COPENHAGEN: Real estate investors are trying to figure out how to block a proposal by Denmark to close a legal loophole through which they’ve enjoyed virtually unlimited tax deferrals on value gains.
The plan, which still needs to go through parliament, represents the latest step by Denmark to rein in commercial property companies. The Social Democrat government has criticized the industry, arguing it’s padded its pockets while leaving average residents struggling to pay rent.
“Foreign investors have been able to push back tax payments for eternities and that is of course completely unacceptable, ” said Christian Raabjerg Madsen, a member of the parliamentary finance committee for the ruling Social Democrats, and the party’s finance speaker.
Denmark’s government wants to use the extra tax revenue to cover the cost of early retirement for low-wage workers. It’s part of a broader plan whereby money is being moved from the finance industry and over to the country’s blue-collar demographic.
Michael Norremark, a partner at the law firm of Kromann Reumert, whose clients include some of the firms affected by the proposal, says it “effectively is targeted at foreign investors.”
Earlier this year, parliament passed legislation that freezes rent hikes for five years after renovations. The measure was aimed at property speculators and followed explicit government criticism of Blackstone Group Inc.
Blackstone has said in the past that it complied with the law. The firm declined to comment on Denmark’s latest proposal.
A lot of deals in Denmark are structured so that, technically speaking, it’s not the property that is sold but the holding company behind it, Norremark said. As companies are transferred, taxes on property gains get deferred “for quite a long time, ” he said. — Bloomberg
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