Why is it worth doing business in Denmark?

Denmark the best country in the world to do business

Denmark is one of the oldest countries in Europe. Like other Scandinavian countries, it is distinguished by a very stable economy. Considered a European center of innovation and technology, its role in the European Union in both political and economic matters is invaluable. Denmark is famous for the very high standard of living it provides its citizens, thanks to which it is at the very top of all rankings almost every year, holding the title of the happiest country in the world. The country is also very business-friendly, considered almost unanimously the best place to do business in Europe. Denmark has numerous laws and regulations designed to support businesses. Its characteristic is a secure business environment and a high degree of flexibility. Registering a business in Denmark is a matter of just a few hours and the costs involved are low. Establishing a company in Denmark not only gives you access to the Danish market, but also allows you to reach more than 100 million consumers across the European Union. These are just some of the reasons why Denmark is the most frequently chosen country by those wishing to start their own business.

Denmark tops world rankings

In June 2022, Denmark topped the prestigious IMD World Competitiveness Ranking (WCR), ahead of 63 other economies. Such a high score is due to a surge in Denmark’s economic performance, driven by a reduction in public debt and budget deficits, increased investment flows, strengthened public finances and a reduction in price increases compared to other countries. The main factors considered in the ranking were business efficiency, economic performance, infrastructure and government efficiency. Denmark proved to be a leader in categories such as business efficiency, management practices and productivity and efficiency. It also performed well in terms of social framework (second place), institutional framework (second place) and business regulations (third place).

In the 2020 Doing Business ranking, Denmark was named the best country for doing business in Europe. It’s easy to find reasons for such a verdict – the combination of an open, ever-evolving business environment and a free-market capitalist economy are almost ideal conditions for entrepreneurs. Globally, Denmark also ranked very highly, taking fourth place. It performed particularly well in the „Cross-border trade” category, taking the first position. The Doing Business ranking assessed economies from around the world based on indicators that measure the complexity and cost of doing business, and that measure the strength of legal institutions. Denmark owes its podium placement to its innovative business environment, flexible labor market and competitive taxes, among other factors.

In the list of Best Countries for Business published by Forbes, Denmark was ranked first in as many as 6 editions. A total of 146 economies were analyzed and compared based on factors such as taxes, technology and innovation, stock market performance, property rights, investor protection, bureaucracy, corruption and freedom (personal, monetary and commercial). Denmark ranked in the top 25 countries in each category, with first place in the categories of low corruption and high personal freedom.

In a Transparency International survey conducted since 2016, which analyzes the level of perceived corruption (CPI) in public sectors in countries around the world, Denmark is also in the lead. In 2021, its score was 88 out of 100, meaning that the Danish public administration is, in the opinion of citizens, uncorrupt. In addition, the public sector’s commitment to reducing the administrative burden on businesses was highlighted, and the low level of bureaucracy was appreciated.

According to the Global Innovation Index 2022, Denmark is the third most innovative country in the European Union and tenth in the world. Denmark is also consistently ranked in the top ten by the World Economic Forum, which assesses the competitiveness of economies around the world.

Solid economy

Although Denmark is a relatively small country, its economy is one of the strongest in the world. It has a very large domestic market and Denmark’s gross national product is among the highest in the world. This makes it a very attractive destination for both individuals and foreign companies. As much as half of Denmark’s income is generated by the private sector. The main industries that dominate are manufacturing, trade and industry, and most of the companies registered in the country are small, privately owned businesses. Most important is the service sector, which provides 80% of all jobs in Denmark. About 11% of jobs are in manufacturing, while the remaining 2% of jobs are in agriculture. A very large portion of the funds raised go to national defense, health care, economic affairs, foreign affairs and social welfare. Denmark also has stable, long-standing domestic relations with other Scandinavian countries and the United Kingdom. In 2020, Denmark’s nominal gross national income per capita was $58,439, proving to be the seventh highest in the world. Taking into account the purchasing power of per capita income, Denmark ranked 10th in the world, with $57,781. Over the years, the distribution of income has been fairly even, even despite the appearance of slight deviations in recent years. In 2017 when the Gini coefficient of the European Union countries, a measure of economic inequality, was assessed, Denmark had the seventh best score. According to the 2022 Index, economic freedom in Denmark was rated at 78.0, ranking it tenth globally and seventh in the world.

