What should be done to deduct a home office from personal income tax in Denmark?

What needs to be done to deduct a home office from personal income tax in Denmark? First of all, one must change the room design used as a home office, for example, by putting in equipment that is used only for business purposes, and only for a certain amount of time each day(about five to eight hours). However, in Denmark there are no specific guidelines for either the time or the changes that must be made, so the entrepreneur is dependent on the tax inspector's interpretation.

In the case where the office is located in rented premises, the inspector will calculate what part of the area of the rented house or apartment is used only for the business. Utility charges are also tax deductible, for example, if the rented apartment is 100m2 and the office occupies an area of 20m2, this means that the entrepreneur uses 20% of the rental area for business, they can deduct 20% tax and 20% VAT. Water used for business purposes can also be deducted from tax by subtracting a percentage, in this example 20%, of the home office from the total cost of water.

In contrast, if a business owner owns property in Denmark for which they have taken out a mortgage on which he pays interest to the bank, they cannot deduct the cost of the mortgage itself, nor can they take any deductions for his home office, since the mortgage and interest are treated as a private expense, and the mortgage interest is deductible for personal tax purposes. 

[infografika] An entrepreneur who uses 10-24% of his property as a home office can deduct only that portion of the property tax as a capital gains deduction. 

This deduction is not included in his personal income or his business income, only as a capital gains deduction, which has a separate field on his tax return.

An entrepreneur who makes a capital gain deduction will only receive one-third of the deduction, not 100%. 

In addition, property tax (Ejendomsskat) must also be paid, each year in two installments. Entrepreneurs who use a minimum of 25 percent of their property for a home office are entitled to deduct the real estate tax they have paid as a business expense, while they are not entitled to a deduction if they use less than 10 percent of their property for business.

Danish real estate value tax, Ejendomsværdiskat, is included in regular income tax. An entrepreneur is entitled to deduct part of the real estate value tax when they have a home office, including if they use only 5% of the real estate for that office. In order to automatically receive such a deduction, one must record the time of use and the percentage of the property used for their home office on their tax return (if a person only owns 50% of the house, their spouse is also entitled to a deduction). 

In addition, when the owner uses over 10% of his property for a home office, then the partial deduction can be taken for maintenance costs. They can also deduct part of the costs incurred for utilities - when using a minimum of 25% of the property for a home office (unfortunately, new installations cannot be deducted). As for water, the home office should occupy a minimum of 10% of the house, and you have to prove that the water is used for business purposes.You can also get a partial VAT deduction, and from each cubic meter of water used you can deduct a designated amount on your VAT return (the rate for 2020 is DKK 6.18/cubic meter of water). As for electricity, SKAT generally accepts a partial deduction.