Successfully investing in Denmark

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last updated on 27 May 2020 | reading time approx. 3 minutes

  

 

How do you assess the current economic situation in Denmark?

Before Covid-19 Denmark has reported stable growth – the last 5 years fluctuating between 2-3 per cent. The growth in these years do help the Danish economy tackle Covid-19 with generous aid packages for businesses granted by the government. The National Bank of Denmark assumes the virus outbreak will lead to a decrease of -3 to -10 per cent in GDP as a result of measures taken to prevent the spread. The economic aid packages, the general flexibility of the labor market and loans guaranteed by the state will secure the Danish market and ensure that fewer will go jobless. The Ministry of Finance has also relieved the Danish municipalities of their normal spending limit on renovations and building new buildings, potentially resulting in up to 10 billion Danish krone public investment more than usual also in order to support businesses and general employment. The Danish economy is expected to have good chances of recurring fast after the outbreak compared to the international markets in light of the Danish economy being well equipped and agile.

 

How would you describe the investment climate in Denmark? Which sectors offer the largest potential?

The economic landscape is shaped by a large number of often medium-sized industrial companies – the majority of them are highly specialized technology leaders. Traditionally, Denmark has been the headquarter of large global companies in the shipping, food and brewing industries. Also the mechanical and plant engineering, the pharmaceutical industry, green tech and the tourism industry play an important role. Due to the country's extensive welfare system, the public sector is very important and employs over 30 per cent of the working population. Denmark strives to expand in knowledge-based and high-tech industries of the future. Great emphasis is placed on Research & Development. As a result of Covid-19 the Danish state has advanced some infrastructure projects, that bear a lot of potential for German companies.

 

What challenges do German companies face during their business ventures into Denmark?

Due to Covid-19 the border between Denmark and Germany is closed as of 15th of March 2020. It is only possible to cross the border if you have a worthy purpose, which implies that you have to be able to document, that you have a business deal, contract or the like with regards to import/export of goods and services. The border closing might result in prolonged transport and delivery times.

 

In more general terms; one of the challenges of German companies venturing into Denmark might be the difference between the Danish and German labor market. The difference is mainly that the Danish labor market is very flexible and subject to only few acts of law, but at the same time more collective bargaining agreements apply. Trade and labor unions are thus very widespread and influential. The trade unions are e.g. trying to stop the import of foreign labor in order to ensure the relatively high levels of salary compared to the rest of Europe, especially protecting unskilled labor.

 

The Danish labor market model can be described as “Flexicurity” (Flexibility + Security). This leads to a high level of risk tolerance among employers and a high degree of mobility among employees. Every fourth Dane changes his or her job every year, and one out of five Danish employees works at a foreign company.

 

The Danish tax regulations for employers and employees can be a challenge. If a permanent establishment is set in Denmark, the employer is required to deduct and pay taxes. In addition, foreign service providers are required to register their activities in a special register (the RUT register). If they fail to do so, the company is at risk of a fine of 10,000 Danish krone (DKK).

 

On the other hand, forming a company is easy in Denmark because the procedure can be very quickly handled via an online portal. The Danish corporation tax is 22 per cent and thus significantly lower than in Germany.

 

What opportunities does the cross-border Øresund Region offer investors?

The Øresund Region is a gateway to Europe. So far, over 300 high-tech companies have established their presence in this cross-border region, approx. 100 of whom operate in the bio-tech sector. Access to both Danish and Swedish markets comes with many advantages such as tax benefits, larger markets to venture and great possibility for hiring highly skilled employees.

 

In your opinion, how will Denmark develop?

Danish mentality and culture will be beneficial for exiting the corona crisis. Denmark is known for being a nation with high levels of trust, which makes it very agile and operational in times of trouble, also taking the size of the nation into consideration. Politically Denmark has always sought compromises and the political parties have a history of cooperation, which e.g. enables the parliament to implement emergency legislation in order to tackle the Covid-19 in timely manner with every political party signing – furthermore improving the efficiency of handling the crisis. Germany is Denmark’s biggest trade partner, which hopefully will result in political action to ensure the continued profitability of the partnership.

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