Attractive business environment

Denmark is widely recognized as one of the most attractive business environments in the world. This is confirmed by numerous studies measuring economic, political and regulatory stability, in which the country ranks very highly each year. Denmark is a member of the European Union and is one of the biggest proponents of liberal trade policies among member countries. According to the 2019 Forbes list, Denmark is among the top 10 most encouraging countries for capital investment, ranking seventh. Denmark is also consistently ranked by Transparency International as the least corrupt country in the world, which is also no small matter for businesses considering the country for future investments. In the business sector, the rate of bureaucracy is at a minimum. Corruption in Denmark is virtually non-existent. When considering doing business in Denmark, one should also keep in mind that there may be some cultural differences, including on business grounds. In Denmark, it is common for there to be no strict hierarchy between co-workers and a pervasive informal, fairly relaxed atmosphere, which many foreign investors view strongly. Nevertheless, Danes also value order and structure in the workplace, which is characteristic of Scandinavian countries. According to data collected by Statista, the total value of foreign direct investment that flowed into Denmark in 2019 amounted to $3.59 billion. The outlook for Denmark is very favorable. It is expected that in 2025 the volume of exports of goods and services in Denmark will increase by 2.20%, the volume of imports of goods and services will be higher by 2.10% and the number of registered business activities in Denmark will also grow, counting more than 35,000 companies.

Quick and easy company registration

The process of registering a company in Denmark is one of the fastest and easiest in Europe. It can take just a few hours to set up a Danish business. You can choose from three available ways to register your company:

  • Online registration – thanks to the use of an electronic online registration system, which was created by the Danish Business Authority, registering a new company is very fast and in just a few hours it is ready for business. This is the fastest possible way to start a business, which is why online registration is most popular among entrepreneurs.
  • Paper registration – the traditional form of company registration in Denmark. The entire process takes an average of two to three weeks.
  • Acquisition of an existing company – the least common way. It involves buying a ready-made business that has already been registered. These types of companies are created for resale and do not carry out any operations beforehand. Operation of a ready-made company can begin almost immediately from the moment of purchase.

To register a business in Denmark, you also need to choose the right form of entity. The most common type chosen is the limited liability company, due to its affordable terms and speed of start-up. There are two main types of limited liability companies in Denmark – the private limited liability company (ApS) and the joint stock company (A/S). Both require the contribution of share capital. While this is not treated as an expense, it can be used as working capital. There are also no additional restrictions in Denmark for foreigners who wish to set up their companies. Knowledge of the Danish language is not necessary, as documentation of the business can also be done in English.

Competitive tax conditions

One of the many reasons Denmark is considered the best place to do business is its competitive tax environment. Business costs are relatively low for the entrepreneur – Denmark stands out for having some of the lowest employer costs and social security rates among European countries. In addition, the corporate tax rate, at 22%, is also much lower than in most countries in Europe. Denmark is furthermore the only Scandinavian country that has not introduced double taxation. This means that Danish companies that decide to open their subsidiaries outside Denmark do not have to pay additional tax. Denmark also has various tax incentives that are deductible for selected capital expenditures. According to the current Danish law, it is possible to immediately write off capital expenditures that were intended for R&D. However, there is a second alternative – the taxpayer may instead choose tax depreciation. It will be carried out using the straight-line method and its duration is the current year and the following four years. In addition to this, it is possible to fully deduct all costs incurred for the exploration of raw materials. The company has the right to deduct in full the costs associated with the purchase of patents and know-how or depreciate them on a straight-line basis for the next seven years.

Support for foreign entrepreneurs

Foreign entrepreneurs are very welcome in Denmark, which is evident, among other things, by the amount and means of support the country offers to foreigners. Investors of non-Danish origin have support from institutions in both the public and private sectors. Danish incubators, investment funds or research centers are also involved in helping foreign entrepreneurs. The largest initiative that deals with supporting people who plan to do business in Denmark is the Start-up Denmark program. It is administered by the Danish Ministry of Business and the Ministry of Employment. Its main goal is to provide entrepreneurs from other countries with access to the Danish market and to help them in the initial stages of developing their businesses. The reason for the Start-up Denmark initiative is to attract foreign entrepreneurs to Denmark who could contribute to economic growth, employment and a global network of startups. Foreign investors who have the talent, necessary knowledge and determination to develop their business make Denmark’s competitiveness steadily grow and new jobs are created. What does Start-up Denmark’s assistance look like in practice? During a period of 2 years after an entrepreneur’s candidacy is accepted, they will be able to count on support from the Danish government to move to Denmark and run their business. An additional 3-year extension of the program is possible. The Start-up Denmark initiative is open to all companies that have high growth potential and a possible global market reach. Besides official monetary support from state authorities, foreign entrepreneurs can also count on help from the Danish people. They are a nation that is very kind and open to people from other countries. If the need arises, they will always extend a helping hand.

