The initiative will be financed by four tax initiatives. Among these is the introduction of mark-to-market taxation of companies’ real estate.
Mark-to-market taxation of companies’ real estate generally implies that the companies will be subject to taxation of any unrealized capital gains while losses will be deductible.
One consequence of this is that capital gains taxation can no longer be deferred by trading properties in companies. Another consequence is that companies will have to finance the taxation of any increases in value on an ongoing basis, which will impact the cash flow as well as the valuation of many assets. The government has indicated an expected revenue of approx. EUR 115 million as a result of this initiative.
The government initiative further contains:
- An increase of corporation tax for the financial sector through an addition to corporation tax. The size and details of this are not yet known,
- An increase of the progressive tax rate for share and capital income from 42% to 45%. This means that individuals’ share income above DKK 55,300 must be taxed at 45%, and that payers of top-rate tax will be taxed with 45% of positive capital income, and
- A deduction limit for salaries over DKK 10 million per employee.
Further details on the individual initiatives, including limitation of which companies are proposed to be taxed on properties, which input values are to be used, the right to deductions in the event of a decrease in value or sales with losses, etc. are not yet known. A very central – and in practice very complicated – question is how companies are supposed to value the properties for tax purposes. These topics, and a number of other issues, will be decided in the upcoming political negotiations.
We are monitoring the development closely and will communicate further when the final result of the political discussions is clear.
