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EXPLAINED: Is it worth freezing your property tax in Denmark?

Richard Orange
Richard Orange - [email protected]
EXPLAINED: Is it worth freezing your property tax in Denmark?
Houses in Copenhagen. Photo by Daniel Diemer on Unsplash

From November 14th, homeowners in Denmark gained the right to decide whether to 'freeze' the property value tax and land tax they pay on their home, only paying for any increases when they sell. Is this worth doing?

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What does "freezing" your property tax mean? 

Since 2018, payment of any increases in Grundskyld, or 'land tax' of more than 200 kroner have been delayed until the owner sells the property, with the higher payment described as "frozen". Under the new property tax system which comes into force in 2024, home-owners will now be able to freeze any increases to their Property Value Tax as well. 

However, while under the old system there was no interest charged on tax which was frozen, under the new system the frozen tax is essentially a loan.  

This means that any property tax which home owners 'freeze' and delay payment on will be subject to an interest rate of 3.57 percent in 2024, with the interest payment updated annually based on prevailing rates.

The same interest rate will be levied on any frozen 'land tax' home-owners already have outstanding, with the 'frozen' amount automatically added to the new indefrysningslån or "freezing loan".

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How do you freeze your property tax? 

From Tuesday, November 14th, it has been possible to choose whether or not to freeze any increases to the two property taxes by logging into the tax agency's website here, using MitID.

To freeze your tax, click on your forskudsopgørelse or "preliminary tax return", press on ejendommen, or "property", and then click "yes" or "no", when asked whether you want to opt in or opt out of taking a "freezing loan" on payment of property taxes. 

To pay off land tax which is already frozen, and so prevent it from being transferred into a loan, homeowners can log on to borger.dk, find the amount of frozen tax accrued so far and opt to pay it.  

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So should you click "yes" or "no" to freezing your tax?

As with any loan, you have to weigh the benefits of delayed payment against the larger amount of money you will eventually have to pay. 

Ann Lehmann Erichsen, an economist at Sydbank, said that people should be aware that freezing the payment (or allowing past frozen payments to be transferred) entailed taking on an interest-bearing debt. 

"Freezing land tax is equivalent to building up a debt that lives a quiet life because we call it something other than what it is: a tax debt," she told the Politiken newspaper. "And when a certain interest rate is imposed on it, it is of course worth considering paying immediately."

She said this was particularly the case for those with cash savings in cash, which are currently accruing little or no interest. 

Sydbank calculated that a homeowner liable for a land debt of 12,000 kroner this year, who decided to freeze any increase, would end up with a debt, including interest, of 7,100 kroner after five years. After 10 years, it would be 31,000 kroner.

For a more expensive house, with land tax this year of 35,000 kroner, the debt including interest would be 20,800 kroner after five years, hitting 90,800 kroner after ten years. 

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