Opportunity to expand into Scandinavia and the rest of Europe

Denmark’s unique geographic location means that it offers opportunities unavailable to any other country. Bordering continental Europe to the south and Scandinavia to the north, Danish companies have extremely easy access to almost the entire European market. Thanks to the country’s well-organized infrastructure, reaching Europe’s 500 million consumers is a matter of just a few days. Copenhagen, the capital of Denmark, is called the logistics capital of Europe. All products that flow between the Nordic countries and the rest of Europe mostly find their way to Copenhagen at some stage of their journey. According to calculations, the average delivery time of goods to the consumer from any country in Scandinavia is no longer than 24 hours. Not surprisingly, Copenhagen is home to the headquarters of world leaders in the logistics services industry, such as FedEx, UPS, DHL Express, TNT and PostNord. In addition, transportation costs from Denmark to other European countries are very low. The number of carriers who are present on the Danish market is very large, so the prices they offer are competitive.

World-class innovation and technology

With its numerous innovation-oriented R&D programs and initiatives, the European Commission has hailed Denmark as a European innovation leader. This country boasts 14 world-class universities, 15 research parks and more than 12,000 researchers. The capital Denmark provides offers almost ideal conditions for expanding knowledge and conducting research on an international scale. Denmark’s innovation can be perfectly seen especially in the renewable energy industry. This small Scandinavian country has been pursuing a very advanced and ambitious energy policy for more than 40 years. The measures taken are primarily aimed at reducing the carbon footprint by 70% by 2030. The ongoing Cleantech program assists Danish companies in minimizing the remaining carbon footprint of their operations by optimizing operations and machinery. Another ambitious plan of the Danish government is to become 100% independent of fossil fuels by 2050. Already as much as 20% of the electricity that is consumed in Denmark comes from harvested wind energy. Danish companies are responsible for more than 30% of the global wind energy market and have pioneered the use of second-generation biofuel on a commercial basis. Denmark also boasts tremendous progress in biotechnology and life sciences, which is the country’s most advanced industry. On top of this, numerous innovations are also being made in food produced in Denmark. Danish food products are of the highest global quality and also of great safety. There are also numerous developments in computer science and programming. Denmark is the cradle for such programming languages as C++, C#, Turbo Pascal and Visual Prolog, among others. Interestingly, robotics is developing more and more rapidly in Denmark. In the city of Odense alone, there are currently as many as 120 companies that pivot in this field. The Danish ecosystem of robotics and automation companies, educational and research institutions and suppliers is extremely high-tech and constantly evolving. Denmark is home to some of the world’s best robot and drone testing facilities, where full-scale tests of the machines’ applications in fields such as manufacturing, agriculture and even healthcare can be performed.

High level of digitization

According to the 2018 Digital Economy and Society Index (DESI) statistics, Denmark is the most digitized country in the European Union. It also ranks a high second in terms of digital competitiveness, second only to Finland. In 2020, IMD’s global digital competitiveness ranking recognized Denmark as the country that is most ready to take advantage of digital opportunities and that has the highest degree of IT integration in society of any country in the world. In addition, in the 2018 and 2020 UN e-government surveys, Denmark was ranked first. Denmark’s capital, Copenhagen, was also recognized, ranking first in the Economist Impact digital cities index. There is no doubt that Denmark is a digital leader in Europe. Almost all Danish citizens are active online and know how to navigate the Internet efficiently, especially when using services like shopping, banking or entertainment. Denmark’s digital development is recognized by technology giants, as manifested by the presence in the country of large centers of companies such as Google, Apple and Facebook. Denmark has a very efficient eGovernment solution. State institutions are striving to realize the plan they have set for themselves to almost completely digitize the public sector. The Danish government is making every effort to establish Denmark as a digital center. Among other things, a „Digital Development Strategy” has been created for this purpose. The goal of this initiative is to create the right conditions for both Danish companies and citizens to be able to use the latest technologies and benefit from the digital transformation. Technology start-ups are also actively supported. Among others, Denmark has the Digital Hub Denmark, which aims to promote digital technology start-ups and attract foreign talent, customers and investors. 2019 also saw the establishment of the National Strategy for Artificial Intelligence (NSAI), whose mission is to enable Danish businesses to use artificial intelligence in their operations to gain a competitive advantage over foreign companies. According to a survey conducted by Silo AI, Scandinavia’s largest private artificial intelligence lab, up to 24% of Danish companies are already using the benefits of artificial intelligence, giving them a huge advantage.

