As a starting point, real estate is a plot of land together with the buildings that belong to it – for example a single-family house, terraced house or holiday home.

Legally, real estate is defined based on the land register (matrikel). A “single real estate property” can consist of one or more parcels of land that, according to the rules, must be kept together.

There are also special cases that are treated as real estate for tax purposes.

When you buy, sell, rent out or renovate, you are subject to the rules on real estate – and these rules affect tax, VAT and property assessment.

If you own or use a home or plot, you will typically encounter three main types of taxation and charges:

• Ongoing ownership: property value tax and municipal land tax (property tax), and taxation of any rental income.
• On sale: gains are as a starting point taxed under the Taxable Gains on Property Act, with possible tax exemption under the owner-occupied home or summer house rules.
• VAT: sale and rental of real estate are normally exempt from VAT, but there are important exceptions for new buildings, building plots and commercial short-term rental.

In practice, the assessment always starts with mapping use, duration, any renovations and your plans for rental or sale.

The starting point is that gains on sale are taxable.

If you sell your own year-round home, the sale can be tax-free under the owner-occupied home rule (parcelhusreglen), if the conditions regarding residence and plot size/subdivision are met. A summer house can likewise be sold tax-free if it has genuinely been used as a holiday home.

In cases of mixed use (residential and business), the property is typically split so that only the residential part can be tax-free.

If the real estate is owned through a company or association, other rules apply, and a specific assessment is recommended.

If you sell a subdivided part of your plot, this is treated as a normal sale with a calculation of gain or loss.

Consideration for permanent restrictions on use – for example an easement – is typically also regarded as a partial disposal. Temporary or more limited rights may fall outside this.

In practice, it is important to have control of the cadastral process, exactly what is being disposed of, and how the price is allocated between land, buildings and any installations.

Rental can range from a single room in your own home to full-year rental of a separate apartment.

Room or short-term rental in your own home: There are special rules with basic allowances and/or simplified income calculation. The basic allowance depends, among other things, on whether the rental is done via a platform or agency that reports the income.

Rental of a dwelling you do not live in yourself: This is treated as a rental business. You must keep accounts, and you can deduct relevant expenses such as maintenance and common costs.

VAT: Rental of residential real estate is as a rule exempt from VAT, but professional short-term rental can be subject to VAT.

The first step is always to clarify whether the rental is private, partly commercial or fully commercial – this determines how the income must be calculated, which deductions you have, and whether VAT may be relevant.

Yes, if the rental is commercial (for example full-year rental of an independent dwelling or commercial real estate). Short-term rental or rental of a room in your own home is generally private and outside the Business Tax Scheme. In cases of mixed use, only the commercial part can be included.

Advantages include income smoothing, saving with 22% preliminary tax and a higher tax value of interest expenses. However, it requires separate finances and compliance with the withdrawal order, and the business assets must not be used as security for private debt.

It is important to make a clear, written price allocation in the purchase agreement between land, building and installations. If the parties do not do this, the Danish Tax Agency can make its own allocation.

You should collect and keep documentation for actual improvement expenses – for example extensions, new roof, new windows – as these can be added to the acquisition sum and thereby reduce a possible taxable gain. Ordinary maintenance cannot normally be added.

A practical checklist includes: purchase agreement, BBR information, drawings, construction contracts, invoices, building case documents and any valuation reports.

Depreciation requires commercial use. For rental, a distinction is made between the building itself, installations and furniture/fixtures, and whether the rental is residential or other commercial use.

Building: Rental for residential purposes is as a rule not depreciable. Rental for other commercial purposes (e.g. office, shop, warehouse) can as a starting point be depreciated on a straight-line basis under the Depreciation Act. Improvements to a depreciable building are added to the depreciation base.

Installations (electricity, heating, ventilation, elevator, etc.): Installations that exclusively serve the building follow the same depreciation rules as the building. In one- and two-family houses and owner-occupied flats used for residential purposes, installations cannot be depreciated. Installations that serve several buildings or both private and commercial use are treated separately and deducted proportionally.

Furniture/fixtures (furnished rental, etc.): Furniture that is not part of the building or installations can be depreciated as movable assets. You must always assess whether an asset is, for tax purposes, an installation (follows the building rules) or furniture (movable asset).

On sale, any recaptured depreciation is taxable, and the depreciation also affects the calculation of the gain. In practice, it is important to make a clear price allocation at purchase/renovation between land, building, installations and furniture, and to keep technical documentation (BBR, descriptions and invoices).