2021 Investment Climate Statements: Denmark

Policies Towards Foreign Direct Investment

As a small country with an open economy, Denmark is highly dependent on foreign trade and investment. Exports comprise the most significant component (55 percent) of GDP. The Economist Intelligence Unit (EIU) ranks Denmark as the world’s second-most attractive business location after Singapore and the leading nation in the Nordic region. The EIU characterizes Denmark’s business environment as among the most attractive globally, 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 the retail sector. Overall, however, operating conditions for companies are broadly favorable. Denmark ranks highly in multiple categories, including its political and institutional environment, macroeconomic stability, foreign investment policy, private enterprise policy, financing, and infrastructure.

As of January 2021, the EIU rated Denmark an “AA” country on its Country Risk Service, with a stable outlook. Sovereign risk is rated “A,” 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 2020 Democracy Index. Denmark has an AAA rating from Standard & Poor’s, Moody’s, and Fitch Group. “Invest in Denmark,” an agency of the Ministry of Foreign Affairs and part of the Danish Trade Council, provides detailed information to potential investors. Invest in Denmark has prioritized six sectors in its strategy to attract foreign investment: Tech, Cleantech, Life Science, Food, Maritime, and Design & Innovation. 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 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 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 foreign control limits. The Danish government has presented legislation to establish a foreign investment screening mechanism, which is expected to come into force on July 1, 2021.

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 (Aktieselskab A/S) or Limited Partnership (Partnerselskab P/S) is DKK 400,000 (approx. USD 61,000) and for establishing a private limited liability company (Anpartsselskab ApS) DKK 40,000 (approx. USD 6,100).

As of April 15, 2019, it is no longer possible to set up an “Entrepreneurial Company” (IVS). This company type, which required a starting capital of only DKK 1 (USD 0.15), was structured to allow entrepreneurs a cheap and straightforward way to incorporate with limited liability. 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, which brought Denmark more in line with other Scandinavian countries. 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 its official address is in Denmark. The minimum capital requirement is EUR 120,000 (approx. USD 137,000).

Danish professional certification and/or local Danish experience are required to provide professional services in Denmark. In some instances, Denmark may accept 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 apply to the following sectors:

• Oil and Gas: Requires 20 percent Danish government participation on a “non-carried interest” basis.

• Defense: The Minister of Justice must approve foreign investment in defense companies doing business in Denmark if such investment exceeds 40 percent of the equity or more than 20 percent of the voting rights, or if the investment gives the foreign interest a controlling share. This approval is generally granted unless there are security or other foreign policy considerations weighing against approval.

• Maritime Services: 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). Vessels owned by EU or European Economic Area (EEA) entities with a genuine, demonstrable link to Denmark are also eligible for registration. Foreign companies with a significant Danish interest can register a ship in the DIS.

• Civil 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.

• Financial Services: Non-resident financial institutions may engage in securities trading on the Copenhagen Stock Exchange only through subsidiaries incorporated in Denmark.

• Real Estate: Ownership of holiday homes, also known as summer houses, is restricted to Danish citizens. Such homes are generally located along the Danish coastline and may not be used as full-year residences. On a case-by-case basis, the Ministry of Justice may waive the citizenship requirement for those with close familial, linguistic, cultural, or other close connections to Denmark or the specific property. In general, EU and EEA citizens may purchase full-year residential property or real estate that supports self-employment without obtaining prior authorization from the Ministry of Justice. Companies domiciled in an EU or an EEA Member State that have set up or will set up subsidiaries or agencies or will provide services in Denmark may, in general, also purchase real property in Denmark without prior authorization. Non-EU/EEA citizens must obtain authorization from the Ministry of Justice to purchase real estate in Denmark, which is generally granted to those with permanent residence in Denmark or who have lived in Demark for a consecutive period of five years.

Other Investment Policy Reviews

The most recent United Nations Conference on Trade and Development (UNCTAD) review of Denmark occurred in March 2013 and is available here:  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:  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 2017 Foreign Investment Regulation review by DLA Piper can be found here:  www.dlapiper.com/~/media/files/insights/publications/2017/11/denmark.pdf

Denmark ranked first out of 180 in Transparency International’s 2020 Corruption Perceptions Index. It received a ranking of four 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 6 out of 131 in 2020.

