Quick Overview of Danish Real Estate

Rental income and capital gains of Danish real estate

 

Taxpayer

Basis of tax

Tax levied

Tax rates (2022)

Resident individual

Rental income

Capital gains

Income tax

Income tax

Up to 56,5%

Up to 56,5%

Non-resident individual

Rental income

Capital gains

Income tax

Income tax

Up to 56,5%

Up to 56,5%

Resident company

Rental income

Capital gains

Income tax

Income tax

22%

22%

Non-Resident company

Rental income

Capital gains

Income tax

Income tax

22%

22%

Rental income

Individuals
Introduction
Rental income is taxed as part of a taxpayer’s annual income using a progressive tax rate up to 56,5% income tax.

Individuals can also use a special tax scheme. To use the special tax scheme a tax balance with assets and liabilities related to the property (real estate business) must be prepared. Individuals using the special tax scheme only pay 22% tax on income as long as the income is not withdrawn from the balance related to the real estate business. When the income is withdrawn from the real estate business and transferred to the individuals private balance, the remaining tax up to 56,5% is paid. The final tax rate depends on the total income.

Liability to tax

Rental income received by individuals is subject to individual income tax.

Basis to tax

Rental income with deduction of operating costs will be taxed with individual income tax up to 56,5%. Further, it is possible to deduct tax depreciations of certain types of buildings. For example, buildings with retail stores, warehouses, or industry. The annual tax depreciation is calculated as 4% of the cost price of the building. However, it is not possible to make tax depreciations on residential property or office property.

Companies

Introduction
Rental income is taxed as business income.

Liability to tax

Rental income earned by companies is subject to corporate income tax as business income.

Basis to tax

Rental income with deduction of operating costs is taxed at a tax rate of 22%. Further it is possible to deduct tax depreciations of certain types of buildings. For example, buildings with retail stores, warehouses, or industry. The annual tax depreciation is calculated as 4% of the cost price of the building.

However, it is not possible to make tax depreciations on residential property or office property.

Capital gains

Individuals

Introduction

Capital gains are taxed as part of a taxpayer’s annual income. Depending on tax scheme and total income, the capital gains are taxed from at a tax rate of approximately 40% and up to 56,5%.

Liability to tax

Capital gains received by individuals are subject to individual income tax.  

Basis of tax

The profit is calculated as the sale price minus real estate agent’s fee and other sales costs minus purchase price including purchase costs and minus improvement costs. Further regulations may be possible according to the Danish Property Gains Taxations Act.  

Companies

Introduction

Capital gains are taxed as business income.

Liability to tax

Sales of land and buildings are subjected to corporate income tax.

Basis of tax

The profit is calculated as the sale price minus real estate agent’s fee and other sales costs minus purchase price including purchase costs and minus improvement costs. Further regulations may be possible according to the Danish Property Gains Taxations Act

Danish VAT & transfer taxes

Taxpayer

Basis of tax

Tax levied

Tax rates (2022)

Resident Individual

Rental income

Transfer of real estate services

Value added tax

Stamp duty

25%*

0,6%

Non-resident individuals

Rental income

Transfer of real estate services

Value added tax

Stamp duty

25%*

0,6%

Resident Company

Rental income

Transfer of real estate services

Value added tax

Stamp duty

25%*

0,6%

Non-Resident company

Rental income

Transfer of real estate services

Value added tax

Stamp duty

25%*

0,6%

Value Added Tax

Individuals

Introduction

Denmark applies the system of value-added tax (VAT) established by the EU. Denmark imposes VAT on imports and taxable deliveries of goods and services, unless specially exempted, at a standard rate of 25%.

Liability to VAT

Each rental property must be individual registered for VAT in Denmark. It is possible to make a full VAT registration or partial VAT registration. When the property is registered for VAT, rental income is invoiced with VAT.

Residential property is not subject to a VAT registration and rental income is invoiced without VAT. However, VAT is charged if a newly created building of building plot is sold.

