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.

In addition to “ordinary sales” of real estate, the sale of rights and company shares over real estate can also, depending on the circumstances, be regarded as a sale of real estate subject to VAT. When sale of a property is subject to VAT, the seller also has the right to deduct VAT on their costs in accordance with the general rules of the VAT Act. When trading in real estate, there are typically very large amounts involved. Lack of focus on the VAT conditions can therefore have a large and in many cases absolutely crucial significance for the profitability of a construction project. Optimal advice early in the process can in many cases help to determine whether there will be any financial gain from a project, just as the advice can otherwise help to optimize the entire process. The VAT liability on the sale 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 rule, private individuals do not have to settle VAT on the sale of building plots and new buildings, regardless of the number and scope of sales.

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 56,500 and 42% tax on income above this limit.

VAT/Transfer Tax

There is no VAT or transfer taxes due on sale of shares in Denmark.

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 is subject to a corporate tax rate of 22%. Capital gains on un-listed portfolio shares is exempted of tax if at least 10% ownership.

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

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 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.

In addition to “ordinary sales” of real estate, the sale of rights and company shares over real estate can also, depending on the circumstances, be regarded as a sale of real estate subject to VAT. When a sale of a real property is subject to VAT, the seller also has the right to deduct VAT on his costs in accordance with the general rules of the VAT Act. When trading in real estate, there are typically very large amounts involved. Lack of focus on the VAT conditions can therefore have a large and in many cases crucial significance for the profitability of a construction project. Optimal advice early in the process can in many cases help to determine whether there will be any financial gain from a project, just as the advice can otherwise help to optimize the entire process. The VAT liability on the sale 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 rule, private individuals do not have to settle VAT on the sale of building plots and new buildings, regardless of the number and scope of sales.

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 is subject to a corporate tax rate of 22%. Capital gains on un-listed portfolio shares is exempted of tax if at least 10% ownership.

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

VAT/Transfer tax

Sale and purchasing of shares is not subject to VAT.

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.

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 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.

In addition to “ordinary sales” of real estate, the sale of rights and company shares over real estate can also, depending on the circumstances, be regarded as a sale of real estate subject to VAT. When a sale of a real property is subject to VAT, the seller also has the right to deduct VAT on his costs in accordance with the general rules of the VAT Act. When trading in real estate, there are typically very large amounts involved. Lack of focus on the VAT conditions can therefore have a large and in many cases crucial significance for the profitability of a construction project. Optimal advice early in the process can in many cases help to determine whether there will be any financial gain from a project, just as the advice can otherwise help to optimize the entire process. The VAT liability on the sale 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 rule, private individuals do not have to settle VAT on the sale of building plots and new buildings, regardless of the number and scope of sales.

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 is subject to a corporate tax rate of 22%. Capital gains on un-listed portfolio shares is exempted of tax if at least 10% ownership.

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

VAT/Transfer tax

Sale and purchasing of shares are not subject to VAT.

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 of 19 October 2009.