2012 Investment Climate Statement
Bureau of Economic and Business Affairs
June 2012
Report

Denmark is characterized by political, economic and regulatory stability. It is a member of the European Union (EU), and Danish legislation and regulations conform to EU standards on almost all issues. Denmark is a social welfare state with a thoroughly modern market economy reliant on free trade in both goods and services. It is a net exporter of food and energy, but depends on raw material imports for its manufacturing sector. Within the EU, Denmark is among the strongest supporters of liberal trade policy. Denmark experienced an economic downturn during the global economic crisis with a 5.8% contraction of GDP in 2009, followed by 1.3% growth in 2010. GDP growth of 1% with slightly increasing unemployment is projected for 2011 and 2012. The underlying macroeconomic conditions are relatively sound, and the investment climate is favorable. Denmark is situated strategically, linking continental Europe with the Nordic and Baltic countries. The transport and communications infrastructure is efficient. Denmark is among the world's leaders in industries such as information technology, life sciences, clean energy technologies, and shipping. Exchange rate conversions throughout this document are based on the 2011 average exchange DKK 5.362 = 1 USD.


Openness To, and Restrictions Upon, Foreign Investment

Denmark is a small country with an open economy. Denmark is highly dependent on foreign trade and international cooperation. Danish trade and investment policies are very liberal and encourage foreign investment.

In general, investment policies are forward-looking and aimed at fostering and developing businesses, especially in high-growth sectors. According to a 2008 business environment survey from the Economist Intelligence Unit (EIU), Denmark was rated the most attractive nation for foreign investment in 2008-2012. The 2011 survey for the period 2011–2015 ranked Denmark eighth globally, third regionally, and characterizes Denmark's business environment as among the most attractive in the world, reflecting a sound macroeconomic framework, excellent infrastructure and a highly flexible labor market. The main concerns relate to the ability to deal with a shrinking labor supply. Several factors are included in the survey, and Denmark scores top marks in various categories such as the political and institutional environment, macroeconomic stability, policy towards private enterprise, foreign investment policy, financing and infrastructure. As of October 2011, the EIU rates Denmark as an AA country on its Country Risk Service with a stable outlook, with sovereign risk at AA and political risk at AAA. Denmark ranked eighth on the Global Competitiveness Report 2011-2012 from the World Economic Forum, fifth on the World Bank’s Doing Business 2012 ranking, and third on the EIU Democracy Index 2011.

According to the Danish central bank, the total stock of foreign direct investment into Denmark in 2009 was Danish Kroner (DKK) 704.7 billion (current prices, exclusive of pass-through investments; equivalent to approximately USD125 billion), corresponding to 40% of GDP. U.S. investments of DKK 56.3 billion (USD 10 billion) in Denmark accounted for 8% of total FDI stock in 2010. The United States is the fourth largest foreign investor in Denmark, surpassed by Sweden (DKK 189.1 billion) the Netherlands (DKK 85.4 billion), and the United Kingdom (DKK 56.7 billion).

The government agency "Invest in Denmark" is part of the Danish Trade Council and is situated within the Ministry of Foreign Affairs. The agency provides detailed information to potential investors. The website for the agency is www.investindk.com. The Greenland Government's trade promotion agency, Greenland Expo, also has information for potential investors in Greenland. The website for the agency is www.greenlandexpo.com. SamVit, the organization charged with promoting economic growth in the Faroe Islands, provides information for potential investors in the Faroe Islands at http://samvit.info/index.php/invest-in-the-faroe-islands.

The Danish central and regional governments encourage foreign investment on a national-treatment basis. There is no mandatory screening of foreign investment. During 2011, focus on the tax compliance of multinationals increased as part of the national political debate. The Government allocated funds in the 2012 national budget for intensified supervision and enforcement of taxation for multinationals, to ensure their compliance with the Danish tax regime.

