New Danish Property Assessments

On October 31, 2018, the new public property assessments were postponed. Therefore, there will be new indicative property assessments for homeowners in Denmark, in 2019. The legally binding assessments will be issued in 2020. The new property assessments  includes, inter alia, a freezing scheme which, in principle, does not increase the tax. In addition, homeowners who have paid tax on overvaluation since 2011 will automatically receive money back.

 

Homeowners in Denmark must pay a public property tax (land tax) and a property value tax. The property value tax, which is paid to the state, is calculated based on the value of the property including the building.  The property tax (land tax), which is paid to the municipality, is calculated based on the sole property value.

The current property valuation system has proved to be too inaccurate and uncertain why a political majority in fall 2016 entered into a settlement of a new and modern property valuation system that will ensure better and more accurate property valuations. At the same time, it was decided to change the existing taxation rules and adopt new rules for property taxation, which will come into force in 2021 when the agreement on the current tax rules expires.

The new reviews involve far more information about each property than ever before. The system now considers e.g. land area, house size, basement area, roofing material, extensions etc. For more special properties, the data can also be supplemented by images. In addition, the system is based on what is happening in the local area and more precisely distances to for example forests or sea, will be taken into consideration, likewise, whether there are railways or major roads nearby. Furthermore, the sales prices of the properties in the local area will be considered.

Before the new property and land values are sent out in 2020, all homeowners will be contacted about the information collected about their housing for the assessment. The homeowner can then review the information and check if these are correct, before the new assessment is made. By 2021, the first assessments of commercial properties under the new assessment system will be sent out. These will, as before, come every two years.

Precautionary principle

The new system contains a new precautionary principle. This implies that the tax calculation deducts 20% from the assessment amount. The purpose of this is to meet the natural uncertainty associated with a firm assessment of the market. This means that the tax base for a house, estimated to DKK 5 million, is DKK 4 million.

Progression limit

In addition, a new progression limit is introduced. Today, the progression limit is about DKK 3 million. The Progression limit implies that the tax on that part of the public assessment that exceeds the approximate DKK 3 million is higher. From 2021 the progression limit will be set at DKK 7.5 million. This means that from 2021, only higher taxes are be paid for the properties where the public property value is higher than DKK 7.5 million.

Further legislation on determination of the property taxation and the progression limit is made in spring 2020.

 

Freezing system

The old tax suspension rules will continue until the end of 2020. However, since it has been possible for the municipality to change the basic debt protil, a temporary freeze system has been introduced, which ensures that no homeowners are required to pay a higher ground tax. Any increases will therefore be frozen and will first be paid when the property is to be sold.

From 2021, a tax discount will be introduced for current homeowners – this applies to owners, who have bought their property before 2021. The tax discount means that no homeowner after 2021 will pay a higher tax according to the new rules than in the old rules.

From 2021, SKAT requires interest corresponding to the interest rate of the existing freezing system for retired people (1% in 2018), it is possible for homeowners to actively opt out of this freezing system.

The freezed amount is secured with a mortgage in the property. No registration fee or other expenses shall be paid by the homeowner, besides the interest rate. The homeowners can benefit from the freezing system regardless of whether there is equity in the property.

From 2021, the basic debt will no longer be paid twice a year but will – like the property tax – be paid via the annual report. This makes it easier for homeowners to pay their housing tax and have an overview of the frozen amounts. SKAT will create a new online portal for the purpose.

 

Refund

Homeowners will receive their first assessment in 2020 with the new assessment system, which will then be available every two years. At the same time, it will be possible to complain about assessments back to 2011. If a homeowner has paid tax on an overvaluation since 2011, the homeowner will automatically receive money back. If, on the other hand, a homeowner has paid too little due to a too low valuation, he will not receive an additional tax collection with retroactive effect.

 

For further information you are welcome to contact attorney Christian Schwarz-Hansen at christian.schwarz-hansen@lead-roedl.dk or at +45 25 17 11 33

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