I own a home in US. If I put that home into an LLC, does that shield me from Danish property taxes on my US home? Thank you!
As far as I know, no country is taxing properties outside their juridiction. Not even the US.
Property taxes are local. So do not get into complicate legal schemes to avoid Danish property tax !
Oh how fun, you’re moving to Denmark of all places. The highest taxed country in Scandinavia by a very narrow margin. Also a great place where they will basically throw the Taxation Code at you at every chance (I can only speak for Sweden tho).
Having an LLC means you’re a business owner?
Count on the Danish IRS to be very interested in that.
When you move to Denmark, you have a duty to inform the Danish Tax Agency (Skattestyrelsen) of any assets or savings you have abroad. These may be:
- life and pension assurances etc.
- property abroad
This is a minefield to navigate, I suggest you get some real professional opinions on the matter since tax codes are very legaleze things. There are also Double Tax Treaties in play.
Every european nation is on the hunt for undocumented abroad assets thanks to the “Panama Papers”. With this come extended duties to prevent tax evasion and money laundering. Hiding shit is basically over.
Unfortunately, the way I read it on the website of the Danish tax authority it seems that the “National Property Tax” mentioned in @horationelson’s link above (what the tax authority calls “Property Value Tax”—PVT) also apply to properties abroad. Though, the local land tax (LT) does not.
Here’s a link about property value tax for properties abroad (in Danish—so use Google Translate). In general, you get credit for property tax paid abroad.
Property taxes in Denmark are also supposed to change significantly from January 1, 2021 [Source 1, Source 2—both in Danish]. I’m not sure what the new rates will be, but it did mention that the rates for the Property Value Tax (the one which also applies to properties abroad) will be lowered—so good news for you.
The following resources are available in English, but not as detailed as the Danish one abroad.
When moving to Denmark, you’re supposed to report your assets (including property).
On this page, look under Direct Tax > Property value tax based on the public property assessment for a bit more general information of the PVT. The same page lists a lot of other Danish taxes it is good to be aware of.
On this page you’ll find some more information about property value tax and possible deductions. If you are renting out the property all year you might be taxed differently (in Danish, also in English but a bit less complete)—typically as if it’s a business/sole proprietorship—and not be charged the PVT per se.
When it comes to the use of US LLCs, the Danish tax authority has made it clear that they maintain their pass-through status in Denmark (meaning they are taxed in a similar fashion as Danish partnership structures such as I/S, K/S, and P/S). From what I could gather by some quick Googling around, in the Danish tax system they tax you on the underlying asset of a pass-through entity as if you owned it directly (so e.g. if you’re renting it out, you’d still be charged as a business). I’m not entirely sure how this works out in your case, and perhaps there will still be some benefits to placing your property in an LLC. But I would advise you to talk to a Danish tax advisor before moving.
An alternative, which might make sense depending on your specific circumstances (e.g. value of the property, your plan for length of stay in Denmark, etc), is to place the property in a corporation (US or Danish) instead. In that case you’d be taxed on whatever you pay yourself as a salary (normal income taxes). The corporation itself might need to pay Danish and/or US corporate income taxes (check with a tax advisor). If you’re planning on staying for longer than 7 years in Denmark (or if you sell the corporation while living there), you will have to pay capital gains tax on the difference in value of the corporation at the time you move to Denmark and the time you sell the corporation or move from Denmark. But perhaps using a corporation would just cause more troubles than it’s worth (more complicated tax reporting, paperwork, costs of running the business, accounting, etc). Not sure if it’s helpful and applicable to your situation, but here’s an article about owning Danish properties in a Danish corporation (in Danish).
Bottom line: Contact a Danish tax advisor who have knowledge of cases like yours.
You can also pick up the phone and ask the Danish tax authorities general questions about the tax system in Denmark. Of course, they won’t help you optimize your taxes, but will gladly give you specific facts about the Danish tax system.
And in case it wasn’t obvious: I’m not an expert on the Danish tax system (but I do understand the language, which helps with the research) so take everything I say with a grain of salt.