According to the Danish Competition Act, the Competition Authorities require notification of mergers and takeovers if the combined turnover of the participating companies exceeds DKK 50 million (approx. USD 9.3 million). However, notification is not required if only one of the participating companies has turnover of more than DKK 10 million (approx. USD 1.9 million). If the combined turnover of the merging companies exceed DKK 900 million (approx. USD 170 million) and at least two of the merging companies each have turnover exceeding DKK 100 million (approx. USD 19 million) or if one of the merging companies has domestic annual turnover exceeding DKK 3.8 billion (approx. USD 710 million) and at least one of the merging companies has global annual turnover exceeding DKK 3.8 billion (approx USD 710 million), the merger or takeover is subject to approval by the Competition Authorities. The EU Commission’s approval must also be obtained for large scale mergers.

There are certain restrictions on foreigners' acquisition of real estate in Denmark. EU citizens and companies from EU member states can purchase any type of real estate except vacation properties without prior authorization from the authorities. Companies and individuals from non-EU countries that have been present/resident in Denmark for at least five years in total and are currently resident in Denmark can also purchase real estate except vacation properties without prior authorization. Non-EU companies or individuals that do not meet these requirements can only purchase real estate with the permission of the Danish Ministry of Justice. Permission is freely given to people with a Danish residency permit, except with regard to purchases of vacation properties. Purchases of designated vacation properties are restricted to citizens of Denmark. See section regarding limits on foreign ownership and control in certain sectors for further information.

Ranking in Indices:

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Measure

Year

Index/Ranking

TI Corruption Index

2011

Score 9.4 - Rank 2nd, down from 1st in 2010

Heritage Economic Freedom

2011

Score 78. 6 - Rank 8th (9th in 2010)

World Bank Doing Business

Doing Business 2012

Rank 5th – unchanged

IMD - The World Competitiveness Scoreboard

2011

Rank 12th (13th in 2010)

World Economic Forum - Global Competitiveness Report

2011 - 2012

Rank 8th (9th in 2010 – 2011)

EIU Democracy Index

2011

Rank 3rd

MCC Gov’t Effectiveness

N/A

N/A

MCC Rule of Law

N/A

N/A

MCC Control of Corruption

N/A

N/A

MCC Fiscal Policy

N/A

N/A

MCC Trade Policy

N/A

N/A

MCC Regulatory Quality

N/A

N/A

MCC Business Start Up

N/A

N/A

MCC Land Rights Access

N/A

N/A

MCC Natural Resource Mgmt

N/A

N/A

Denmark is a major international development assistance donor. The Millennium Challenge Corporation (MCC) and the Ministry of Foreign Affairs signed a Memorandum of Understanding in 2008 to increase cooperation.

Conversion and Transfer Policies

Denmark has not introduced the Euro currency. Although it previously met the EU's economic criteria for membership, the government's response to the global economic crisis has pushed the annual budget deficit past the allowed threshold of 3% of GDP; it is projected to remain over that level through 2012. The Danish reservation concerning Euro participation can only be abolished by referendum, and Danish voters twice (in 1992 and 2000) turned down the introduction of the Euro via national referendum. The Government has indicated it will not hold another referendum on the Euro before the next national election, i.e. probably no sooner than 2016; polling shows an increasing majority of public opinion in favor of keeping the Krone – 59.2% against joining the Euro versus 14.6% in favor, according to a December 2011 Danske Bank poll.

Denmark conducts a fixed exchange rate policy with the Danish Krone linked closely to the Euro within the framework of ERM II. The Danish Krone (DKK; plural: Kroner) has a fluctuation band of +/- 2.25% of the central rate of DKK 746.038 per 100 Euro.

There are no restrictions on converting or transferring funds associated with an investment into or out of Denmark. Policies 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.

