, , credit agency Moody’s upgraded to Aa2 from Aa3 the long-term issuer rating of the Government of Faroe Islands. The outlook remains stable., reflecting credit fundamentals that have continuously improved over the last years, as shown by better than expected economic and financial indicators, a trend which should continue going forward.. The stable and historical relationship with Denmark is deemed an additional strength.

The Faroe Islands opened their own securities exchange in 2000; active trading of shares followed in 2005. The exchange is a collaboration with the VMF Icelandic exchange on the Nasdaq OMX Nordic Exchange Iceland.

The most recent figures available show Foreign Direct Investment into the Faroe Islands totaled DKK 1.6 billion (USD 243 million) in 2012, about half of which originated from Denmark. The Faroese government has indicated interest in attracting further foreign investment. “Invest in the Faroes” is the Faroese government unit promoting Faroese trade. The website is http://www.government.fo/ .

Looking ahead, the Faroe Islands face a demographic challenge. Currently there are 4.5 people in the working age group “16 to 66”, for every person aged 67 or older. By 2050, that number is projected to be less than half; an estimated 2.1 persons for every dependent retiree. The Economic Council for the Faroe Islands estimates that a permanent fiscal consolidation of 5 percent of GDP will be required to stabilize government debt, which is currently at a low level.

The Faroe Islands have in recent years engaged in several disputes with the EU over-fishing quotas. The disagreements escalated in September 2012 when the EU adopted measures which allowed it to impose sanctions on the Faroe Islands. In March 2013, the Faroe Islands unilaterally increased their quota for herring and mackerel. EU member states responded by voting in favor of imposing sanctions which went into force in August 2013. Sanctions were lifted a year later after a political understanding between the two parties was reached on herring catches. Subsequently a five-year agreement with the other coastal states in the North Atlantic was signed on mackerel quotas, reducing uncertainty for fisheries and improving profitability, since the agreement allows for more sustainable harvesting. In December, 2019 the EU and Faroe Islands reached an agreement on reciprocal exchanges of fishing opportunities in each other’s waters for 2020.

The Faroe Islands retain control over most internal affairs, including the conservation and management of living marine resources within the 200 nautical mile fisheries zone, natural resources, financial regulation and supervision and transport. Denmark continues to exercise control over foreign affairs, security, and defense, in consultation with the Faroese Government.

The labor force comprised 31,667 people in 2019. In many areas, the Faroese labor market model resembles that of the other Nordic countries, with high standards of living, well-established welfare schemes and independent labor unions. Most people in the Faroe Islands are bilingual or multilingual, with Danish and English being most widely spoken after Faroese. The Islands boast well-developed physical and telecommunications infrastructure and have well-established political, legal, and social structures. The standard of living for the population of 52,428 (which exceeded 50,000 for the first time in May 2017) is high by world standards, and Gross National Disposable Income per capita eclipsed that of Denmark in 2014, while GDP per capita remains slightly higher in Denmark.

Contact for More Information on the Faroe Islands

Aaron Feit
Economic Officer
U.S. Embassy Denmark
Dag Hammarskjolds Alle 24,
2100 Copenhagen, Denmark
Email: CopenhagenICS@state.gov

2020 Investment Climate Statements: Denmark
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