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, www.virk.dk , is the principal 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. For other types of businesses, online registration costs DKK 670 (approx. USD 103). Registration by email or post costs DKK 2150 (approx. USD 329).

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 www.investindk.com/-/media/invest-in-denmark/publications/business-conditions/investindk-fact-sheet-step-by-step-web.ashx , along with other relevant resources at . The services are free of charge and available to all investors, regardless of country of origin.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 (ApS), for example, generally takes four to six weeks for a standard application. Establishing a sole proprietorship (Enkeltmandsvirksomhed) is more straightforward, 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 registering 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.

Denmark defines small enterprises as those with fewer than 50 employees. Annual revenue or the yearly balance sheet total must be lower than DKK 89 million (approx. USD 13.6 million) or DKK 44 million (approx. USD 6.7 million), respectively. Medium-sized enterprises cannot have more than 250 employees. Limits on annual revenue or the yearly balance sheet total are DKK 313 million (approx. USD 47.9 million) or DKK 156 million (approx. USD 23.9 million).

Outward Investment

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

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 agreements are unratified. There has been little change to these investment protection agreements’ status since the European Union’s Lisbon Treaty came into force, 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 significant aspect relates to eliminating 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).

Transparency of the Regulatory System

Denmark’s judicial system is highly regarded and considered fair. Its legal system is independent of the government’s legislative branch and 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 ranked Denmark as the world’s tenth most competitive economy and fourth among EU member states, characterizing 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 1 and July 1—as the only days when 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 follow international standards.

Bureaucratic procedures are streamlined and transparent; proposed laws and regulations are published in draft form for public comment. Public finances and debt obligations are transparent.

The Ministry of Taxation publishes and updates annually all companies’ corporate tax records. Greenland and the Faroe Islands retain autonomy for their respective tax policies.

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 that 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. This Act, along with Danish consumer legislation, aims to promote efficient resource allocation in society, promote efficient competition, create a level playing field for enterprises, and 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 under accounting classes determined by company size:

• Small businesses (Class B): Less than an annual average of 50 full-time employees and total assets not exceeding DKK 44 million (USD 6.7 million) or net revenue not exceeding DKK 89 million (USD 13.6 million) during the fiscal year.

• Medium-sized enterprises (Class C medium): Less than an annual average of 250 full-time employees and total assets not exceeding DKK 156 million (USD 23.9 million) or net revenue not exceeding DKK 313 million (USD 47.9 million) during the fiscal year.

• 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; there is no requirement to prepare financial statements unless the owner voluntarily chooses to do so.

All government draft proposed regulations are published at “Høringsportalen” ( www.hoeringsportalen.dk ) and are available for comment from interested parties. Following the comment period, the government may revise draft regulations before publication on 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 zero to five scale. Concerning 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 should be revised or eliminated.

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

Denmark’s decision-making power is divided into the legislative, executive, and judicial branches. The principles of separation of power and an independent judiciary help ensure democracy and Danish citizens’ legal rights. The district courts, the high courts, and the Supreme Court represent the Danish legal system’s three basic levels. The legal system also comprises other institutions with special functions, e.g., the Maritime and Commercial Court.

For further information, please see:  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  investindk.com . The Faroese government promotes Faroese trade and investment through its website  faroeislands.fo/economy-business . For further information concerning Greenland’s investment potential, please see Greenland Holding at  www.venture.gl  or the Greenland Tourism & Business Council at  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 has presented legislation to establish a foreign investment screening mechanism, which is expected to enter into force on July 1, 2021. The screening mechanism would be in line with the EU investment screening framework encouraging member states to screen foreign investments in critical infrastructure and other sensitive 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 revenue in Denmark of all undertakings involved is more than DKK 900 million (USD 137.7 million) and the aggregate yearly revenue in Denmark of each of at least two of the undertakings concerned is more than DKK 100 million (USD 15.3 million), or if the aggregate annual revenue in Denmark of at least one of the undertakings involved is more than DKK 3.8 billion (USD 581.5 million) and the aggregate yearly worldwide revenue of at least one of the other undertakings concerned is more than DKK 3.8 billion (581.5 million). When a merger results from the acquisition of parts of one or more undertakings, the calculation of the revenue referred to shall only comprise the share of the revenue of the seller or sellers that relates to the assets acquired. Merger control provisions are contained in Part Four of the  Danish Competition Act and in the Executive Order on the Notification of Mergers . Revenue is calculated under the 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, 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, Annex 2 – Information for Simplified Notification of Mergers . From August 1, 2013, merger fees are payable for merger notifications submitted to the Competition and Consumer Authority. The fee for a simplified notification amounts to DKK 50,000 (USD 7,650). The fee for a full notification amounts to 0.015 percent of the aggregate annual turnover in Denmark of the undertakings involved; this fee is capped at DKK 1,500,000 (USD 230,000).

