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rent proportionally with increases in taxes or utilities, or other
costs paid by the landlord with relation to the leasehold.
• Under the Business Lease Act either party may require that
the rent be adjusted to the market rent by observing a special
procedure. Such adjustments may take place 4 years after
commencement of the lease agreement or 4 years after the
latest previous adjustment to the market rent.
Change of control of the lessee
• The Business Lease Act does not govern change of control or
restructuring situations, so these are generally permissible
unless otherwise agreed between the parties. However, most
lease agreements drafted by legal advisers contain change-
of-control clauses requiring the landlord’s permission prior to
such event (or at least enabling the landlord to object to the
change-of-control under defined circumstances).
TAX
Direct acquisition of a property
• The Registration of acquisition of a property gives rise to a
registration fee and in some cases value added tax (VAT).
• The registration fee amounts to DKK 1,660 plus 0.6 % of
the purchase price or the latest public valuation (whichever
is higher). The registration fee is the same for registration
of conditional and absolute title deeds but is only to be paid
once.
• Generally, no VAT is due on the acquisition of a property.
However, transfer of a building site or a newly constructed
building will be subject to VAT. The standard Danish VAT rate
is 25 % assessed, in principle, on the purchase price.
Direct owning of a property
• Owners of a property in Denmark are generally obliged to pay
property taxes, which are determined in each municipality
and vary from 1.6 to 3.4%. The property tax rate in the
municipality of Copenhagen is 3.4%.
• For investment properties it is possible, and typical, to pass
on the actual obligation to the tenant in the property lease
agreement whereby a regulation of the rent payment will take
place if the property tax rate is changed.
Acquisition of shares in a company holding a property
• In practice the options open to a foreign investor are to
establish a Danish limited liability company (an “A/S” or
an “ApS”), a limited partnership (a “K/S”) or a partnership
limited by shares (a “P/S”) or to purchase a company holding
a property.
• The minimum capital requirement is DKK 500,000 for a
public limited liability company and DKK 50,000 for a private
limited liability company, which may be denominated in Euro.
• The acquisition of the shares in a company holding a property
does not give rise to a registration fee. No VAT is due on the
sale of shares in a company owning real property.
• A public or private limited liability company will be subject to
Danish income tax at a flat rate of 23,5 % (2015) of the net
taxable income. Taxable income includes rental income and
financial income attributed to the real estate. Other tax rules
apply for the limited partnership (“K/S”) and a partnership
limited by shares (“P/S”).
• A sale of shares will not trigger a Danish tax payment
for foreign investors. Thus, there will not be any Danish
withholding tax levied on capital gains on the shares of
the public or private limited liability company for foreign
investors.
Generally
• As a main rule, interest related to commercial activity in a
company is tax deductible. This implies that interest on loans
as a starting point should be fully deductible for the company
for corporate income tax purposes. However, there are certain
limitations in the ability to deduct interest, inter alia by “thin
capitalization” rules.
• Commercially used buildings are as a main rule depreciable.
Each building which is subject to depreciation is depreciated
individually on a straight-line basis. The depreciation rate
may be determined by the tax payer between 0 and 4% each
year. Special rates of depreciation apply for buildings subject
to abnormal deterioration (if the building despite normal
maintenance will have lost its value within 25 years from
construction). However, the following commercially used
buildings are not subject to depreciation: (a) office buildings;
(b) buildings used for a financial enterprise such as banking,
insurance and stock brokering; (c) post offices; (d) residential
homes, except hotels etc.; (e) hotels that have been split into
apartments; and (f) hospitals and certain other buildings and
installations for health care purposes.
• Even though office buildings as a general rule are not subject
to depreciation, it should be noted that office buildings that
are connected to otherwise depreciable buildings and directly
serve the business operation conducted in such building, may
be subject to depreciation.
Asset deal vs. share deal
• Acquisition of the shares in a company holding a property
may generate tax savings in terms of registration fee and the
ability to deduct interest and maintain capital in the company
for investment purposes at a lower taxation. However, it may
also have other indirect tax consequences (e.g. no right to
depreciate shares).
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Investors Guide to Europe 2015