Expropriation and Compensation

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

Dispute Settlement

There have been no major disputes over investment in Denmark in recent years. The judicial system is extremely well-regarded and fair. The legal system is independent of the legislative branch of the government and is based on a centuries-old legal tradition. It includes written and consistently applied commercial and bankruptcy laws, and secured interests in property are recognized and enforced. The World Economic Forum's 2011-2012 Global Competitiveness Report, which ranks Denmark as the world's eighth most competitive economy and fifth among the EU27, characterizes Denmark's judicial system as a notable competitive advantage. Denmark has among the best-functioning and most transparent institutions in the world. In addition, Denmark ranks highly among the evaluated countries for its judicial independence (number 2), property rights protection (number 7), intellectual property protection (number 6), and efficiency of legal framework in settling disputes (number 8).

Monetary judgments under the bankruptcy law are made in freely convertible Danish Kroner. The bankruptcy law addresses creditors' claims against a bankruptcy in the following order: (1) costs and debt accrued during the treatment of the bankruptcy; (2) costs, including the court tax, relating to attempts to find a solution other than bankruptcy; (3) wage claims and holiday pay; (4) excise taxes owed to the government; and (5) all other claims.

Denmark is a member of the International Center for the Settlement of Investment Disputes (ICSID) and is a party to the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Subsequent Danish legislation makes international arbitration of investment disputes binding in Denmark. In addition, 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.

Performance Requirements/Incentives

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

Performance incentives are available to both foreign and domestic investors. For instance, foreign and domestic investors in designated regional development areas may take advantage of certain grants and access to preferential financing. Investments in Greenland may be eligible for incentives as well.

Denmark does not offer favored treatment to foreign investors. Foreign subsidiaries located in Denmark can participate in government-financed or subsidized research programs on a national-treatment basis.

Right to Private Ownership and Establishment

A foreign or domestic private entity may freely establish, own, and dispose of a business enterprise in Denmark. The capital requirement for establishing a corporation (A/S) is DKK 500,000 (approx. USD 93,000) and for establishing a private limited liability company (ApS) DKK 125,000 (approx. USD 23,000). No requirements apply as to the residency of directors and managers of A/S or ApS.

Since October 2004, a private entity may found a European public limited company (SE company). The legal framework of the SE company is to a large degree subject to national company 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 Commerce and Companies Agency if the official address of the company is in Denmark. The minimum capital requirement is 120,000 Euros (approx. USD 165,000).

Like most other countries, Denmark imposes restrictions on establishing companies providing professional services (e.g., legal, accounting, auditing, and medical services). Danish professional certification and/or local Danish experience is required to practice in Denmark. In some instances, Denmark may accept an equivalent professional certification from other EU or Nordic countries on a reciprocal basis.

Establishment of new, large department stores outside city centers is on a non-discriminatory economic needs-test basis and has to be approved by the local authorities. The maximum size of a store must not exceed 3,500 square meters without explicit permission.

Ownership restrictions are applied in the following sectors:

- Hydrocarbon exploration: Requires 20% Danish government participation, but on a "non-carried interest" basis.

- Defense materials: The law governing foreign ownership of defense companies (L538 of May 26, 2010) stipulates that the Minister of Justice has to approve foreign ownership of more than 40% of the equity or more than 20% of the voting rights, or if foreign interests gain a controlling interest in a defense company doing business in Denmark. The approval will be granted unless there are foreign policy considerations or security issues weighing against approval.

- Aircraft: Unless a waiver is granted, non-EU physical and legal persons may not directly own or exercise control over aircraft registered in Denmark.

- Ships registered in the Danish International Ships Register (DIS) must, as a general rule, be Danish-owned. Ships owned by Danish citizens, Danish partnerships or Danish limited liability companies are eligible for registration. Ships owned by EU or European Economic Area (EEA) entities with a genuine link to Denmark are eligible for registration. Also, foreign companies with a major Danish influence can register a ship in the DIS.


Protection of Property Rights

Property rights in Denmark are well protected by law and in practice. Intellectual property protections in Denmark are particularly well regarded. Denmark adheres to key international conventions and treaties concerning protection of property rights. Denmark has ratified The WTO Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS). The WIPO (World Intellectual Property Organization) internet treaties, the WIPO Copyright Treaty (WCT) and the WIPO Performances and Phonograms Treaty (WPPT), have been signed, ratified, and are in force.