Additional information concerning notification of mergers is available in the Guidelines to the Executive Order on Notification of Mergers and on Merger Fees . More general information on Danish merger control can be found in the Merger Guidelines .

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 under 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 significant investment disputes 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. The ICSID Convention has been extended to include the Faroe Islands. 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 specific 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 United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration in 1985.

Investor-State Dispute Settlement

N/A

International Commercial Arbitration and Foreign Courts

N/A

Bankruptcy Regulations

Monetary judgments under the bankruptcy law are made in freely convertible Danish Kroner. The bankruptcy law addresses creditors’ claims 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.”

Investment Incentives

Performance incentives are available to both foreign and domestic investors. Examples include grants or preferential financing in designated regional development areas. 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 Malmö (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 mainly 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 investments in hydrocarbon exploration, where concession terms typically require a fixed work program, including seismic surveys and, in some cases, exploratory drilling, consistent with applicable EU directives. Performance requirements are primarily designed to protect the environment, mainly by encouraging reduced energy and water use. Several environmental and energy requirements are universally applied to 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 specific 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 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.

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 permitted 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 10th out of 129 countries in the Property Rights Alliance’s International Property Rights Index 2020, and 6th 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 IPR , including the World Trade Organization (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) and several 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.

For additional information about national laws and points of contact at local IPR offices, please see WIPO’s country profiles at www.wipo.int/directory/en .

A list of attorneys in Denmark known to accept foreign clients can be found at dk.usembassy.gov/u-s-citizen-services/attorneys.  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 Faroe Islands may be found at the Danish Bar Association web site: www.advokatnoeglen.dk .

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 is 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. 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 EUR 1 billion (USD 1.1 billion) are in the group of “Large Cap,” companies with a market value between EU 150 million (USD 171) and 1 billion Euro (USD 1.14 billion) belong to the “Mid Cap” segment, while companies with a market value smaller than EU 150 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. By January 2021, the total of Danish shares valued DKK 3.82 trillion (USD 584 billion) and were owned 52.5 percent by foreign owners and 47.5 percent by Danish owners, including 13 percent held by households and 7 percent by the government. The three largest Danish banks – Danske Bank, Nordea Bank Danmark, and Jyske Bank – hold approximately 75 percent of the total assets in the Danish banking sector.

The primary goal of the Central Bank (Nationalbanken) is to maintain 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 three 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 2.60 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 2020 average exchange rate where Danish Kroner (DKK) 6.5343703 = 1 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 ERM II framework. 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, if 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 it supports adopting the Euro in principle, 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 three percent.

Denmark’s debt to GDP ratio is projected to have increased from 33.3 percent in 2019 to 43.5 percent in 2020 (final statistics for 2020 were pending when this report was published). Denmark is also projected to have run a 3.5 percent budget deficit in 2020, after running a 3.8 percent budget surplus in 2019 and a 0.7 percent surplus in 2018.

Remittance Policies

N/A

Sovereign Wealth Funds

Denmark maintains no sovereign wealth funds.

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, utilities, 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.

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:  mneguidelines.oecd.org/National-Contact-Points-Website-Contact-Details.pdf 

From January 1, 2016, the largest companies must account for their responsible business conduct, including with respect to human rights and to reducing the climate impact of the company’s activities. Additionally, 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 (Danish Financial Statements Act, sections 99a and 99b). 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 “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 received recommendations in October 2020 and is working on new initiatives. The government hosts  www.csrkompasset.dk/  (English language version  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), the 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.

Denmark is a signatory of the Montreux Document on Private Military and Security Companies.

