Economic overview
If the Eurozone economic crisis spread – triggering a vicious circle – first in the United States and then in emerging economies, consumer and business confidence would collapse internationally and world trade would slow down. The impact of the collapse in international demand could prove particularly severe on the Danish economy, whose GDP is over 60% dependent on exports.
The exit from the Eurozone of the weaker economies would cause the appreciation of the euro and immediate difficulties for the remaining Eurozone countries with pronounced trade deficits. In this new scenario, France’s behavior could be crucial: if it decided to leave the eurozone, the euro would leave the scene and give way to the German mark, which would thus affirm its hegemony in Europe; in such circumstances the Danish krone, which would re-link the historical link with the German currency, would appreciate and Danish exports would become much more expensive.
Confidence in the Danish banking system has suffered a decisive setback in conjunction with the recent international financial crisis: in fact, since 2008 there are already 12 full-blown cases of bankruptcy of small local banks. Although they are the main banking institutions still well capitalized, they too would risk incurring substantial losses and seeing their ability to grant loans compromised in the event that a debt crisis were to involve large countries such as Spain or Italy. .
Denmark faced a sharp and deep economic recession as a result of the COVID-19 pandemic, with GDP shrinking by around 4% overall in 2020. The gross public debt / GDP ratio is expected to rise sharply from 33% in 2019 to around 45% in 2020. The global recession and disruption of cross-border value chains caused the most severe impact on Denmark’s foreign trade. In Q, exports and imports contracted by 17% and 14% yoy, respectively. Exports are bound to decline more than imports. Overall, investments are expected to decrease by 4.4% in 2020. The normalization of external demand and the government’s recovery package should support investments in the near future.
Main sectors of industry
The maritime and relatively mild climate, combined with a flat and fertile land, has made Denmark one of the countries with an advanced industrial economy capable of producing and exporting a wide and diverse range of goods and services characterized by strong specialization. The long tradition of sea fishing has also allowed the development of an advanced fishing industry.
66% of the territory is arable, while 12% is covered by forests and woods. Only 7% of the country is occupied by urban areas. Apart from the oil and gas fields in the North Sea, which since 1997 have made Denmark self-sufficient in terms of energy supply, the country does not have large mineral resources.
Committed to environmental protection, the Danish government has for some time been conducting programs to reduce carbon dioxide emissions, reduce waste from water basins and reduce the use of chemical agents. The introduction of “environmental taxes” has allowed the country to invest in the search for alternative and renewable energy sources.
The geographical position and the rich availability of infrastructures and services make Denmark a bridge market towards the Baltic area. The tertiary sector accounts for 70% of GDP and 73% of total employment. The growth of wages in recent years has instead penalized the industry which reacted by delocalizing production abroad. Given that it explains, among other things, the shift of economic activity from manufacturing to the service sector.
The state has a great weight in the economy, accounting for about 25% of the demand for goods and services. Although the resources of the subsoil are negligible, the development of industries is increasing. The first place is occupied by the food industries (dairies, sugar factories, fish processing). A relevant place is occupied by shipyards – Copenhagen is the main center. Other industry products are railway machinery, diesel engines, agricultural machinery, chemical industries, industries that process imported raw materials such as leather, rubber, ceramics and majolica.
Taxation for businesses in Denmark
The level of taxation is among the highest in Europe. The greatest burden falls on personal income, and for companies on corporate income (from 32% to 24.5% in 2014, 23.5% in 2015, up to 22% in 2016).
VAT is 25% while capital income is taxed from 0 to 25%. There is also a tax withholding from 0 to 27% on dividends paid. Property tax ranges from 1.6% to 3.4%, depending on where the property is located. The tax on land ownership reaches a maximum of 1% on the value of the land, depending on the location. Any dispute relating to the assessments must be addressed to the tax authorities; Subsequently, an appeal can be lodged with the Landsskatteretten (Regional Court Agency), whose decisions can be appealed to the Landsret (regional court) or the Højesteret (high court).
Personal income tax: progressive up to a maximum of 51.7% (or a maximum of 55.6% including the AM-Tax and 56.25% including the “Church Tax”).
Denmark is in first position among the member countries for the ratio between tax revenue and GDP, equal to 46.7%. A value clearly above the OECD average, which stops at 34.2%. The largest share of tax revenues comes from income taxes and capital gains with 63% (the highest percentage among OECD countries), 32% comes from taxes on goods and services, only 4% from property taxes .
Investing in Denmark
Currently Denmark continues to have a favorable policy towards large and small investors who want to do business on its territory: in the face of a rather high labor cost, there is a decidedly fast and simplified climate of rules. According to some data, it appears that in Copenhagen alone there are more than 2000 foreign companies active. The types of companies in Denmark can be distinguished in what is called A / S, i.e. an aktieselskab and an APS, i.e. an anpartsselskab similar to an S.R.L. In the first case, ie in an A / S, its establishment requires, among other things, the presence of a manager who is a European citizen, even if he is not resident in Denmark; an on-site office and the mandatory auditing of accounts and the budget.
For a sole proprietorship there is no minimum capital but there is always the obligation to present the financial statements to the tax authorities, even if they do not have the obligation to review them. These types of operations are however managed by the Danish Trade Agency. Usually the registration times of a company are very short