Real estate is for the most part 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. The new Basel III framework for capital requirements (particularly CRD IV) may present a challenge to the Danish mortgage bond credit system, though final regulation is not in place yet.

With the amended Danish mortgage banking regulation, commercial banks now have the same opportunities as mortgage banks and ship-financing institutions to issue covered bonds. Only issuers that have been granted a license from the Danish Financial Supervisory Authority (FSA) are able to issue Danish covered bonds.

Secured interests in property are recognized and enforced in Denmark. All mortgage credits in real estate are recorded in local public registers of mortgages. Except for interests in cars and commercial ships, which are also publicly recorded, other property interests are generally unrecorded. The local public registers are a reliable system of recording security interests.

Transparency of the Regulatory System

Danish laws and policies granting national treatment to foreign investments are designed to support the Danish goal of increasing FDI in Denmark. Denmark applies high standards with regard to health, environment, safety, and labor laws. These policies are universally applied and are not used to impede foreign investment. Danish corporate law is generally in conformity with current EU legislation. The legal, regulatory and accounting systems are relatively transparent and in accordance with international standards. Bureaucratic procedures are streamlined and transparent, and proposed laws and regulations are published in draft form for public comment.

In June 2007, the Danish Parliament enacted a major bill on Controlled Foreign Company (CFC) taxation and private equity funds. The bill reduced the corporate tax rate from 28% to 25%. The bill also limited tax speculation for private equity funds. Additionally, the bill capped deductibility of net financing costs and changed taxation of dividend and liquidation distributions. Furthermore, the bill included amendments to the taxation of CFCs indirectly forced upon the Danish government by a European Court of Justice (ECJ) ruling in the British "Cadbury-Schweppes" case. The Danish rules now include specific criteria for when CFC taxation will be triggered, such as the relative size of financial assets and CFC income.

Efficient 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. The Danish banking system is under the regulatory oversight of the Financial Supervisory Authority. Like banks in many other countries, Danish banks experienced significant turbulence in 2008 - 2009. In October 2008, the Danish Parliament passed legislation that calls for all private banks and the Danish government to finance jointly a "safety net" program that provides unlimited guarantees for bank deposits and certain classes of bank creditors through September 2010. Both Danish and foreign deposits were covered by the legislation. A total of 133 banks joined this so-called "Bank Package." In spite of this legislation, some local businesses reportedly complain of tight lending practices and difficulty in obtaining bank financing. When the “Bank Package” expired in September 2010, the Government had a profit from the agreement. In January 2009 a second initiative was passed, "Bank Package 2," which provided government lending to financial institutions in need of capital to uphold their solvency requirements. Only Danish banks were eligible for inclusion in the second initiative. A total of 43 applicants received DKK 46 billion (approximately USD 8 billion) through this initiative. A government-run Financial Stability Company was initiated to take over failed banks. By the end of 2010, ten banks had been taken over or divided and sold by the Financial Stability Company. A third package was enacted in July 2010 without a set expiration date, which ensures the orderly management of failed banks through the Financial Stability Company in the period after September 30, 2010 when Bank Package I expired. The package guarantees all deposits up to DKK 750,000 (approx. USD 130,000).

The third Bank Package received much national and international criticism for making Denmark one of the EU's toughest jurisdictions in terms of dealing with banks in distress. The package includes provisions stipulating that senior debt holders will shoulder losses in the event of a bank failure. The failure of Amagerbanken, the tenth largest Danish bank, in February 2011 resulted in some ripple effects for smaller Danish banks, which experienced difficulty in accessing international credit markets, and intensified scrutiny of the financial sector by the rating agencies. A fourth Bank Package was passed in August 2011 which will 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 premium-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 Bank Package 3. Senior debt holder losses are still a possibility in the event of a bank failure. The Danish system of troubled financial institution resolution mechanisms is expected to be revised when the EU Commission presents a proposal for common EU rules at some point in 2012. The national payment system, Nets, is jointly owned by Danish banks; it is difficult for foreign banks to gain access and this may pose a barrier for foreign banks in Denmark. The assets of the three largest Danish banks -- Danske Bank, Nordea Bank Danmark, and Jyske Bank -- constitute approximately 75% of the total assets in the Danish banking sector.