Additional Resources 

Department of State

• Country Reports on Human Rights Practices;
• Trafficking in Persons Report;
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities and;
• North Korea Sanctions & Enforcement Actions Advisory

Department of Labor

• Findings on the Worst Forms of Child Labor Report;
• List of Goods Produced by Child Labor or Forced Labor.
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World and;
• Comply Chain.

Denmark is perceived as the least corrupt country in the world according to the 2020 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, 11604 København V
Phone: +45 72 68 90 00
Fax: +45 45 15 01 19
Email:  saoek@ankl.dk 

To report any knowledge of corruption within Danish Ministry of Foreign Affairs development assistance agency DANIDA projects or among staff, or DANIDA partners: 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 Rosa Bisgaard and Oliver Kofod Nørgård, 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 

Denmark is a politically stable country. Incidents involving politically motivated damage to projects or installations are very rare. The EIU rates Denmark “AAA” for political risk.

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 hiring and firing employees generally enable employers to adjust the workforce quickly to changing market conditions.

The Danish labor force amounted to approximately 2.86 million people at the end of 2020. Of these, 891,000 (Q4, 2019) are employed in the public sector. Denmark’s OECD-harmonized unemployment rate was 6.1 percent in February 2021, lower than the EU-27’s rate of 7.5 percent and OECD average of 6.66 percent.

The public sector in Denmark is large and accounts for about 25 percent of the labor force. The labor force participation rate for women is among the highest in the world. In 2019, 75.6 percent of working-age women participated in the labor force, and the employment rate was 72.9 percent. The working-age male labor force participation rate and employment rate were 79.2 percent and 76.7 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 established through 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 work week for most wage earners is 37.5 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 (four 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 rest of the leave. Forthcoming EU legislation will earmark eight of the 52 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 2.3 percent from Q4 2019 to Q4 2020, while inflation was 0.4 percent, 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 rate: for example, since January 1, 2020, wages must total at least DKK 69,600 (USD 10,650) 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 2021, the Pay Limit Scheme extends to positions with an annual pay of no less than DKK 445,000 (USD 68,100), 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 four 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.

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).

Kristen Stolt
Economic Officer
U.S. Embassy Denmark
Dag Hammarskjölds Alle 24,
2100 Copenhagen, Denmark
Email: CopenhagenICS@state.gov

GREENLAND

Greenland is a self-governing region within the Kingdom of Denmark. The Greenlandic government is actively working to attract investments to Greenland to diversify the economy and integrate it into the world economy.

Greenland originally joined the EU with Denmark in 1973 but left in 1985.

Two-thirds of Greenland lies above 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 was estimated at DKK 19.9 billion (USD 3.05 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 the development of tourism and the 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. Before 2009, 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, indexed to inflation, which accounts for about 20 percent of Greenland’s GDP and half of the Greenlandic government’s revenue. In 2020, this grant was DKK 3.9 billion (approx. USD 597 million).

The Greenlandic government seeks to increase economic growth and government revenues by promoting the further development of fisheries, extractive resources, and tourism while periodically 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. Over the past decade, rising prices for fish and shellfish, the predominant Greenlandic exports, have generated solid 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 decline.

Greenland’s capital city Nuuk and its primary tourist destination Ilulissat have seen extensive construction activity in recent years. A planned expansion of their respective airports will lead to further growth and facilitate growth in 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, three smaller mines (ruby, anorthosite, and ilmenite) are in varying stages of production. One company was granted an exploitation license to restart a gold mine in southern Greenland. Two small Australia-based companies are vying 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, Kringlerne, received an exploitation license in late 2020. The other project, Kvanefjeld, has faced significant local- and national-level political opposition due to environmental concerns over potential uranium contamination, and efforts to obtain an exploitation license have stalled as of spring 2021.

Greenlandic Economic Outlook

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 2.7 percent in 2019 and contracted by -0.2 percent in 2020. Before the COVID-19 pandemic, GDP growth for 2020 had been forecast at 3.8 percent. The GEC has forecast 2.1 percent growth for 2021. A strong economy in recent years has led to labor shortages, both geographically and by sector, especially in connection with large construction projects. The Council estimated unemployment declined from about 10 percent in 2014 to a projected 5.4 percent in 2020, while the Bank of Greenland calculated the ratio of job-ready jobseekers to only around 3 percent of the total workforce, but with significant 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, 2020 – will have a detrimental economic impact, with tourism and exports expected to decline. Lockdowns and travel restrictions from the COVID-19 pandemic effectively wiped out the 2020 tourism season. Simultaneously, the crisis curtailed demand in the food service sector (restaurants, cafés and canteens, etc.) due to the lockdown, but businesses managed to sell their goods to retail businesses instead.

