What are the usual steps to buy a real estate property in Denmark?
When the buyer and vendor have agreed upon the most essential terms such as price and date of acquisition, the real estate agent will draft a private agreement for the parties.
In order for the keys to change hands legally, the deed must be signed by the parties and registered in the registration authority.
What legal checks should be done before buying a property?
Usual the parties enter into an agreement conditions by the buyer’s attorney and banks approval.
If the buyer hasn’t had residential address for a period of minimum 5 years the justice departments approval of the purchase is needed.
Buying property through a company in Demark
Using a company as a vehicle to buy a property is only recommended when the owner intends to use the property as a business, either by renting or through acting as a developer.
Money laundering in Denmark
All services provided by Danish lawyers are regulated by law of money laundering and financing of terror. In according to this law Danish lawyers are obligated to retrieve and store the clients ID.
If it is suspected that the client is loundering money or financing terror Danish lawyers are required to inform the State Prosecutor for Serious Economic and International Crime about the activities. The Lawyer will attach the persons ID.
What are the purchase costs and taxes?
Purchase costs and taxes incurred in the purchase of a property are usually paid in the following way:
The buyer pays the following:
- Registration fee on the deed will be DKK 1,660 plus 0,6 % of the purchase price.
- Lawyer’s fee (depends on the law firm)
- Insurance between seller and buyer for damages.
- The financial councillor’s fee.
The Vendor pays the following:
- Capital gain tax
- Agent fees for introducing the buyer etc.
What documentation must the buyer have in place before buying a property?
- Identity card or passport.
- Foreigners must give a writtenstatement, that declares:
- That the buyer is a citizen in a European country or a country who is a part of EEA.
- That the buyer is eligible to conduct business in Denmark or is employed by a Danish Employer.
- That the buyer has a residence permit in EU or EEA.
- That the property is to be used as a permanent residence, and
- That the property is not a holiday home.
If you as an individual wants to acquire a holiday home in Denmark, it is required that you have resided in Denmark for a period of 5 years. If this requirement is not met, a buyer will have to seek the Ministry of justice for a derogation.
- Information about the Company retrieved from the Danish Business Authority
- A declaration stating that the company will be leasing out the property for residential purpose or for business use.
What precautions have to be taken regarding off-plan purchases?
It is convenient to do the following checks:
- Verify that the developer is the registered owner of the land where the dwelling will be built.
- Ask for a copy of building license
- Verify that the building license corresponds to the Project under which the building will be built.
- Verify if the builder will be capable of completing the Project,
- Make sure that payments to the developer are done via bank transfer to a special account opened by the developer for this purpose which is controlled by the bank.
- Verify the developer gives the buyer a bank guarantee assuring the refund of the money as purchase price. Such guarantee can be executed in the event the building workersdon’t start or are not completedon the date promised by the developer.
- The private contract should clearly state a date for the handover of the property
- Assure the statutes of the future community of owners don’t impose any unreasonable limitation of ownership,
- First occupancy License must be granted before going to completion at the registration authority,
- Assure that the developer can be held accountableforhidden damagesdiscovered after the handover.
Tips for clients looking to build their own property in Demark
The process of building your own property starts by preparing a budget. The budget willconnect the economy of the project to the project itself. When the budget is completed, you must engage with an architect which will draft a project to be submitted and approved by the right authorities.
When the project has been approved you will need to find a reputable builder and formalize a written contract.
Once the building is finished, a deed must be signed by the owner and registered. The developer must describe the building and attach compulsory documentation such as building and occupation licenses, decennial insurance covering structural damages, building book, certificate of end of building works as per the project and energy efficiency certificate.
Annual running costs.
The following taxes can be levied by the Danish and local authorities every year.
- County land taxes.
- The tax-amount is calculated by the value of the property minus costs spend on improvements.
- Property value taxes.
- This tax is only for individuals owning and staying in the property. The tax is based on the valuation of the property and will be paid monthly. (approximately 1% yearly of the property value)
- Income tax
- When renting out your property you will have to pay 42% tax of the income minus the costs spend in relation to the rental.
What minimum legal checks should be done when selling a property?
When you sell a property, the vendor must assure that the property is sold in according to what the private contract prescribes. If nothing is specified in the contract the property must be sold in good conditions of inhabitability. The description of the property is very important, which is also the reason for the use of the law that is mentioned in the beginning. The law prescribes that the vendor must have professionals to do certain checks of the property, so that the buyer is aware of any damages.
Regardless of the vendor chooses to make use of this law or not, hidden defects showing after completion can be claimed by the buyer as damages, and in case of serious defect, the buyer will be able to terminate the contract.
Property selling costs and taxes in Denmark
It is an essential and fundamental starting point that a sale of personal goods is tax-free regardless of whether or not the item has increased in value.
The same is point is used when selling your property. There are however 2 exemptions.
- If you are selling properties systematically with the purpose of earning money.
- Income tax.
- If the law of capital gain when selling property applies.
- 42% tax.
- This law applies on all property sales, with the exemption of when 3 requirements are met.
- You have stayed in the house for the latter 2 years before the sale.
- The house is not being used for conducting business
- The size of the house is less than 1,400 square meters.