Commercial rental

Types of Property Rental:

• Commercial Rental: Applies when you rent your property for more than 12 months without living there. Income (or losses) from rental activities is considered personal income, and you must maintain records for tax purposes.
• Partial Rental: Applies when you rent your property for less than 12 months or rent out rooms while living in the home. Rental income is taxed as capital income.

Commercial Rental – Personal Income:

If you rent your property for over 12 consecutive months, it’s considered a business. You must keep records of all income and expenses and file reports with the tax authorities. Profits are taxed as personal income, similar to regular salary income.

Taxation Schemes:

• Personal Tax Law (PSL)
• Capital Return Scheme (KAO)
• Business Scheme (VSO)

You can also receive a deduction for improvements and maintenance in the first year and the next two years (25% for rental apartments and 35% for single-family houses).

Exemptions:

You do not have to pay property value tax (ejendomsværdiskat) while the property is rented.

Parental Purchase:

If you rent out a property to family members (children, grandparents, or their spouses), note that from 2021, there’s a limit on interest deduction related to such properties. The business scheme may still apply if you own multiple properties.

Partial Rental – Capital Income:

For short-term or room rentals while living in the property, rental income is treated as capital income. You can choose between:

• The accounting method
• The standard deduction (bundfradrag)

Accounting Method:

You are taxed on rental income minus deductible expenses. Not all expenses are deductible, but you can deduct certain costs such as:

• Utility expenses (electricity, water, heating)
• Maintenance and depreciation of furnishings (excluding major appliances)
• Advertisement expenses for renting

You cannot switch to the standard deduction method later.

Standard Deduction:

This simpler method allows you to pay tax only on rental income exceeding a threshold (bundfradrag). The thresholds for 2023 and 2024 differ depending on the length of rental and whether you use an agency.

• Short-term Rental (<4 months): The deduction is higher if rented via an agency (e.g., Airbnb).
  • 2023: DKK 31,200 for agency rentals, DKK 12,200 for private rentals
  • 2024: DKK 32,300 for agency rentals, DKK 12,700 for private rentals

Once the threshold is exceeded, 40% of the income above it is deductible.

• Long-term Rental (>4 months): You can use a deduction of 1.33% of the property’s value (minimum DKK 24,000).

‍

VAT:

If you rent rooms for less than 30 days, VAT applies if rental income exceeds DKK 50,000 annually.

‍

Subletting an Apartment or Cooperative Housing (Andelsbolig):

If you sublet an apartment or cooperative housing, the deduction is 2/3 of your total annual housing costs. Income above the deduction is taxed as personal income.

‍