Taxable gains on property are the profit you obtain when you dispose of real property. Disposal does not only mean sale – other transfers can also trigger taxation under the Taxable Gains on Property Act (ejendomsavancebeskatningsloven).

Real property includes, among other things:

• Year-round homes, summer houses, and holiday homes
• Buildings
• Land, both developed and undeveloped, including building plots

For individuals, taxable gains on property can be tax-free if the property meets the conditions in the owner-occupied home rule (parcelhusreglen). This typically applies to year-round homes, one- and two-family houses, and summer houses that have served as a residence for the owner or the owner’s household.

For one- and two-family houses, it is an additional condition that the plot does not exceed 1,400 square metres, or that according to a public authority it is not possible to subdivide the plot, or that subdivision would reduce the value of the remaining area or existing buildings by more than 20% according to a statement from the Danish Tax and Customs Administration.

Companies and other legal entities cannot use the owner-occupied home rule; all gains are taxed under the Taxable Gains on Property Act.

The gain is calculated as:

Disposal sum (sale price minus selling costs)
– Acquisition sum (purchase price + purchase costs + improvement expenses)

Other important points:

• Expenses such as real estate agent fees and lawyer’s fees can be included in the disposal sum.
• The acquisition sum is increased by a standard allowance of DKK 10,000 per year the property has been owned, except in the year of sale.
• Expenses for maintenance and improvements that have not been deducted in the income statement when incurred can, to the extent they exceed DKK 10,000, be added to the acquisition sum.
• Losses on the sale of property are source-restricted and can only be offset against gains on other properties covered by the Act.

Please note that special rules apply to properties acquired before 19 May 1993. The above guidelines do not apply to these properties.

You can defer the tax on the gain if you sell a commercial property and, before the end of the year after the disposal, buy another commercial property.

To obtain deferral, the acquisition sum for the replacement property (or properties) must at least correspond to the disposal sum for the property sold. The rule does not apply to rental properties or properties that have been used privately.

Yes, a transfer to children can trigger taxation of taxable gains on property. The tax is calculated as the difference between the property’s market value and your original acquisition sum.

However, special valuation rules apply:

Parents can generally transfer the property to their children at a price within ±20% of the new official property assessment (property assessment) – the so-called 15% rule. If the price is within this range, the transfer is normally not considered a gift. This means there is normally no gift tax – but the seller must still pay tax on taxable gains on property on the difference between the market value and the acquisition sum.

If the child buys at a price below market value, the difference is considered a gift, which may trigger gift tax.

It is a condition that there are no special circumstances that make the official property assessment unrepresentative.

We refer to our article on transfer of real property to related parties and in particular to the section on indicators for when the tax authorities will not accept the use of the 15% rule.

Link to article on valuation of real property in estates and transfers between related parties

Profit or loss from the sale of real property must be reported in the annual tax return/information form for the income year in which the property was disposed of.

You must be able to document both the purchase and sale price as well as relevant expenses (e.g. real estate agent fees, lawyer’s fees, improvement expenses).

If you are covered by the owner-occupied home rule, you generally do not have to report the gain, but it is recommended that you keep documentation of how the property has been used during the ownership period, in case the Danish Tax Agency asks questions later.

This is particularly relevant if you have not lived in the property throughout the entire ownership period or you have owned several residential properties at the same time.

Seek advice in cases of doubt. It may be considered negligent not to inform the tax authorities about a potentially taxable gain.

SkatteInform can assist you with:

• Calculating gains and losses correctly, including taking into account purchase and sale expenses that must be included in the gain calculation.
• Assessing whether the owner-occupied home rule or other exemptions can be used, so you do not pay tax unnecessarily.
• Advising on the possibilities for deferral if you reinvest in commercial property.
• Advising on family transfers, including correct determination of market value and gift tax consequences.
• Ensuring correct and timely reporting to the Danish Tax Agency, so you avoid errors and interest.
• Acting as a sparring partner, so you get a complete tax overview when buying, selling, or transferring real property.