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Property taxes are an essential aspect of real estate ownership, and that’s no different when buying a house in Denmark. These taxes consist of a number of components, each addressing different aspects of property ownership.
Understanding how these taxes are structured will help you make an informed decision about buying or selling a house in Denmark. -Taxes are higher than in many other European countries but fees directly related to the purchase of property are very low. So let’s take a closer look:
Short List of all Property Taxes & Fees
Property taxes and fees in Denmark are divided into three or four categories, depending on how you plan to finance your new home. All four largely depend on the purchase price or value of the property with some fixed price components:
- Property Value Tax: This is levied annually at 0.92% of the property value up to DKK 3,040,000, with any excess value taxed at 3%.
- Property Land Tax: Paid annually, this tax is determined by the municipality and cannot exceed 0.3% of the land value.
- Contract Signing Fee: This one-time fee includes a fixed registration cost of DKK 1,750 plus 0.6% of the purchase price.
- Optional: When taking out a loan on real estate from a bank in Denmark, there is an additional one-time fee of DKK 1,750 plus 1.45% of the purchase price.
What is the Danish Property Value Tax?
The Property Value Tax, known as “ejendomsværdiskat,” usually is responsible for the lion’s share of your tax burden. It is applied to the assessed value of the property – excluding the value of the land.
This tax is split into two rates: a lower rate of 0.92% applies to the first DKK 3,040,000 of the property’s value, suitable for most residential properties. Values above this threshold are taxed at a higher rate of 3%. This progressive structure aims to fairly distribute the tax burden based on wealth and income of the respective owner(s).
What is Property Land Tax in Denmark?
The Property Land Tax, or “grundskyld,” is another important tax levied on Danish properties. House owners pay it annually based on the land value alone (excluding the value of the property) and is set by individual municipalities.
The maximum rate is capped at 0.3%, but the actual rate varies. This tax emphasizes the value of the land, reflecting an approach that considers location and accessibility. To give you a better idea of what to expect, here’s an overview of the rates for each municipality as of May 2024:
Details about the Contract Signing Fees
Contract Signing Fees in Denmark are mandatory costs associated with the formal registration of a property transaction. These fees ensure that the new ownership is legally recognized and properly recorded. The fee structure includes a fixed price of DKK 1,750 and an additional 0.6% of the property’s purchase price. This fee is paid once and – considering the moderate price tag in the country, excluding Copenhagen here- this fee is comparably low.
Optional Fee When Taking Out a Loan
When financing a property through a loan, there is an additional fee that covers the legal registration of the mortgage. This fee comprises a fixed amount of DKK 1,750 plus 1.45% of the amount you borrow when buying the house. So, as always, the more equity you have, the better.
This fee is crucial for securing the loan against the property, providing legal assurance to lenders and clarity in property rights. Please also note that getting a loan as a foreigner comes with various hurdles and usually also with higher interest rates compared to those Danes pay. So if you think about moving to Denmark and buying property there, it’s worth thinking of financing options you might have outside the country.
Calculation Example for a House worth USD 150,000
Let’s consider a house in Denmark purchased for USD 150,000 USD (approximately DKK 1,050,000 at current exchange rates). Now you cannot use the purchase price as base for tax calculation but only for the fees directly related to the purchase. Instead, the Danish government evaluated what your land and the property on it is worth each year. Let’s say, in our case your property is valued at USD 125,000 (DKK 875,000) and your land at USD 30,000 (DKK 210,000). So, in total, USD 5,000 more than what you paid for it.
Here’s how the taxes and fees would break down:
- Property Value Tax: 0.92% of DKK 875,000 = DKK 8,050 annually
- Property Land Tax: Assuming 0.3% of the land value (assuming land value is DKK 210,000) = DKK 630 annually
- Contract Signing Fee: DKK 1,750 + (0.6% of DKK 1,050,000) = DKK 7,950 (one-time)
- Optional Loan Fee: If taking a loan for the full purchase price, DKK 1,750 + (1.45% of DKK 1,050,000) = DKK 16,975 (one-time), if taking a loan out for 75% of the purchase price it would be DKK 1,750 + 0.0145* DKK 1,050,000*0,75 = DKK 13,170.
This makes a total of DKK 7,950 without a loan and DKK 24,925 if you take out a loan for the full price of the house. This is not realistic as you need to have at least 5% of the purchasing price in equity – as a foreigner sometimes more. So let’s assume you’ve got 25% (USD 37,000 or DKK 262,500) the one-time fees would sum up to approx. DKK 22,870.
The yearly costs for your property in this example would be DKK 8,050 + DKK 630 = DKK 8,680:
- One-Time: min: DKK 7,950, max. DKK 24,925
- Annually: DKK 8,680 (this may vary depending on the yearly re-evaluation of property and land value by the government).
Summary
Understanding property taxes and fees in Denmark requires quite a bit of background information. To really know how much you will have to pay annually you have to know the area in which you want to buy and be aware of the difference between property value, land value, and purchasing price. Once you know the types of taxes tied to buying and owning property, the entire thing becomes pretty straight forward.
Generally, these taxes are designed to support municipal services, ensure equitable tax distribution, and secure property transactions. By comprehending these components, you can navigate the complexities of real estate in Denmark and easily calculate the cost of ownership.