The major Danish banks are rated by international agencies, and their creditworthiness is high by international standards. Following the failures of two Danish banks in 2011 that were resolved through the above mentioned Bank Package 3 resolution mechanism, the larger banks and mortgage issuers were downgraded by the international rating agencies, though their ratings remain at a relatively high level. The major Danish banks all passed European and national stress tests with a considerable margin.

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 market place, OMX Exchanges, headquartered in Stockholm. Besides Stockholm and Copenhagen, OMX also includes the stock exchanges in Helsinki, Tallinn, Riga and Vilnius. In order to increase the access to capital for primarily small companies, the OMX in December 2005 opened a Nordic alternative marketplace -- "First North" –- in Denmark. In February 2008 the exchanges were acquired by the Nasdaq OMX Group.

Competition from State-Owned Enterprises (SOEs)

SOEs hold dominant positions in rail, energy utility and broadcast media in Denmark. Large scale public procurement must go through public tender in accordance with EU legislation. Competition from SOEs is not considered a barrier to foreign investment in Denmark. The World Economic Forum's 2011-2012 Global Competitiveness Report ranks Denmark as fourth when it comes to lack of favoritism in government officials' decisions and finds that Denmark has among the best functioning and most transparent institutions in the world.

Corporate Social Responsibility (CSR)

A survey from 2000 found the Danish population to be the most willing among the European countries to pay more for products and services which are socially or environmentally responsible. Surveys from the international business school IMD in Switzerland rank Denmark at the top when it comes to corporations' social, environmental and ethical conduct. A recent survey by the London and Harvard business schools concludes that management is considered the most trustworthy in Denmark, Finland and Singapore. All major companies in Denmark have a CSR strategy. The Danish government has launched an action plan to advance CSR in Denmark and recommends following the principles of the UN Global Compact, UN PRI and OECD guidelines for multinational enterprises.

Political Violence

Denmark is a politically stable country. Incidents involving politically-motivated damage to projects or installations are very rare in Denmark.

Corruption

According to the 2011 Corruption Perceptions Index by Transparency International, Denmark is the second least corrupt country in the world along with Finland and only eclipsed by New Zealand. Denmark tied for first in the 2010 index with Finland and Singapore. Transparency International has local representation in Denmark.

Corruption is covered under the Danish Penal Code, and the Ministry of Justice is responsible for combating corruption. 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 of the OECD Convention on Combating Bribery and the UN Anticorruption Convention.

Bilateral Investment Agreements

Denmark has concluded investment protection agreements with the following 45 countries and Hong Kong: Algeria, Albania, Argentina, Belarus, Bolivia, Bulgaria, Czech Republic, Chile, China, Croatia, Egypt, Ethiopia, Estonia, Ghana, Hungary, India, Indonesia, Kuwait, Latvia, Lithuania, Malaysia, Mexico, Mongolia, Mozambique, Nicaragua, North Korea, Pakistan, Peru, the Philippines, Poland, Romania, Russia, Slovakia, Slovenia, South Korea, Sri Lanka, South Africa, Tanzania, Tunisia, Turkey, Uganda, Ukraine, Venezuela, Vietnam, and Zimbabwe. Further, Denmark has signed investment protection agreements with Bangladesh, Bosnia Herzegovina, Brazil, Cuba, Laos, Montenegro, Morocco and Serbia, but these agreements await ratification. There has been no change to the status of the investment protection agreements since the enactment of the Lisbon Treaty.

The U.S.-Danish Bilateral Convention for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income was concluded in 1999 and came into force on March 31, 2000. In May 2006, a protocol was signed to amend the existing tax treaty between Denmark and the United States. The most important aspect of the protocol relates to the elimination of withholding tax on cross-border dividend payments.

