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So you missed Denmark’s July 1st tax deadline. Now what?

Outstanding tax payments in Denmark were due July 1st, but if you have missed that deadline here is what you can do.

So you missed Denmark's July 1st tax deadline. Now what?
Photo: Skattestyrelsen

Last year presented a number of situations likely to impact outstanding tax liabilities for Danish residents. 

In a year where more people than usual experienced unemployment changes, there are ample scenarios where outstanding tax might be due, from taxing holiday pay in connection with a job change, lower income than expected due to job loss, to using your primary tax card for two different jobs in the same period.

Perhaps your transport deduction between home and work was less than anticipated after many months of remote work, or you’ve jumped on the hot housing market as either a buyer or seller (both of which can impact your tax assessment). 

Maybe you’ve profited from investments during a record year for most stock markets. Another possibility? You sent the payment via online banking before July 1st, but it wasn’t deducted from your account by the deadline.

Regardless of the cause, missing the July 1st outstanding tax deadline can be stressful.

Here’s what happens next.

What happens when you miss the outstanding tax deadline?

Well first of all there’s no need to panic – missing the deadline doesn’t mean that you will be dragged off to a debtor’s prison.

If you haven’t paid outstanding tax by July 1st, the Danish tax authority Skattestyrelsens will include your outstanding tax for 2020 in your preliminary tax assessment for the following year.

However they will add an additional 3.8 percent interest on top of the 1.8 percent interest that accrues between January 1st and the July 1st deadline, so you will end of paying more. 

This will be factored into your monthly tax payments throughout 2021. The maximum interest Skattestyrelsens will tack onto next year’s taxes is 21,798 kroner. 

Amounts beyond that are charged in three installments, usually in August, September and October 2021. Skattestyrelsens will send a message to your e-Boks when the first installment is due. It’s possible to set up direct debit, Betalingsservice, and pay the installments automatically.

What about tax deadline extensions related to Covid-19?

Although the outstanding tax deadline remains July 1st, the deadline to correct your tax assessment for 2020 has been extended from May 1st to September 1st. 

When you correct your tax assessment ahead of September 1st, your new outstanding tax will be calculated but will include both the 1.8 percent daily interest and the 3.8 percent additional interest.

If you owe more than 21,798 kroner, your three installments will begin the following month. Exact amounts and due dates will be sent to your e-Boks.

How can I avoid interest on my outstanding tax payments in the future?

To avoid outstanding tax due next year, check to see if your preliminary income assessment for 2021 is correct. 

Keep in mind that paying outstanding tax between January 1st and July 1st is still subject to interest, 1.8 percent, from the first of the year until the day you make your payment.

If circumstances prevent you from correcting your preliminary income assessment before January 1st, it’s still wise to pay outstanding tax as soon as possible to limit accrued interest. 

Payments can be made within the online tax website, TastSelv, by selecting ‘Betal skat’ (pay tax) and the year you’re paying for. Payments can be made by Dankort, via online banking, or even from a foreign bank account.

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PROPERTY

EXPLAINED: Denmark’s new property tax rules from 2024

New property tax rules (boligskatteregler) take effect in Denmark in 2024. How will they affect homeowners and first-time buyers?

EXPLAINED: Denmark’s new property tax rules from 2024

The new tax rules, which will impact property value tax rates (ejendomsværdiskattesatser) and land value tax (grundskyld), were originally ratified by the previous government in a 2017 bill. In general, they mean the rates for both of the above property taxes will fall in most municipalities, according to the Danish tax ministry.

A public real estate appraisal (ejendomsvurdering) forms the basis for taxation of your property. According to the tax ministry, many homeowners will find that new appraisals issued from September 2021 are higher than preceding valuations from 2011 and 2012. That is partly due to increasing house prices in recent years.

In order to avoid much higher property taxes as a result of higher valuations in the public real estate appraisals, the 2017 political agreement secured a reduction of the two forms of property tax, effective from 2024.

Homeowners who appear to be facing higher property taxes due to the new appraisals – even though tax rates will be reduced – can be eligible for a tax subsidy. This can occur in cases where a property has seen a large increase in its valuation.

In short, the new tax rules will not result in taxes for existing homeowners in 2024 that are higher than they would have been if the current rules (still in effect in 2022 and 2023) were to remain in place.

However, the tax subsidy mentioned above does not apply to new homeowners from January 1st 2024. This is because first-time buyers will be expected to “plan their finances in accordance with the new tax rules,” the ministry states.

This could have a knock-on effect on the housing market, according to financial media Finans, which wrote in November 2021 that people buying apartments would be likely to demand reduced prices as 2024 approaches, to offset the higher taxes they are likely to pay.

READ ALSO: Danish apartment sales cool to eight-year low

An analysis by Finans and Nykredit showed that apartment prices in major cities, particularly in and around Copenhagen as well as in Aarhus and Odense, will typically have to fall by around 5-10 percent for total costs for now buyers – mortgage plus tax – to be unchanged compared to the outgoing rules.

The new rules and subsequent increased taxes will hit first-time (in 2024) buyers of apartments hardest, according to Finans. That is because many buyers will not be able to afford the same mortgage they previously could, due to the higher property taxes.

One reason apartments are more likely to get tax increases under the new rules is that the valuation appraisal system left them subject to lower property tax relative to houses.

“Apartments have been too lightly taxed for many years because the land under them is massively undervalued compared to appraisals of detached house land,” Mira Lie Nielsen, housing economist at Nykredit, one of Denmark’s major banks and the country’s largest mortgage lender, told Finans last November.

People buying apartments before 2024 could also push prices down knowing they risk making a loss if they sell shortly after the tax reform takes effect.

From 2024 onwards, the two property taxes – ejendomsværdiskattesatser and grundskyld – will be pegged to appraisals of the property and land value such that if these fall in valuation, so will the property tax.

If the valuation of the property, and thereby the property tax, increases after 2024, homeowners can fix the rate of (indefryse) their taxes by postponing payment of a part of the property tax. The frozen tax payment becomes due (and is calculated) when the property is sold. Alternatively, the increased taxes can be paid in instalments.

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