Denmark’s government presented a bill to the Danish parliament on June 16th, which will once again delay the decision on new property valuations in the hope of ending the backlog in assessments. We explain how you might be affected.
Instead of being based on completely new assessments of each property made by the Danish Property Assessment Agency (Assessment Board)a division of the Danish Tax Agency, under the new law, the tax agency will tax properties in 2026 and 2027 based on valuations reached by extrapolating existing assessments from 2022 in line with changes in property prices in the local area.
Jakob Engel-Schmidt, Denmark’s new tax and growth minister, predicted that the law would bring “peace of mind” to homeowners.
What is the background?
Denmark’s new property tax assessment system has been a fiasco.
The new law was passed back in 2016, but was delayed by IT difficulties, only coming into force when assessments were made for the 2020 tax year.
Henning Boye Hansen, chief consultant at the international accounting firm BDO, said that the tax authorities had quickly realized in 2020 and 2021 that the assessments, which were supposed to be made every second year by the new IT system, were not reliable.
“The idea of the system was that you put a lot of information about every building, every house, into the system, and the output should be realistic valuations,” he told The Local. “But when they used the system they realized that that wasn’t the fact: the valuations made by the IT system weren’t close to real valuations of the real estate.”
The 2020 valuations were the first to show problems, and when the tax agency began work on the 2022 valuations, the problems were repeated, sucking up considerable staff time and leading to delays.
“They had to employ a lot of manpower to investigate and check all the valuations made by the system, and they weren’t prepared for that, and that’s part of the reason for all this delay.”
In 2022, the then tax minister Jeppe Bruus promised that the system would be operational in 2026, but at the end of 2025, the Danish Property Assessment Agency again warned that new property valuations would not be ready in time.
A decision to postpone full valuations was then made by the government in agreement with the Liberal Party, the Conservatives and the Liberal Alliance, with a bill submitted to the parliament in February, which was then shelved due to the election. The new bill presented on Tuesday is largely identical to the shelved bill.
What does the new law mean for property owners?
It effectively kicks the can down the road yet again, with property taxes for 2026 and 2027 based, yet again, on an extrapolation from 2022 valuations.
For property owners in Denmark this means that the valuation they receive for the 2026 tax year will be final and there will not be a risk of unexpected tax arrears in the coming years as the assessment agency adjusts valuations.
“It’s a tolerable solution. It means we’ll be able to get there without having to subsequently go through the hassle of having to reopen old annual accounts that we thought were closed,” Nordea’s housing economist Lise Nytoft Bergmann duty TV2.
Hansen said he was disappointed, however, that the new government seemed to be continuing with the patchwork solutions that characterized the old one, and had not decided to reform the poorly functioning system once and for all.
“My hope was that the new government would take a long, hard look at the system and maybe pause it for a time to figure out how they could get rid of all the problems it has caused,” Boye Hansen said. “But it seems that the new government is going to continue using the system.”
