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To be, or not to be planting flags in Denmark

July 19, 2010
Copenhagen, Denmark

The Kingdom of Denmark is one of those places like Ghana or Guatemala… everyone’s heard of it, but no one really knows anything about it aside from what they read in Hamlet. I’m here to tell you that the country definitely has some merit, and it may be worthy of you planting some flags, with caution.

For starters, Denmark ranks very highly as a place to plant a PT or part-time residency flag. One of the biggest reasons for this is because there is no language barrier; sure, Danish is the official language, but North American English is spoken with a near native fluency.

This is quite common in Scandinavia; despite sharing certain core traditions and characteristics, each country in the region has its own language. They’re not even necessarily related, either. Swedish, for example, is Germanic in origin, while neighboring Finnish is actually closer to Hungarian.

To cope with this disparity, English has become the de facto pan-Scandinavian language… it’s simply assumed that everyone speaks English.

Aside from being an easy place to communicate, the standard of living is high in Denmark. It’s a very clean country, and crime is low. Copenhagen has seen an increase in certain drug-related turf battles in the seedier areas of town, but this hardly affects the vast majority of the populace.

As such, families with children should have little concern about planting a flag in Denmark.

For single people, Denmark can be a veritable paradise; the locals are very attractive (both men and women), and they tend to react favorably to foreigners… especially those with darker features.

On the downside, living costs are significantly higher than North America and most of Europe. Danish import duties and taxes are among the highest in the world, and this is what contributes so much to the excessive pricing.

To give you an example, dining out can easily set you back $50 per person at an average restaurant. Things like rent which aren’t subject to VAT, however, are much more reasonable. A 2-bedroom apartment in the city center rents for about 1,000 euro/month.

As a place to plant a tax residency flag, Denmark fails miserably. Residents of Denmark are taxed on their worldwide income, and capital gains are treated as income. In total, Danes can pay up to 59% of their income in taxes.

Most of whatever money is left over that is spent on goods and services is subject to a 25% VAT. Painful. Tax residency in Denmark simply isn’t worth it.

One of the nice things about their VAT regime, though, is that you may be entitled to a VAT refund if you are not a resident. Provided you keep your receipts and do a bit of paperwork, you can collect a refund on your way out of Denmark… this is one of the advantages to being a PT.

As a place to plant a business flag, Denmark is not worthy of your consideration; employees are incredibly expensive, both due to their high salaries as well as the payroll tax liabilities.

Furthermore, Danish employees simply aren’t very ambitious. A recent survey indicated that only 4% of Danish employees are actively seeking to move up in their organization, while 68% said that they specifically do not want to be promoted.

Employees with this sort of attitude are not the type who will bust their butts in order to make themselves and the company more successful.

As a place to explore new markets for your business, though, Denmark is definitely worthy of your consideration. The average Danish bank balance is just shy of $30,000; they have money, and they will spend on value-added products and services.

As a place to plant a banking flag, skip over Denmark. There are better jurisdictions in nearby Switzerland, Austria, and you normally have to be a resident to open a Danish bank account.

If you’re looking for an online brokerage, Denmark may be useful to you. Saxo Bank has a great online trading platform that gives you access to a variety of international stock exchanges and FOREX. I can tell you from experience, though, that they’re a bit weak on customer service.

It’s also important to note that Saxo Bank no longer accepts new applications from US citizens. This is a recent change, and another example of how the window is closing on many offshore opportunities for some nationalities.

Lastly, as a place to acquire second citizenship, Denmark is unfortunately not a viable option; the Danish nationality law requires 9-years of permanent residence, and you must agree to renounce your previous citizenship. If you’re seeking an EU passport, Belgium is a much better option.

Children born in Denmark are also not entitled to Danish citizenship, unless at least one of the parents is a Danish national.

About the author: Simon Black is an international investor, entrepreneur, permanent traveler, free man, and founder of Sovereign Man. His free daily e-letter and crash course is about using the experiences from his life and travels to help you achieve more freedom.

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Comments on this entry are closed.

  • Wille

    I would actually argue that planting a business flag in Denmark CAN be beneficial under very specific circumstances:
    Denmark has one of the best Holding Corporation regimes in Europe (the other EU standout being Holland(!)) and access to a very wide range of double taxation treaties which can make use of this, with none of the “tax haven” stigma of many other countries.

    For instance: for a EU citizen living in a high tax European country, holding shares in your other businesses through a Danish holding company can be useful, as qualifying dividends and share sales will not be liable to dividend tax, capital gains tax or corporation tax.
    In other words, it could be a potentially useful vehicle for stock holdings for people living in European high tax countries who want to defer paying dividend- or capital gains tax indefinitely.

    ..that being said, administration costs and startup costs may be pricey, so the potential gains would have to be substantial, as well as ensuring that the double taxation treaty between Denmark and the country of your residence allows for taking advantage of these benefits.