OPIC and Other Investment Insurance Programs

OPIC programs are not applicable to U.S. investments in Denmark, but may be used by at least 95%-U.S.-owned subsidiaries in Denmark to support their investments in qualifying countries.

Denmark is a member of the Multilateral Investment Guarantee Agency (MIGA).

Labor

The Danish labor force is generally stable, well-educated and efficient. Language skills are good, and English is considered a natural second language among a very high proportion of Danes. Furthermore, the Danish labor market is flexible. Danish rules on the hiring and firing of employees are not burdensome, which enables employers to adjust the workforce quickly to changing market conditions. The World Economic Forum Global Competitiveness Report 2011 – 2012 finds that Denmark continues to distinguish itself as having one of the most efficient labor markets in the world (ranked sixth), with more flexibility in setting wages, firing, and therefore hiring workers than in the other Nordic states and in most European countries more generally.

The Danish labor force amounted to approximately 2.75 million persons in 2011. Denmark's OECD-harmonized unemployment rate was 7.4% in 2010, which was relatively low compared to the EU and OECD averages. Based on November 2011 figures, unemployment was projected to be about 7.8% by the end of 2011, which is still relatively low compared to EU and OECD averages following the 2008 - 2009 economic crisis. Unemployment is expected to increase slightly through 2012.

The public sector in Denmark is large and accounts for approximately 28% of the employment at full-time equivalence. The labor force participation rate for women is among the highest in the world. In 2010, 72.4% of working-age women participated in the labor force and the employment rate was 70.4%. The male labor force participation rate and employment rate were 76.5% and 73.2% respectively.

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

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

Denmark has well-functioning unemployment insurance and sick-pay schemes, which are not financed by employers. Maternity leave in Denmark is 52 weeks to be divided between the parents as they see fit, though 18 weeks are earmarked for the mother and 2 weeks for the father. Employers are obliged to pay salary for at least 14 weeks.

Danish wages are high by international standards and have contributed to the use of capital-intensive technologies. The average wage level is seen as detrimental to Danish competitiveness. However, employer contributions to social security (including health care) are very low. As a result, total employee costs for employers are lower in Denmark than in many other industrialized countries. Real wages declined in 2009 and 2010 due to the economic crisis and restraint by the unions on wage increase demands.

In general, work permits are not difficult to obtain for foreign managerial staff. However, permits for non-managerial workers from countries outside the EU (citizens of EU countries do not require work permits) and the Nordic countries are granted only if substantial professional or labor-related conditions warrant it.

Special rules, detailed in the so-called 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. In 2011, professions covered by the Positive List Scheme include engineers, scientists, doctors, nurses, IT specialists, economists, lawyers, accountants and a wide range of other Master's or Bachelor's degree positions. The Pay Limit Scheme extends to positions with an annual pay of no less than DKK 375,000 (approximately USD 70,000) annually, 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.

Denmark also introduced a Green Card scheme to issue three-year residence permits to foreign nationals, allowing them to seek employment in Denmark. The residence permit can be extended for one year without special authorization, followed by a four year extension if authorized. Permits are issued based on an individual evaluation using a point system. However, a residence permit issued under the Green Card scheme is not a work permit. If offered a job, the applicant must apply for a work permit. A work permit is only granted for research and specialist positions, as well as positions covered by the above-mentioned Positive List scheme.

Generally, personal income tax rates in Denmark are among the highest in the world. However, foreign key employees and researchers may choose to be subject to a favorable 25% gross tax rate in the first three years of working in Denmark or to a 33% gross tax rate for five years. The choice must be made at the latest before the final date for filing tax returns for the year of taxation in which the employee chooses to be taxed under the special tax scheme for the first time. Some conditions must be fulfilled in order for key employees to be eligible for the 25% tax scheme: for example, in 2010 wages had to total at least DKK 69,348 (approx. USD 13,000) per month before the deduction of labor market contributions and after Danish labor market supplementary pension contributions. The special tax scheme is currently under review. Compared with the general Danish progressive income tax system, this is an attractive incentive. Further information can be obtained from the Danish embassies or from the Danish Immigration Service (www.nyidanmark.dk).