There are special rules for VAT on purchase and sale of Property.

Basis of tax

Generally, the lease of property is exempted form VAT and can be voluntarily registered for VAT see above.

Companies

The same rules as for individuals apply.

Transfer Taxes

Individuals

Introduction

All transactions on land and buildings are subject to stamp duty. The buyer of the property is liable to pay the tax.

Liability to tax

A transfer of ownership is in general subject to stamp duty.

Basis of tax

Stamp duty is based on the purchase price. The tax rate is 0,6%. Special rules apply for the calculation of stamp duty for transfers between related parties.

Exemptions

It is possible to avoid stamp duty for transfers when the transfer relates to a tax-free restructuring according to Danish tax regulation.

Companies

The same rules as for individuals apply.

Danish Local taxes

Taxpayer

Basis of tax

Tax levied

Tax rates (2022)

Resident individual

 

Assessed tax value

Coverage tax

Property Tax

Coverage tax

16,0-34,0%*

0-18‰**

Non-Resident individual

Assessed tax value

Coverage tax

Property Tax

Coverage tax

16,0-34,0%*

0-18‰**

Resident company

Assessed tax value

Coverage tax

Property Tax

Coverage tax

16,0-34,0%*

0-18‰**

Non-Resident company

Assessed tax value

Coverage tax

Property Tax

Coverage tax

16,0-34,0%*

0-18‰**

*The property tax % may increase when new public real estate appraisals have been issued by the authorities.

**Coverage tax is a tax you pay to the municipality of the land value. The tax rates vary for zero in some municipalities to respectively 18 of the land value.

 

Introduction

Land tax (property tax) is a tax you pay to the municipality of your land value. The land value is the value of the land in undeveloped condition. The individual municipality sets the rate and collects the tax twice a year.

Coverage tax must be paid on properties used for office, business, hotel, factory, retail stores and similar purposes.

Liability to tax

The Property tax and the Coverage tax is paid in two parts over the year. The current owner of the property must pay the taxes.

Basis of tax

The Property tax and the Coverage tax is based on the current set public real estate appraisal. New rules applied in 2021 for setting public real estate value for commercial properties.

Danish Net Wealth/worth taxes

There is no net wealth/worth tax for individuals or companies owning commercial or rental properties in Denmark.

Vehicles for Danish real estate

Limited
Limited liability companies are the most common type of business entity in Denmark. A limited liability company can be a either an A/S or ApS (in Denmark: Aktieselskab or A/S; Anpartsselskab or ApS). Both forms are regulated by specific legislation, The Limited Liability Companies Act. The act is based on the same principles as the EU's limited company legislation. The main difference between the two types of business entities is that ApS companies may not be listed on the stock exchange.

The minimum capital requirement is DKK 40.000 for an ApS and DKK 400.000 for an A/S.

Profits made by the A/S of ApS are subject to the corporate income tax at a tax rate of 22%.

Individuals receiving dividends from a Limited liability company in Denmark are taxed at a tax rate of 27% for dividend below DKK 57.200 (2022) and at a tax rate of 42% for dividend above DKK 57.200. Dividends from limited liability companies in Denmark are taxed as Share Income.

Unlimited Partnership

Investments in real estate are also done on a collective basis by some entities and/or individuals. For Danish tax purposes, there is no distinction between taxation of partnerships and joint ventures. The profit will be taxed against individual income tax on the owners of the partnerships/joint venture at a rate up to 56,5%.

Foreign investors

Investments in real estate in Denmark will result in a permanent establishment and income from the activity will be taxed in Denmark. Profit from real estate located in Denmark through a limited liability company (the permanent establishment) is subject to the corporate income tax at a tax rate of 22%. If the investment in Danish real estate is made directly by a private person (the permanent establishment), they will be taxed with individual income tax at a rate up to 56,5%.

How can we help you?

Contact us by phone 97 91 11 11 or submit your questions, comments, or proposal requests.

Email us