  • Cristian

    A couple of observations. Children born in DK with one parent a DK citizen does not necessarily give the child DK citizenship options. My wife is Danish. Our first child was born in DK [1968]. Because I am US citizen, the DK authorities said there was no option, the child would be issued a US passport and that was that. Years later we looked into the possibility of his gaining a DK passport at age 18, or 21 or whatever age the Danish authorities marked. No go. Not an option unless he had lived in DK for 5 consective years during his first 18.
    The VAT recovery you outline is being made more and more difficult. That is, another layer of paperwork has been added for “walk-outs.” A high priced item exported is easier, but often a 6 to 12 week wait for the refund [better than no refund].
    Den Danske Bank will open an account for a US citizen still since they have North American banks and have long since complied with US demands. If you don’t provide a SS number, then they withhold 25% of any interest earned, no recourse.
    Comment #1 ref Danish holding company is quite correct. Holland is a touch better and easier to navigate.
    Would love for you to show me where to find the 2 bedroom apartment in city center for 1000 euros! Seriously! Unless you mean that 4th floor apartment with no elevator and all of 45 meters square.
    Good article and write-up. Thanks.

    • AlexP1973

      Cristian- they changed the law in 2004; what Simon is saying is current.

  • Don

    Wille gives part of the answer I missed in your article. We opened a saxo account to attempt to learn Forex trading and thus funded it minimally. We were told that Forex profits were not taxed to us in Denmark but we unfortunitly never needed to varify that!Subsequently we considered using the platform for stocks, etc. But we could never figure out how to ascertain the tax withholding on future profits (Willie suggests none as in USA or Canada if in a non treaty country) , nor the safety of Saxo Bank, nor the treatment of sercurity holding in the Saxo account if we get a double dip, etc. Partly my own laziness but does anyone know?

    • Wille

      I don’t believe the holding corporation regime is valid for forex trading – I believe it is mostly for trading subsidiaries where the ownership is in excess of 10%.

      As for Cristians comment on Holland: Holland has a slightly friendlier regime, as they allow for Dutch holding corporations to be owned by offshore entities from the Netherlands Antilles (I believe IKEA is held this way and ultimately owned by offshore trusts closely tied to founder Ingvar Kamprad).

  • Elai

    You keep on talking about belgium as the goto place in EU, please write a letter about the place!

  • Zaph

    Hey Simon,

    What are your thoughts on Poland and a Polish passport. I’m American, but, my Grandpa was Polish so I’m entitled to a Polish passport. And I’ve been studying there for the past 3 years.

    Is it true that with a Polish passport, if I work in Poland as a Polish citizen I don’t owe the IRS anything even if I’m also a U.S. citizen?

    Also, do you know the difference between having dual-citizenship and having two citizenships because the Consulate told me that with the Polish passport I would have two citizenships NOT dual-citizenship. I’m thinking it’s something like I could only be a citizen of one country at a time.

    Lastly, do you see any negatives in being treated only as a Polish citizen while in Poland as they completely disregard any other passport?


  • lf

    Saxo Bank website still shows that US citizens can apply for Forex account. As for other services, they were not available to US residents as long as I remember. Do you mean that US citizens who are not US residents cannot open full-service brokerage account?
    That will be news, since just couple of years ago it was very easy to open full-service account for an American residing in Singapore with their Singapore branch…

  • Arbinvestor

    About a year ago i was working with some Danish colleagues when the issue about the integration of “immigrants” into Danish society came up. This was seen as a key challenge for Danish society and they all seemed quite concerned. When i started to try to understand the issue it quickly became clear that many of these “immigrants” had actually been living in Denmark for many years. When i asked the question “when does an immigrant become a Dane” they looked quite perplexed. “Oh no you don’t understand” they said. “Immigrants can never be Danish no matter how long they stay”.

    As i probed further it became clear at least that these Danes (notionally well educated and ‘liberal’) saw themselves as ‘Race” much as the Germans do and connected via blood rather than place and culture. Anyway, the whole discussion left me feeling rather queasy and yearning for a more simple US style approach where a set of common ideals and values are used to forge a nation and identify.

    So whereas Denmark might seem on the surface a pleasant enough place to live in reality you had better share some Danish ancestry or you will forever be tagged as an “immigrant”!

  • Mark

    Jyske Bank (the 3rd largest in Denmark) does accept US clients through an SEC registered subsidiary called JGAM (Jyske Global Asset Management). Their staff is all salaried and does not receive commissions, which seems refreshing to me (not having to worry about self-interested advice). They seem to do quite well with foreign exchange trading and carry trade investments. I am in the process of establishing an account there now.

  • David

    Hi Simon,

    can you recomend an apartment for two persons in Austria Wiena. Maybe you can recomend an agency. Price range per night should be moderate, around 0 – 100 € per night.

    Thank you very much.

  • JJ

    Note that Saxo bank has been reported to the fraud squad and one of the directors have moved to switzerland where he tried to hide by reporting a fake adress to the danish authorities. This happened only a few weeks ago. I’ve met with him once, and he seems like a nice guy. But you never know.

  • Swin

    I agree with simon’s opnion about Saxo- I’ve used their service before… customer service definitely lacking (They took 2 weeks to return an email!) but a good trading platform.

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