Flexible labor market

Denmark is famous worldwide for its non-standard labor market model, called Flexicurity. The main premise of this model is that employers can hire and fire employees freely and very easily to adapt to current market needs. This approach is unprecedented not only in Europe, but also in the world. Despite the fact that an employer can decide to lay off overnight or even sooner, Danish workers feel secure and stable. This organization of the labor market ensures their well-being, securing them in the event of unemployment and enabling them to take up another position very quickly. Flexicurity is beneficial for both businesses and Danish citizens. The fact that when making an employee redundant, the employer does not incur any costs is also important. This makes it very easy to adjust the size of the workforce to meet current demand. The Danish flexicurity model came about as a result of very long discussions between trade unions and employers’ associations. Together, a solution was developed to satisfy both sides. However, the flexible Danish labor market is not just about flexicurity. Interestingly, there is no pre-imposed, statutory minimum wage in Denmark. Wages in individual professions are set during regular negotiations between unions and employers. Similarly, there are no top-down labor conditions that must be met. Neither are there any regulations that limit the issue of overtime. These matters are determined on a case-by-case basis, during the conclusion of a contract between employer and employee.

Qualified employees

Denmark has one of the best talent pools in the world, as evidenced by its fifth place in the 2020 Global Talent Competitiveness Index. Danish workers are among one of the most skilled, educated and multilingual workforces, making it much easier for foreign businesses to do business. The vast majority of Danish citizens are fluent in English – as many as four out of five, according to a survey. Half of Denmark’s population can also communicate in German. Up to 96% of Danes have a high school education and 47% have a university degree. Such a highly educated population is the result of Denmark’s traditional awareness of the importance of education. The state is constantly working to enable equal access to education for every citizen and allocates a large portion of its funds for this purpose. In addition to this, Danes are also encouraged to learn and improve their competence throughout their lives. In Denmark, you can find numerous universities that offer world-class education. An excellent example is the Copenhagen Business School, which is considered one of the best engineering schools in Europe. The University of Information Technology in Aalborg, also ranked very high in European rankings, has a good reputation as well. Unsurprisingly, Denmark has exceptionally highly qualified technicians and engineers. Foreign entrepreneurs who do business in Denmark perceive the Danish workforce as highly motivated. Denmark is characterized by a flat hierarchical structure and a team-oriented approach. This means that every employee can play an active role in solving the company’s current problems, regardless of the position they hold. This approach gives room for original ideas and solutions to emerge. The Danish employee is therefore not only highly educated, but also very independent and flexible. Danes are not afraid to prove themselves in the implementation of new tasks and are willing to make even key decisions, which in a classic team organization would be the task of management.

Subsidies for companies

Danish companies have the opportunity to take advantage of various financing tools and funds, especially from the European Union. We distinguish between direct and indirect financing. Under direct financing, we can only count on limited subsidies, while indirect financing involves various intermediaries, both local and national. Companies in Denmark can count on the support of financial institutions, banks and other organizations that give them access to diverse financing tools, which is made possible by the European Union’s structural funds and the support of the European Investment Bank Group. Direct financing grants mainly come from the European Commission and its executive agencies. This is the only way in which direct financial contributions can be obtained from the European Union. Companies applying for direct funding should work on projects focused on goals related to research, environment, training and innovation. Direct grants are designed to help promising initiatives become profitable, rather than to help increase profits. The situation is slightly different with indirect funding. This is when local, Danish intermediaries decide to whom they will give the funds they receive from the European Union – they set their own criteria for companies that wish to take advantage of this opportunity, considering each case individually. Much of the intermediary funding comes from the European Investment Bank Group, but domestic funding sources are also used. In order to obtain information on which financing option will be best for a particular company, it is recommended to contact a local business development center. Here, entrepreneurs can get all the necessary information from highly qualified business experts. There are also publicly funded programs in Denmark, which are also very popular. For example, Innovation Fund Denmark (Innovationsfonden) is keen to support companies that contribute to the growth of employment in Denmark and the creation of new jobs. Also very well-known is the Danish Growth Fund (Vækstfonden), focused on creating, promoting and supporting the growth of businesses by lending to and investing in them. Another example of support that Danish businesses can count on is Innovation Fund Denmark. The program is concerned with creating the right conditions for entrepreneurs, companies and researchers to enable the introduction of viable solutions to the social challenges currently facing Denmark. Innovation Fund Denmark is particularly interested in initiatives in areas such as healthy food, clean environment, climate mitigation, transportation ecology and healthcare.

