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TAXES

What do homeowners need to know about new Danish property tax rules?

Denmark is set to implement new laws from January 1st 2024 that will impact the way property tax is calculated. Here’s what homeowners should know.

Published: 25 July 2023 16:08 CEST
Updated: 6 August 2023 12:30 CEST
What do homeowners need to know about new Danish property tax rules?
New property tax rules will apply in Denmark from next year. File photo: Ida Marie Odgaard/Ritzau Scanpix

New property tax rules adopted by parliament back in 2017 will mean 4 in 5 homeowners will pay a lower rate of property tax, according to an outline of the changes issued by bank Nykredit.

But the remaining homeowners need not be concerned about the impact on their private finances, because they will be given subsidies intended to insure their property tax burden does not go up as a result of the new rules.

On the other hand, as The Local reported in an earlier article, future homeowners could face a different property tax bill once the new rules have taken effect, compared to if they had purchased their home before 2024.

READ ALSO: EXPLAINED: Denmark’s new property tax rules from 2024

The new property tax rules are designed to keep property tax stable as new property valuations, on which taxes are calculated, come into effect.

In short, homeowners will from 2024 onwards pay property tax based on valuations of their property made in 2022, an update from older data.

For most people, the new valuations will be higher than the older ones, because house prices have generally risen in the intervening years. Houses and apartments in and around major cities have seen their values increase the most.

In response to the rising valuations, parliament adopted a new property tax law (ejendomsskattelov). The new law means that property value tax rates (ejendomsværdiskattesatser) and land value tax (grundskyld) will both be reduced from next year.

In other words, the higher valuation of your home will push your property tax up, but a lower rate will make sure you pay around the same amount.

Several other aspects of the law have also been introduced to protect homeowners from a sharp tax rise.

Existing homeowners will be given a tax deduction if the valuation of their property has increased so much that they owe more than before the reform, even after the lower rate is applied. The purpose of the subsidy is to ensure homeowners don’t pay more in property tax in 2024 than they did on the same home under the old rules. The deduction is applied to their property tax annually for as long as they own the home.

If the property valuation – and therefore tax – goes up again at a later date, the homeowner will be able to freeze their tax payment through a special loan.

Collection of the land value tax (grundskyld) has meanwhile been moved from municipalities to the state under the new rules, in a change designed to simplify the system. This means that land value tax will be collected in the annual tax return (årsopgørelsen) instead of through a bill issued by the local municipality.

Individual amounts that will be due in property tax in 2024 will be displayed in the preliminary tax return or forskudspgørelse for the year. These preliminary returns are issued in the preceding November – so November 2023 for the 2024 taxes.

More information in the new rules can be found (in Danish) here.

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RENTING

INTERVIEW: ‘Landlords who charge excess rent in Denmark target expats’

Alex Dagil, the serial entrepreneur behind the company Rent Hero has helped over a thousand foreigners in Denmark challenge excess rents. He explained to The Local why expats are targeted and why he won't take on every case.

Published: 21 May 2024 15:53 CEST
INTERVIEW: 'Landlords who charge excess rent in Denmark target expats'

Denmark’s system of rent control is complicated, with at least four different sets of rules determining what counts as a fair rent, depending on the age, location and size of the apartment, and on what actions current and former landlords have taken to win the right to levy higher rents. 

But rent is still controlled, meaning anyone who suspects they are being overcharged can submit a complaint to their local rental board (see list here), themselves.

You can also ask Lejernes Landsorganisation (LLO, the Danish Tenants Organisation) and Dankse Lejere (Danish Tenants), two tenants unions who help members win fair rent cases. Then there are the private companies offering help reducing rents, often on a no-win, no-free basis, such as Fair Husleje and Digura. Rent Hero is alone in specialising in helping foreigners. 

READ ALSO: The four ways your rent can be regulated in Denmark

“We saw that expats were being overcharged and that they were not really any companies that tried to specifically cater to the needs of expats,” Dagil told The Local about his decision to launch the company five years ago. 

This was surprising, he said, as foreigners were and still are disproportionately affected by unscrupulous landlords.  

“Landlords who want to rent out housing at above the fair price target expats because they don’t know the rules,” he explained. “And then even if they lose a case, they limit their loss because an expat might stay in an apartment for two to three years, but if you rented out to a Dane, they might be stuck there for ten years.”