Denmark adheres to the ILO conventions protecting worker rights.

Foreign Trade Zones/Free Ports

The only free port in Denmark is the Copenhagen Free Port operated by the Port of Copenhagen. The Port of Copenhagen and the Port of Malmo (Sweden) merged their commercial operations in 2001, including the free port activities, in a joint company named CMP. CMP is one of the largest port and terminal operators in the Nordic Region and one of the largest Northern European cruise-ship ports; it occupies a key position in the Baltic Sea Region for the distribution of cars and transit of oil. The facilities in the free port are mostly used for tax-free warehousing of goods imported, for exports, and for in-transit trade. Tax and duties are not payable until cargo leaves the Free Port. Also, 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 the 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.


Foreign Direct Investment Statistics

The total stock of FDI inbound to Denmark in 2010 corresponded to 40% of GDP (current prices, exclusive of pass-through investments). Danish outbound direct investment corresponded to 62% of GDP in 2010. The largest foreign investor in Denmark is Sweden, followed by the Netherlands, United Kingdom, the U.S, Luxembourg and Germany. U.S. investment accounted for 8% of the total 2010 FDI stock in Denmark, up from 6.8% in 2009.

Major U.S. direct investment in Denmark is in telecommunications, information technology, biotechnology, oil exploration, financial services and facility services. During recent years, several U.S.-based private equity funds have invested in Danish firms such as ISS, the Legoland Parks, TDC and Danisco. Over 400 U.S. companies have subsidiaries in Denmark, of which several are regional headquarters.

The main destinations for Danish FDI are Sweden (20.2%), the United States (10.7%), United Kingdom (8.8%), Germany (7.7%) and Norway (5.9%). EU countries held 57.6% of the stock in 2010.

The following are tables for foreign direct investment at current prices. Pass-through investments are not included since they have no or very little real-economic significance for the pass-through country. The source of data is the Danish Central Bank, www.nationalbanken.dk, based on average exchange rates of DKK 5.099 = 1 USD in 2008, DKK 5.355 = 1 USD in 2009, DKK 5.626 = 1 USD in 2010 and DKK 5.362 = 1 USD in 2011.

Foreign Direct Investment in Denmark


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Table 1. Danish FDI Inbound, STOCK

2008

2009

2010

Total DKK, billions

699.2

711.1

704.7

Total USD, billions

137.1

132.7

125.2

% of GDP

40%

42%

40%

% of Total, Origin:

2008

2009

2010

USA

9%

7%

8%

EU

75%

76%

73%

-Sweden

25%

26%

27%

-Luxembourg

9%

9%

8%

-Netherlands

14%

13%

12%

-United Kingdom

8%

9%

8%

-Germany

6%

7%

8%

Norway

6%

6%

7%

% of Total, Sector:

2008

2009

2010

(Sector of the Danish enterprise)

Agriculture, Fisheries, Raw Materials

2%

3%

3%

Manufacturing

16%

17%

21%

Energy and Water Supply, and Construction

2%

2%

2%

Trade & Transport, etc.

18%

19%

17%

Information & Communication

7%

6%

9%

Financial Intermediation

39%

40%

38%

Business Service, Insurance

8%

8%

6%

Real Estate Commercial and Non-Commercial

5%

4%

3%

Table 2. Danish FDI Outbound, STOCK

2008

2009

2010

Total DKK, billions

899.7

973.7

1094.2

Total USD, billions

175.3

179.7

204

% of GDP

52%

58%

62%

% of Total, Destination:

2008

2009

2010

USA

9%

10%

11%

EU

61%

59%

57%

-Sweden

19%

21%

20%

-France

6%

4%

4%

-Netherlands

5%

4%

4%

-United Kingdom

6%

6%

9%

-Germany

8%

8%

8%

Norway

6%

7%

6%

% of Total, Sector:

2008

2009

2010

(Sector of the Danish enterprise)

Agriculture, Fisheries, Raw Materials

6%

6%

6%

Manufacturing

31%

30%

33%

Energy and Water Supply, and Construction

2%

4%

4%

Trade & Transport, etc.