The public budget has run surpluses since 2015; however, the 2020 budget is expected to be in deficit due to the COVID-19 crisis. The Greenland Government adopted a number of financial support measures, which increased public expenditure in 2020. Spending on social benefits and emergency aviation also increased, while fisheries taxes fell. The Greenlandic economy continues to be bolstered by a yearly block grant from the Danish Government at DKK 3.9 billion (USD 597 million) in 2020. The Greenlandic economy is characterized by the unusual condition of having higher public than private consumption. Public consumption in Greenland was 44.8 percent of GDP in 2019, compared to 24 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 not be in deficit over four years. 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 had a gross debt of approximately 24 percent of GDP in 2019, up from 22 percent of GDP by the end of 2018.

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 Greenland has not sufficiently addressed its sustainability challenges and estimated that the public budget would need to be reinforced by DKK 1 billion (USD 153 million) annually by 2040 to accommodate the aging population. Activity in natural resource exploration has increased only gradually since the global industry downturn in 2015. However, the two mines currently in operation have generated optimism that more small-scale mining operations could follow.

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. Some 92 percent of Greenlandic exports, measured in local currency, were fish products, with the remainder being mainly raw materials and machinery. Royal Greenland and Polar Seafood are the two main seafood exporters. Royal Greenland’s largest country market is China, and one-third of its revenues are generated in Asia, half in Europe, and ten 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 would continue to do so for future upgrades, including 5G.

Establishing a Company in Greenland

Danish business (CVR) registration through indberet.virk.dk  is required to conduct business in Greenland. 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. Therefore, an ApS cannot be subject to listing or otherwise issue shares to the public to secure more capital. In addition, there are a few differences concerning capital and management requirements. Under the Companies Act, the minimum share capital requirement for an ApS is DKK 40,000 (USD 6,100). The minimum share capital requirement for an A/S is DKK 400,000 (USD 61,000). 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 46,000). A founder of a company may be both foreign or Greenlandic individuals or corporate entities. Both types of companies can be registered via the Danish Business Authority’s online system. No registration fees are required.

Registered Branch Office

A foreign company may typically establish a registered branch office in Greenland instead of establishing a Greenlandic company. A branch of a foreign company may be created through an 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 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. As the rules of taxation for businesses can be complicated, 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.

The 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 15,304) 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 27,141 persons in 2019. Average unemployment for 2019 was 5.1 percent – lower than the OECD average of 5.4 percent, and a decrease from 10.3 percent in 2014. Unemployment has decreased significantly, especially in Nuuk. However, more than a third of 16 to 25-year-olds are neither employed nor in school. According to Statistics Greenland, 49.2 percent of the Greenlandic workforce in 2019 have an education beyond municipal primary and lower secondary school. Of the workforce, 27.4 percent have vocational education, while 15.6 percent have a tertiary education. Among the unemployed, 84 percent have no education beyond municipal primary and lower secondary 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 765 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 ferroalloys (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. However, 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 Greenland’s natural resources’ exploitation becomes commercially viable, Greenland will keep the first DKK 75 million (USD 11.48 million) in annual revenues derived from these resources. Additional revenues will be 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 3.9 billion (approximately USD 597 million). Once the block grant’s total value 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 2020, Greenland maintained its favorability ranking as 41st out of 77 jurisdictions in the annual mining survey from Canadian Fraser Institute. The survey highlights political instability and the lack of qualified officials as creating uncertainty for investors.

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 significant 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

Louise Grønvold
Political and Economic Specialist
U.S. Consulate Nuuk, Greenland
Email:  USConsulateNuuk@state.gov 

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 the Faroe Islands’ domestic factor income. About 92 percent of goods exports are fish products. Salmon alone accounts for 39.5 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 a premium even while prices have dropped significantly in the European market.

