Dateline: Copenhagen, Denmark
I’m in Denmark for all of six hours on a purposefully scheduled layover. To be honest, Denmark is one of the few European countries I haven’t been to and I wanted to at least pop in for a quick visit. Denmark is an interesting place. On one hand, you wouldn’t be thought as odd to think the place practically invented regulation. Last year, some bureaucracy passed an edict forcing salons to charge women with short hair the same price as men. As if their top income tax rate of 56 percent wasn’t enough, Denmark also has a tax on fatty foods. Oh, and then there’s that TV ad that encourages Danes to travel Europe, citing statistics that they’re more likely to have sex and prop up dwindling birth rates in Paris than Aarhus. Seriously. As a result of all of that regulation and Denmark’s sky-high income taxes, Copenhagen is far from a cheap place to live. My small plate lunch of glazed pork at the Hotel d’Angleterre set me back $31. On the other hand, Denmark has been given high marks for economic freedom. In its oft-quoted Economic Freedom rankings, The Heritage Foundation pegs Denmark as the world’s tenth freest economy – three spots ahead of The Land of the Free, which dropped back out of the top ten this year. Imagine, a highly socialist European country with a fascination for societal wealth distribution outpacing the United States in economic freedom. Go back ten years and ask yourself if you ever thought you’d see pigs fly. The reason Denmark scores so well in spite of horrible government spending and growth statistics is simple. Property rights, freedom from corruption, investment freedom, and financial freedom are all at near-record levels. Basically, the things you’d look for in an asset protection safe haven. Denmark is not a member of the Euro currency zone; instead, it’s Danish crone trades at about 5.5 per US dollar. While the Norwegian kroner is typically regarded as the safe-haven currency in this region thanks to Norway’s abundance of oil wealth, the Danish kroner hasn’t been a bad currency to hold the last two years. After my friends at the Sovereign Society discussed the possibility that Denmark is the new Swiss bank account for offshore investors, I wanted to consider the idea further. Consider a few facts:
1. Denmark is a member of the European Union but not in the eurozone.
I frequently suggest that you stay away from countries that are part of destructive alliances like the EU. There are exceptions when a country really stands out, but I prefer to deal with independent countries in charge of their own affairs. Denmark, of course, isn’t some backwater in far eastern Europe. No one is claiming that Vladimir Putin will march into Copenhagen any time soon. Denmark is as European as you can get, and it has full access to the European markets without some of the inconveniences of sharing a currency with places like Greece.
2. Denmark banks offer lower fees and account minimums with strict ethical standards.
Bank secrecy isn’t a huge thing here in Denmark, although there is enough of it for the global watchdogs to claim Denmark must make “major progress” to become a transparent financial center. However, the offshore sector in Denmark is growing. Jyske Bank is based here, and has a sizable offshore bank presence in places like Gibraltar, as well. For a fraction of the cost of opening an account in Switzerland, you can open an account in Denmark. Private banking services are available here for anyone with a few hundred thousand dollars. That’s not exactly a high bar, putting Denmark on par with mid-level private banking services in a place like Singapore.
3. Denmark banks aren’t under attack by the European Union or the IRS.
You know that the IRS is coming down hard on offshore banks all around the world. That’s why fewer and fewer offshore banks are willing to accept American clients. But what you may not know is that the EU is also cracking the whip on banks it believes are out of line. European governments got together to create the European Savings Directive, which mandates reporting of interest earned in EU member banks by residents of other EU countries. Of course, like any far-reaching government, the EU bureaucrats took it way too far. These days, the Directive is being used to harass offshore banking jurisdictions like Andorra, which is imposing its first-ever income tax thanks to bullying by the high tax European community. Meanwhile, European politicians have long had it out for Austria, whose bank secrecy laws are perhaps the strongest in Europe. In an era where bankrupt Europe wants every government to know everything about everyone, Austria hasn’t budged, and that puts it in a bad spot of sorts. However, Denmark is not the victim of any such witch hunts. And for Americans, Danish banks aren’t on the IRS radar. That doesn’t mean you shouldn’t report a bank account held in Denmark, but it means that your bank there won’t subject you to the nonsense that Swiss bank account holders have had to go through. Switzerland, of course, has been under fire from the IRS for years. The oldest bank in Switzerland closed as a result of aggressive targeting by the IRS and the US government. Larger Swiss banks were not immune from huge blows, as well, and many have paid huge fines to settle tax evasion charges with Uncle Sam. For that reason, opening an offshore Swiss bank account is nearly impossible these days. One or two smaller banks will let you in with around $750,000, and others require millions. Denmark banks do not have such stringent requirements precisely because they haven’t been targeted as evil tax evasion conspirators. Denmark’s bank deposit insurance program covers deposits of up to 750,000 Danish kroner (about US$138,000), and its position outside of the European Union’s “mandatory” 100,000 euro deposit insurance – which we know from Cyprus means nothing – is a plus in my book. Denmark’s offshore banking sector is tiny by most standards, accounting for well under 1% of all offshore deposits. Copenhagen isn’t exactly Zurich if you’re comparing this place to the Swiss bank account. However, many of the fundamentals we look for in an offshore banking hub can be found here in Denmark. There are some other potential benefits to placing some of your finances in Denmark which I’ll be covering later. Of course, choosing the best place to open an offshore bank account involves a number of factors including the stability of the jurisdiction and the local political climate. Denmark isn’t perfect, and the 1% interest you can earn on a 1-year CD here will be taxable in Denmark; check your tax treaty at home. If you have to travel to open an account, I’d rather you go to Singapore – if they’ll take you (and if you can take the flight). I believe there are a couple of ways to open Danish bank accounts from home, and I’ll report back on that later. However, amidst a sea of weak banking jurisdictions in Europe, Denmark doesn’t look all that bad. If you can afford pricey pork dishes for lunch, you could even make a vacation out of opening a private bank account.