17%

17%

17%

Information & Communication

3%

3%

2%

Financial Intermediation

27%

26%

27%

Business Service, Insurance

11%

10%

8%

Real Estate Commercial and Non-Commercial

3%

3%

2%


Major FDI in Denmark by U.S. companies:

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Microsoft

IT

IBM

IT

HP/Compaq

IT

Intel

IT

Computer Sciences Corp., USA

IT

ADC Telecommunications Inc.

IT

Motorola

Telecom

Texaco

Energy

Amerada Hess

Hydrocarbon exploration

Ashland

Road Construction

Masco

Furniture and Sanitary Fittings

York Holding Corp.

Refrigerating Equipment

Tenneco Inc.

Automotive

3M

Tapes, Health Care and Pharmaceuticals

Pfizer

Pharmaceuticals

Merck, Sharp & Dohme

Pharmaceuticals

Eli Lilly

Pharmaceuticals

Sauer Inc.

Fluid Power

CP Kelco

Hydrocolloids

Doane Pet Care Co.

Pet Food

GE Capital

Financial Services

Biogen IDEC

Biotechnology


Among the largest U.S. corporate takeovers in Denmark are:

- DuPont’s acquisition of the Danish enzyme and ingredient producer Danisco in May 2011. DuPont’s final bid for DKK 700 per share (approximately DKK 37.9 billion (USD 7.1 billion) total) gave DuPont complete control of the company.

- Microsoft's acquisition of the Danish software company Navision in 2002 (USD 1.2 billion) and IBM's acquisition of Maersk Data in 2004 (estimated USD 400 million).

- Ameritech purchase of 34% of the Danish telecommunication provider incumbent Tele Danmark in 1997 for DKK 21 billion (USD 3.2 billion, 1997 exchange rate). Ameritech was later acquired by SBC Communications that gained an additional 8% of Tele Danmark stock and sold off its position in 2004 for DKK 14 billion (USD 2.3 billion, 2004 exchange rate).

- In May 2007, the Greenland Home Rule Government and Alcoa signed a memorandum of understanding to study the feasibility of the construction of an aluminum smelter and associated hydropower generation and transmission facilities in Greenland. It is estimated that upon completion, the Alcoa investment would be worth approximately USD 2.5 billion, the largest ever greenfield U.S. direct investment in the Kingdom of Denmark. U.S. companies ExxonMobil and Chevron own approximately 48% of a partnership that, in October 2007, was awarded licenses for the exploration and exploitation of hydrocarbons off the western coast of Greenland. In 2010, Greenland announced the award of exploration licenses for seven blocks in Baffin Bay off Greenland's west coast. ConocoPhillips was among the seven awardees. The list of companies with licenses for oil/gas exploration in Greenland also includes: Exxon, Chevron, Husky and EnCana among others.

Other FDIs in Denmark mostly come from Denmark's neighboring countries or other nearby countries, including Sweden, Iceland, Norway, Finland, Germany, and the United Kingdom. Most of those nations' major companies, and numerous smaller ones, have a presence in Denmark, either as regional headquarters, sales/marketing offices, or in production. Some foreign companies with large investments in Denmark are Statoil (Norway); L.M. Ericsson (Sweden); Nordea (Sweden); Vattenfall (Sweden), APV (United Kingdom); Bayer (Germany), and Q8 Oil (Kuwait).

Several Danish companies have a presence in the U.S., both to get closer to the market and to gain access to American Recovery and Reinvestment Act (ARRA) funds, some of which have been allotted to, among others, Vestas Wind Systems and Novozymes.

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