Selling and Transferring Danish Real Estate

DIRECT SALE OF REAL ESTATE

Resident individual

Capital gains

Gains derived from real estate is subject to individual income tax. Depending on tax scheme and total income, the income derived from real estate are taxed fat a tax rate of approximately 40% and up to 56,5%.

VAT/Transfer tax

Sale of real estate is exempt from VAT. However, this VAT exemption does not apply to the sale of building plots and new buildings, which are thus subject to VAT, but only when the sale is made by a “VAT-liable person” who acts in this capacity. The VAT liability includes the sale of new buildings erected at the seller's own expense. Companies that build buildings on their own account for sale must be aware of the rules on the settlement of the so-called construction VAT (surcharge VAT), which thus also applies to the construction of buildings for the purpose of sale subject to VAT. This is because the construction VAT is included as part of a possible VAT adjustment obligation on the building. When assessing whether VAT is to be settled on the sale of real estate, a number of factors must be considered. In order for VAT liability to arise, the seller must be a taxable person acting in this capacity. There must also be a sale of a building plot or a new building. In this context, the definition of a new building includes both a newly built and a significantly rebuilt (renovated) building. Finally, depending on the specific circumstances, the sale may be subject to a VAT exemption, or it may be a VAT-free business transfer.

The VAT liability on the sales of building plots and new buildings only includes commercial sales. This means that only so-called "VAT-liable persons" who trade in this property must settle VAT on the sale of building plots and new buildings. Persons liable for VAT are defined as "legal or natural persons engaged in independent economic activity". As a main rule, private individuals do not have to settle VAT on the sale of building plots and new buildings. 

Transfer taxes- Stamp duty

Stamp duty is based on the purchase price. The tax rate is 0.6%.

Losses

Losses from direct sale of real estate are deductible against capital gains arising from real estate. Losses can be carried forward without any time limitations.

Non-resident individual

Non-resident individuals are treated in the same manner as resident individuals.

Resident company

Capital gains

Capital gains from sale of real estate is subject to corporate income tax at a flat tax rate of 22%.

VAT/Transfer taxes

Same rules as for individuals applies

Losses

Losses from a direct sale of real estate are deductible against capital gains arising from real estate. Losses can be carried forward without any time limitations.

Non-resident company

Non-resident companies are treated in the same manner as resident companies.

INDIRECT SALE

Resident individuals

Capital gains

Individuals who hold shares in a Danish company will be tax on share gains at a rate of 27% tax of share income up to DKK 57,200 and 42% tax on income above this limit.

Value added tax

As a general rule, the sale and purchase of shares is exempt from VAT. Only in very special cases where the buyer of the shares obtains a special exclusive right of use for the real estate can VAT liability arise.

Losses

Losses from a direct sale of real estate are deductible against capital gains arising from real estate. Losses can be carried forward without any time limitations.

Non-resident individual

Capital gains

lncome derived from indirect sale of shares is not taxable in Denmark for non-resident individuals. Non-resident individuals will be subjected to tax rules in their jurisdiction.

Resident company

Capital gains

Gains from sale of shares are tax exempt if there is 10% or more ownership. Capital gains on un-listed portfolio shares are exempted of tax if there is less than 10% ownership.

Any gains on shares must be included in the tax return at the time of the sale.

Value added tax

Same rules as for individuals applies. 

Non-resident company

Capital gains

lncome derived from indirect sale of shares is not taxable in Denmark for non-resident companies. Non-resident companies will be subjected to the tax rules in their jurisdiction.

DIRECT TRANSFER INTRA CONCERN
(DANISH REAL ESTATE TO DANISH COMPANY)

Resident Company

Capital gains

Capital gains realised on the sale of real estate are subject to corporate income at a tax rate of 22%.

VAT / Transfer tax

Sale of real estate is exempt from VAT. However, this VAT exemption does not apply to the sale of building plots and new buildings, which are thus subject to VAT, but only when the sale is made by a “VAT-liable person” who acts in this capacity. 
The transfer of an ongoing rental estate will be a VAT-free business transfer. 

Transfer tax

Stamp duty is based on the purchase price. The tax rate is 0.6%.

Deferral tax

N/A

Losses

Losses from a direct sale of real estate are deductible against capital gains arising from real estate. Losses can be carried forward without any time limitations.

Fiscal unity

N/A

Non-resident company

Non-resident companies are treated in the same manner as resident companies since real estate hold by a foreign company is a permanent establishment in Denmark.

INDIRECT TRANSFER INTRA CONCERN
(DANISH REAL ESTATE TO DANISH COMPANY)

Resident company

Capital gains

Gains from sale of shares are tax exempt if there is 10% or more ownership. Captital gains on un-listed portfolio shares are also exempted of tax if there is less than 10% ownership.

Any gains on shares must be included in the tax return at the time of the sale.

Value added tax

As a general rule, the sale and purchase of shares is exempt from VAT. Only in very special cases where the buyer of the shares obtains a special exclusive right of use for the real estate can VAT liability arise.

When purchasing shares, there is no change in ownership to the real estate itself. Therefore, no registration of new ownership is needed, and no stamp duty applies.

Non-resident company

Capital gains

Non-resident companies are taxed according to the rules in the resident country and any double tax treaty between Denmark and resident country.

Value added tax

Non-resident companies are treated in the same manner as resident companies.

DIRECT TRANSFER INTRA CONCERN
(DANISH REAL ESTATE TO FOREIGN COMPANY)

Resident company

Capital gains

Capital gains realised on the sale of real estate are subject to corporate income at a tax rate of 22%

VAT/Transfer tax

Sale of real estate is exempt from VAT. However, this VAT exemption does not apply to the sale of building plots and new buildings, which are thus subject to VAT, but only when the sale is made by a “VAT-liable person” who acts in this capacity.
The transfer of an ongoing rental real estate will be a VAT-free business transfer.

Transfer tax

Stamp duty is based on the purchase price. The tax rate is 0.6%.

Losses

Losses from a direct sale of real estate are deductible against capital gains arising from real estate. Losses can be carried forward without any time limitations.

Non-resident company

Non-resident companies are treated in the same manner as resident companies since real estate hold by a foreign company is a permanent establishment in Denmark.

INDIRECT TRANSFER INTRA CONCERN
(DANISH REAL ESTATE TO FOREIGN COMPANY)

Resident company

Capital gains

Gains from sale of shares tax exempt if there is 10% or more ownership. Capital gains on un-listed portfolio shares are also exempted of tax if there is less than 10% ownership.

Any gains on shares must be included in the tax return at the time of the sale.

VAT/Transfer tax

As a general rule, the sale and purchase of shares is exempt from VAT. Only in very special cases where the buyer of the shares obtains a special exclusive right of use for the real estate can VAT liability arise. 

When purchasing shares, there is no change in ownership to the real estate itself. Therefore, no registration of new ownership is needed, and no stamp duty applies

Non-resident company

Capital gains

Non-resident companies are taxed according to the rules in the resident country and any double tax treaty between Denmark and resident country.

VAT/Transfer tax

Non-resident companies are treated in the same manner as resident companies.

TRANSFER DANISH REAL ESTATE TO AN EU-COMPANY

If the transferor’s home jurisdiction is in the European Union, the liability to tax on the capital gains may be avoidable if the merger and acquisition provisions apply. Several detailed conditions apply which can be found in the Council Directive 2009/133/EU with subsequent changes.

How can we help you?

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

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