Why Is Denmark So Expensive

Why is Denmark so expensive? The main reasons that the cost of living in Denmark is so high

If you look at the World Happiness Report each year, you’ll notice that Denmark regularly battles with Finland for the number one spot. And despite the terrible weather for most of the year, living in Scandinavia’s southernmost country has several benefits. But, why is Denmark so expensive?

The Danes enjoy an excellent work-life balance, and traveling is a breeze, with much of Europe reachable within 2-3 hours by plane. Moreover, families enjoy benefits such as shared leave when they have children — all while living in a safe country where crime rates are low and getting around is a breeze.

Before you book a one-way ticket to Copenhagen, it’s worth researching why the cost of living in Denmark is higher than in many other European countries. Stick with us because that’s what you’ll learn in this article.

Why Is Denmark So Expensive

VAT prices in Denmark are high by European standards

If you choose to make Denmark your home, you’ll quickly learn that there’s more than one form of high taxes. Perhaps the largest annoyance is value-added tax (VAT), known in Danish as moms.

The flat VAT for items in Denmark is 25%, which is the joint-second highest in the EU. Only Hungary (27%) is higher, while Sweden and Croatia have the same rate.

In Denmark, you’ll have to deal with VAT for almost everything you purchase. The rate applies to clothes you buy on the high street and electronics; it’s even included on food items you buy from grocery stores!

If you’re not a resident in Denmark or another EU country, we’ve got some good news; you can receive a tax refund on your shopping if you spend at least 300 Danish Kroner on a purchase. If you live in the UK (excluding Northern Ireland), you’re eligible for this refund as the country is no longer an EU member.

Ask for a tax-free form at the checkout register.

The Danes enjoy a high standard of living

Like the other Scandinavian countries, Denmark has a high standard of living compared to much of the world. And like Denmark, its neighbors to the north are all notoriously expensive countries to visit and live in.

Naturally, high quality comes at a cost. But in most cases, it’s worth it.

Minus a few exceptions, housing standards in Denmark are excellent. Moreover, you won’t see as many homeless people on the streets compared to major cities in other European countries.

The Danes also enjoy at least five weeks of paid holiday per year, and many receive “feriepenge” (holiday money) each year to spend on their travels — though they contribute to this from their salary.

If you live in Denmark, you also gain access to very good social services. The infrastructure is also very well-maintained, and the local cultural scene is alive and kicking too.

Education standards are also good, and even the larger cities don’t struggle with crime on the same level as places in the United States and elsewhere.

Moreover, Danish and EU students enjoy free education at university level.

Why Is Denmark So Expensive

The Danes earn a good salary compared to most other countries

You’ll probably ask: “why is Denmark so expensive?” multiple times if you ever visit. If you’re a local, things are still quite pricey, but you probably won’t feel it as much. Why? Because jobs in Denmark pay pretty well compared to most other places.

According to Statistics Danmark, the average salary in Denmark is 44,513 DKK (roughly $6,400) per month before tax.

Even though part of the Danes’ salaries goes toward their pension and high taxation on income at approximately 45% on average, most people — even in single-family homes — have more than enough to cover their monthly costs and enjoy life.

Income inequality exists in Denmark, just like it does everywhere globally. But unlike most countries, the Danes have done a pretty good job at keeping this to a minimum. According to the World Population Review, Denmark has a net Gini of 25.3 — which is much lower than the global average of 37.23.

High income tax, especially for the big earners, keeps Denmark’s income inequality at a minimum. But what also helps is that even entry-level jobs in the service industries still offer pretty high wages.

Although Danish law doesn’t state a minimum wage that employers must pay, workers are protected by trade unions.

Considering all of the above, Denmark isn’t such a bad place to live — even if it’s an expensive expat destination and cheaper options exist.

The Danish economy works

Another contributor to Denmark’s reputation as an expensive country is that the economy doesn’t function too badly.

Despite its small size, the Danes have made full use of their natural resources to develop a mixed economy that provides several jobs and has made them a valuable partner for many countries.

According to statistics from the World Bank, Denmark has a per capita gross domestic product of just over $61,000 in 2020.

Agriculture is one of the country’s most important industries; Denmark’s climate, along with its relatively flat landscape and arable land, make it excellent for growing produce such as carrots and potatoes.

Another core aspect of the Danish agricultural sector is meat production. The country had around 13 million pigs in 2020, compared to 5.8 million people. Bacon and other pork products are crucial exports, along with forming a key part of Danish cuisine.

Denmark’s position between the North and Baltic Seas makes it an important country for the energy sector as well. Perhaps unsurprisingly, its windy weather has led to the construction of numerous wind farms off the coast; over 40% of energy consumption in the country comes from this energy source.

Research is another important sector in Denmark, with Copenhagen and Aarhus Universities dedicating significant resources. Increasingly, the tech industry is making its mark on the country — especially in the two largest cities.

Major Danish tech businesses include the fintech companies Lunar and Pleo, while international companies such as Salesforce and Microsoft have offices in and around the Greater Copenhagen Area. 

Why Is Denmark So Expensive

How Denmark isn’t as expensive as you think

Despite Denmark’s capital being an expensive city and the rest of the country having similarly high prices, living here isn’t as costly as you might think. In fact, you’ll probably have higher costs if you live somewhere like New York City.

Medical care is (mostly) free in Denmark

Like all other Nordic countries, Denmark has a well-developed welfare system. The high taxes are used to good effect here, and you can see that when you look at health care in the country.

The Danes enjoy free access to several health services, and the standard of care throughout the country is relatively high. You do have to pay for some services, such as going to the dentist — but costs aren’t particularly extortionate in many cases.

Tipping isn’t expected in most places

Although restaurant prices in Denmark are high, you don’t need to worry about extras on top of your final bill. Since restaurant workers earn good money, you’re under no obligation to tip, and doing so is entirely optional.

When you eat in a restaurant, the service charge is already included in your cheque.

When you enjoy other experiences in Denmark, you similarly aren’t expected to tip. The only time when it’s better to do so is if you join a free walking tour, as those are largely tips-based. Moreover, taxis usually round up final bills to the closest whole even number.

You probably won’t need to pay for public transport

If you live in any of Denmark’s cities, you probably won’t need a monthly public transport pass unless you live deep in the suburbs. And even in smaller towns, getting the bus or train can be more time-consuming than riding around on your bike.

The only country in the world that can rival Denmark for cycling infrastructure is the Netherlands. Throughout the nation, you’ll find an abundance of bike lanes — especially in Copenhagen.

Repairs and check-ups will cost you a bit, but those prices are minimal.

Housing can be affordable

If you live in Copenhagen or Aarhus, finding somewhere to live is difficult and expensive in equal measure. But if you’re in a smaller town or somewhere rural, you can find surprisingly affordable accommodation.

Of course, you’ll have to deal with the realities of living somewhere rural. But considering that Denmark has several lovely villages and islands, such as Bornholm, it might not be the worst decision.

So, why is Denmark so expensive?

Denmark is so expensive because the country operates well as a whole.

It’s a pretty good place to live and visit. Income taxes are high, and consumer items cost a lot of money. But with the country’s effective ways of doing things, Denmark’s high prices are worth it.

No place is perfect, but Denmark has achieved an excellent standard of living and a well-maintained infrastructure. It’s a misconception that every Dane is filthy rich, but most people have enough to cover their needs and enjoy life.

Before you move to Denmark, visiting is a good idea. If you come during the summer, you might decide to never leave. Believe it or not, the country has plenty of beaches to kick back and relax on!

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