Key industries in Denmark

Energy industry

Denmark’s energy sector is one of the main pillars of the country’s economy. According to analyses conducted, as much as 21% of Denmark’s total energy needs are met through coal power. Oil is also very important in Denmark, providing about 33% of Denmark’s energy needs. Denmark is involved in oil exports as well. About 18% of energy demand is met by natural gas and the remaining 27% of energy supply comes from renewable sources such as wind power, solar power, nuclear power, geothermal power and biomass. Denmark has a very effective energy policy, which has contributed to significant energy consumption over the years.

Organic production

The beginning of the dynamic development of organic production in Denmark is considered to be 1987, when regulations for this field were first introduced. Since then, Danish organic production has evolved more and more every year. According to official statistics, exports of organic products in 2017 reached as much as DK2.95 billion, an increase of 21% compared to 2016 and 153% compared to 2012. Denmark also has the highest share of retail consumption of organic products in the world, accounting for 13.3% in 2017.

Clean technology

Denmark is one of the few countries in the European Union that offers a very good opportunity for businesses whose area of activity is clean technology. With innovations in smart grid, smart city, recycling, upcycling, water management and renewable energy, this country is at the forefront of the world when it comes to green investments. One of the main goals in Denmark in this area is to be a country powered entirely by renewable sources. The Danish government plans to achieve this goal by 2050.

Agriculture

As much as 60% of Denmark’s total land area is used for agricultural activities. This makes the country abundant in food, and on average twice as much food is produced annually as the total national demand. Not surprisingly, Denmark is one of Europe’s food export leaders – the country supplies organic produce, meat, milk and vegetables, among other products.  The food products produced in Denmark are of very high quality. Agriculture is an extremely important industry for the Danish economy, as it accounts for 20% of total Danish exports.

Transport

Denmark’s transportation infrastructure is extremely developed, due to the significant investments that are being made in the industry. Denmark is famous for its very modern network of highways and rail links. It has three large, major airports – in Copenhagen, Aalborg and Billund, which are used by more than 33 million passengers annually. There are five other, smaller airports that serve only for transportation within the country. The maritime industry should not be forgotten either. Danish ports are highly developed and annually handle 100 million tons of cargo and 50 million passengers.

Engineering and high technology

Denmark has a reputation as one of the best countries in the world to do technology business. The Danish test market has talented programming specialists with extensive experience and expertise. Denmark is home to numerous engineering and high-tech companies in the electronics, aerospace, pharmaceutical and robotics industries.

Best Danish cities to start a company

Copenhagen

Copenhagen is a city that is open to foreign entrepreneurs, giving a great deal of support in running a business. Among other things, those operating a business in Denmark can take advantage of the Copenhagen Business Hub, which provides a great deal of training and business consulting. Copenhagen’s unique location means that it has very good logistical connections to both continental Europe, the Baltics and the Nordic countries. Copenhagen Airport has been officially awarded as the best in Northern Europe. Companies planning to expand into the Scandinavian market should definitely pay attention to Copenhagen – it is about 15-20% cheaper to establish a company in this city than in the nearby Swedish capital, Stockholm. Copenhagen is one of the world leaders among smart cities, which gives investors a unique opportunity to develop companies related to this type of technology. The most promising investments can count on funding from the Danish government and the chance to bid with the Danish public sector. Copenhagen has as many as 15 science parks and 14 universities, giving access to a highly skilled workforce.

Aarhus

Aarhus is the second largest city in Denmark. Among other things, it is home to the international container port, which is responsible for handling more than 60% of the container traffic taking place in Denmark. Worldwide well-known companies such as Uber, Lego, Arla and IBM are also headquartered in Aarhus. The city is characterized by very good infrastructure as well, which enables efficient transportation. Interestingly, Aarhus is also a leader among Danish cities when it comes to startup survival rates.

Odense

Odense is located in the center of Denmark, which has made the city a very important commercial center. Odense is famous as a traditional industrial town, but as a result of numerous transformations, it is now representative of the modern „Industry 5.0.” ecosystem. A particularly developed industry in Odense is the robotics and industrial automation sector – there are as many as 133 engaged in this type of activity in the city, employing about 4,000 people. Odense, specifically the city’s airport, is also home to one of Europe’s most modern centers for drone research. The digital infrastructure that Odense has is world-class – so it’s no surprise that Facebook decided to establish its new hyperscale data center in the city.

Denmark offers entrepreneurs opportunities that are unparalleled anywhere else. It is a European business center, where companies can count on great support from both state authorities and private entities. The place where you register and do business is extremely important – by choosing Denmark, we can be almost certain that we are making the best possible choice.

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