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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
First time buyers in Denmark will generally pay higher property taxes on apartments in cities under new rules effective from 2024. File photo:

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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ENERGY

Denmark gives cash to 400,000 households hit by energy costs

A cash payout of 6,000 kroner was sent to around 400,000 households in Dennmark on Wednesday in a measure intended to relieve people struggling with high energy costs.

Denmark gives cash to 400,000 households hit by energy costs

The one-off payouts, which were agreed by parliament in March, were sent on Wednesday to over 400,000 households which meet the criteria set to receive the relief.

“We hope that this outstretched hand of 6,000 kroner will be a helping hand in a difficult time for Danes who are finding it hardest of all due to increasing heating prices,” the minister for climate, energy and critical supplies, Dan Jørgensen, said in a statement.

All residents of Denmark are eligible to receive the payments, provided their household meets the relevant criteria – not just Danish nationals as could be inferred from Jørgensen’s statement.

“It was important for the parties behind this agreement to help in a way that could be felt and in a targeted way. We think this cash will make a difference,” he said.

Households with a collective pre-tax income of under 706,000 kroner are eligible for the one-off cash boosts, which are costing the government 2.4 billion kroner.

Additionally, the household should be primarily heated by individual gas heaters, electronic radiators or be located in a district heating area in which the heating is produced by at least 65 percent gas.

Eligible houses do not have to apply for the cheque and will receive the payment automatically to their designated account (Nemkonto). In households with more than one person, the oldest member of the household receives the payment.

Errors in registration data can result in households which meet the criteria not receiving payments automatically, according to the Danish Energy Agency. People who believe that their household meets the criteria, but have not received the money, will be able to apply for it to be sent to them at a later date. Application will be possible from January 2023. 

Jørgensen said on Wednesday that the government did not expect any further cash payouts to be made to homes heated by gas. Instead, the government’s focus is to move away from dependence on gas as an energy source.

“Before the summer holidays we made a plan that ensures we phase out gas as a heating source, he said.

READ ALSO: Denmark announces major plan to replace gas heating in homes

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