This can make a big difference to the financial impact of having excess rents corrected, he pointed out. 

If it’s decided rent should be reduced by 5,000 kroner a month, which is quite common, the landlord faces an annual loss of 60,000 kroner. If the Danish tenant remains in place for 10 years, that’s a 600,000 kroner loss. If an expat manages to get their rent reduced, they might only stay three years, limiting the loss to 180,000 kroner. 

This is why some landlords advertise apartments as available to expats only, or use expats only rental portals like Apartment in Copenhagen. 

“Those apartments are never available for Danes for the specific reasons which I mentioned before: The rent is super-overpriced, so they’re worried that it could be rented out to a Dane they would stay there for longer and and the likelihood of them being aware of rent control is probably also higher.” 

Some foreigners are of course naive, but others are simply in a hurry to get an address that can provide them with a CPR number, which can into turn allow them to get a bank account, and so start work. 

“They have a job, which they would very much like to start and they need to have a place to register their CPR, so they can get started with their life in Denmark. So they’re much more desperate in a housing market where everybody wants affordable housing,” Dagil explained.

The landlords offering these expat-targeted apartments will often claim that they’re providing a service that makes it easier for expats to settle. 

“They say ‘we’re offering this great product for expats’. Well, that’s fine. You’re doing a product targeted at expats. But there’s no place in the rental law for creative products targeted towards the needs of expats, because rent control is rent control. And they don’t see it that way,” Dagil said.

Rent Hero estimates that expats are charged on average 30 percent more in rent than Danes are for a comparable apartment, but for some expats, that’s a price worth paying. Dagil told The Local he found many expats are unwilling to challenge excess rents, even if they fully understand how much extra they are paying. 

“The primary issue that expats have is that they’re worried that if they start a case they’ll get evicted. What happens with their deposit, if they start a case? Those are the two primary issues. It’s never isolated. People don’t look at rent in isolation. They’re worried about, what if the landlord retaliates? What if they do x? What if I need to have my dishwasher switched? What happens then? It’s not necessarily the lack of information, which is the biggest thing holding people back.” 

Dagil said Rent Hero’s interests are more aligned with those of tenants than the big rental unions, as the rental unions generally want to take all cases to the rental board to challenge the rent, partly to set a precedent keeping rent under control for all tenants, even if it might not be in the interests of the individual tenant. 

Big landlords in Denmark increasingly appeal all decisions against them from rental boards to the higher housing court, largely because a new rule requires them to inform all tenants in a building if they accept a rental board’s decision, meaning they risk other tenants also seeking reduced rent. 

Often, Dagil said, this can mean tenants risk spending more on legal costs than they can get back in rent. 

“There’s a lot of cases we simply do not take – even though the client might win it at the rent board,” he explained. “If the tenant doesn’t have legal insurance, they will have to pay for that cost themselves. If you’re dealing with a case that might save 1000 kroner a year in rent, and you’re left with a potential court case that costs you 50,000 to 70,000 kroner to pursue, no one in their right mind would pursue these cases.”

Dagil argues that the two tenant unions will tend to push members to pursue such cases, whereas Rent Hero is more likely to seek a settlement with the landlord, that might not reduce rent to such a large extent but which will avoid the courts. Rent Hero, he says, will only advise clients to go to the courts if the amount they are being overcharged is sufficiently large, if the landlord is a relatively small landlord who tends not to appeal cases, or if the tenant has legal insurance. 

An article in Vi Lejere, a website run by the Danish Tenants’ Organisation, accuses Rent Hero on the other hand of levying “huge fees”, with one tenant ending up having to pay the company fully half of the excess rent they had recouped.  

Dagil does admit that Rent Hero is “maybe a bit more expensive”, than the other rent reduction companies. “But it’s very easy to get hold of us usually, and we’re also super-specialised,” he said. 

The tenants’ organisations are likely to push people to take their case to the rent board regardless, even though they only have a win rate of about 50 percent, whereas Rent Hero, with its no-win, no-pay structure has to focus on cases with a high chance of a quick win.  

“If they don’t have the conversation beforehand about legal insurance, it’s probable you will end up worse than you were before. And I think that what I try to strive towards is to be as honest as possible.” 

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