Danish tax implications of owning a home located abroad

26 August 2016

Not everyone is aware that owning a home located abroad will have tax implications in Denmark - regardless of the individual circumstances.

Many individuals coming to Denmark from abroad to live and work for shorter or longer periods of time retain a home abroad.

It may be expatriates on assignment in Denmark on behalf of their foreign employer for a temporary period of time or it could be Danes relocating to Denmark after pursuing a career abroad for many years.

Not everyone is aware that owning a home located abroad has tax implications in Denmark - regardless of the individual circumstances.

In the following, we provide an overview of the tax implications of owning a home located abroad for individuals, who are resident in Denmark for tax purposes.

The tax implications depend on how the home is being used.

Private use

If the home is used exclusively for private purposes of the owner, there is no tax deduction for expenses related to property taxes, maintenance, insurance, etc.

By contrast, interest expenses on mortgages are deductible for tax purposes in Denmark.

Danish resident individuals owning their home are subject to Danish property value tax.

The Danish property value tax also applies to holiday homes and it applies equally to homes located in Denmark and abroad.

The property value tax is generally calculated as 1 pct. of the property value up to DKK 3,040,000 and 3 pct. of the property value exceeding this threshold.

The lowest public property value of either the current value, the value in 2001 plus 5 pct. or the value in 2002 can be used as basis for calculating the Danish property value tax.

If no public property value similar to the Danish public property value is available, special rules apply in order to calculate the basis for the Danish property value tax from the taxpayers acquisition price.

In practical terms, this means that the basis for calculating the Danish property value tax is usually considerably lower than the current property value.

Foreign taxes similar to the Danish property value tax can be offset against the Danish property value tax.

Use for business purposes

If the home located abroad is rented out exclusively, the owner is generally not subject to the Danish property value tax as the rental activity is considered a business for Danish tax purposes.

The rental income after deduction of expenses is taxable in Denmark.

Foreign taxes on the rental income in the country of source can generally be offset against the Danish tax on the rental income.

BDO can help you if you require advice and/or assistance in compliance matters in relation to your home located abroad.

 

The above article is taken from tax:watch, our electronic English newsletter on Danish Tax and VAT matters. tax:watch is issued on the last Friday of each month and is free of charge.