•
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.
Î
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
Î
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. Howe-
ver, 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 agree-
ment whereby a regulation of the rent payment will take place
if the property tax rate is changed.
Î
acquisition of shares in a company holding a
property
•
In practice the options open to a foreign investor are to esta-
blish 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 24,5 % (2014) 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”).
Investor Guide to Europe 2014
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•
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.
Î
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.
Î
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 depre-
ciate shares).