The islands exported DKK 8.4 billion (USD 1.29 billion) worth of goods in 2020, 92.0 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 2020, the majority of goods exports went to Russia (22.9 percent), followed by Denmark (10.8 percent), UK (10.1 percent), and the United States (8.6 percent). Goods imports totaled DKK 8.1 billion (USD 1.2 billion) in 2020. The vast majority of imports came from Europe in 2020. Of total Faroes’ goods imports, 25.9 percent of imports came from Denmark, followed by Germany (9.7 percent), Norway (9.3 percent), the Netherlands (7.9 percent), and China (6.4 percent). Direct imports from the United States were 1.5 percent of total imports. Major import categories were input to industry (24%), household consumption (23%) fuels (11%), and input for construction (11%).

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 provides an annual block grant of DKK 642 million (USD 98.2 million).

COVID-19 reached the Faroe Islands in March 2020. The Faroese Government quickly instituted short-term measures, similar to Denmark’s, to contain the infection. The Faroes were virus-free by July 2020 until seeing brief upticks in August and December. As of February 26, 2021, the Faroes were virus-free again. The effective containment strategy reduced the need for long-term, austere measures to prevent the spread of infection.

The global economic downturn and long-term uncertainty lowered worldwide demand and fish prices, the Faroes’ main export. Some fisheries have used their existing supply chains to convert a large portion of their sales from restaurant customers to retail trade customers. At the same time, corporate investment appetite has remained intact, as corporations were well consolidated before the virus outbreak. This has helped mitigate some of the negative economic impact of the pandemic. Labor market compensation schemes have further supported the economy. By September 2020, the wage cost compensation scheme had been phased out, and employment and unemployment levels were roughly back to their pre-pandemic levels. The pandemic badly impacted the tourism sector, but this sector makes up only a small portion of the Faroese economy.

In 2013, the Faroese economy began a strong recovery after several years of stagnation. Official statistics list 2019 as the most recent year available for GDP figures, at DKK 20.9 billion (USD 3.2 billion). Statistics Faroe Islands estimated that nominal GDP rose 8.8 percent in 2016 followed by estimated growth of 3.8 percent in 2017, 0.65 percent in 2018, and 8.21 percent in 2019. The estimate for 2019 reflects an unexpectedly high salmon harvest. The robust growth in salmon farming is the result of new farming methods. According to the Danish Central Bank, the strongest underlying drivers for recent years’ growth are substantial price increases for farmed salmon and larger catches of mackerel and herring in particular, combined with considerable productivity gains. Activity has been concentrated on fewer farms and shipping companies, both in aquaculture and in the pelagic fisheries, making these industries more profitable. These factors have boosted incomes and led to higher private and public sector demand. Employment has risen notably, which has pushed down unemployment from seven percent in 2011 to 1.5 percent in 2020. 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. Unemployment has fallen to just 1.5 percent of the labor force, which is the same low level as immediately before the financial crisis in 2008.

Construction of the Eysturoy and Sandoy tunnels, with an expected cost of approximately DKK 2.64 billion (USD 404 million) or 16 percent of GDP, are proceeding as planned. The Eysturoy tunnel opened for traffic on December 19, 2020, and the Sandoy tunnel is expected to open in 2023.

In the longer term, the aging Faroese population will weaken the sustainability of public finances. To maintain the high level of service to citizens established over many years, the Faroese government must prioritize this issue in due course. Currently, there are four people of working age (16 to 66), for every person aged 67 or older. By 2050, that number is estimated to be 2.1 persons for every dependent retiree. The Economic Council for the Faroe Islands estimates that a permanent fiscal improvement of five percent of GDP will be required to stabilize government debt, which is currently at a low level. On July 17, 2020, credit agency Moody’s maintained its Aa2 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. This trend 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 245 million) in 2012, about half of which originated from Denmark. The Faroese government has indicated an 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 .

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 that 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. The Faroe Islands negotiates reciprocal exchanges of fishing opportunities with the EU, Norway, and the UK annually.

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 31,793 people in 2020. In many areas, the Faroese labor market model resembles 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 the 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 52,154 (which exceeded 50,000 for the first time in May 2017) is high by world standards. Gross National Disposable Income per capita eclipsed that of Denmark in 2014 GDP per capita in 2019.

Contact for More Information on the Faroe Islands:

Kristen Stolt
U.S. Embassy Denmark
Dag Hammarskjölds Alle, 242100 Copenhagen, Denmark
Email:  CopenhagenICS@state.gov