Danish Property Tax Reform: LVT + Smoothed Profit Tax

Document ID: orp-dk-property-tax-001 Compliance Level: ORP-Full Status: Open for comment Author: Asbjørn Created: 2026-02-25

What This Example Demonstrates

This is a complete, validated ORP-Full document proposing a reform to Denmark’s residential property tax system. It demonstrates:

• All five ORP layers working together
• Real policy proposal with substantive claims
• Transparent data provenance (Layer 1) — Two datasets with full documentation
• Economic modeling (Layer 2) — Four scenarios comparing current vs proposed systems
• Stakeholder analysis (Layer 3) — Seven stakeholder groups with impact assessment
• Decision accountability (Layer 4) — Six documented methodological choices
• Fork invitation (Layer 5) — Explicit invitation to challenge assumptions

This document is designed to be debated, challenged, and forked. If you disagree with the LVT rate, the land value assumptions, or the stakeholder analysis — fork it and publish your alternative.

Executive Summary

The Problem

Denmark’s current property tax system:

• Combines annual property value tax (ejendomsværdiskat) with land tax (grundskyld)
• Creates complex, unpredictable tax burden
• Exempts all capital gains on primary residence at sale
• Generates lock-in effects (people afraid to sell and trigger reassessment)

The Proposal

Replace with:

1. Annual Land Value Tax (LVT) of 1% on land value only (not buildings)
2. Profit tax of 10% on gains at sale, paid in annual installments over 5-10 years
3. LVT credit system — LVT paid accumulates as credit that offsets profit tax base (prevents double taxation)
4. Opt-in window of 12 months for existing owners to register cost basis

The Claim

This system is:

• Fairer — Taxes windfall gains currently fully exempt
• Simpler — One base rate, clear rules
• More stable — Fixed LVT + smoothed profit tax = predictable costs
• Cheaper for most — 3 out of 4 scenarios show lower total tax burden

The one group that pays more: High-appreciation urban owners (e.g. Copenhagen apartments with DKK 3M gain). But they’re being taxed on a gain currently fully exempt.

Layer 1 — Data Provenance

This proposal uses two datasets. Both are fully documented below.

Dataset 1: Danish Property Tax Rates 2024

Source: SKAT (Danish Tax Authority) and Vurderingsstyrelsen What it contains: Official current tax rates for ejendomsværdiskat and grundskyld Why it matters: Establishes the baseline for comparison

Key Data Points:

• Ejendomsværdiskat: 0.51% on property value up to DKK 9.2M
• Grundskyld: Municipal rate (average ~0.2-0.3%)
• Combined effective rate: ~0.7% for median property
• Capital gains on primary residence: Fully exempt

Known Limitations:

• Rates vary by municipality
• 20% prudence discount means statutory rates overstate actual burden
• Transition discount scheme means many existing owners pay less until next sale

Data Quality: ✅ High — Official government data, publicly accessible

Dataset 2: Illustrative Property Price Scenarios

Source: Author-constructed based on general market knowledge What it contains: Purchase and sale prices for four illustrative scenarios Why it matters: Demonstrates how the proposal affects different homeowner types

Synthetic Data Warning: ⚠️ These are illustrative scenarios, not statistical records. Formal policy modeling should use actual transaction data from Danmarks Statistik.

Scenarios Constructed:

1. Provincial house, modest appreciation (DKK 2M → DKK 3M over 14 years)
2. Copenhagen apartment, strong appreciation (DKK 3M → DKK 6M over 9 years)
3. Long-term family home (DKK 1.5M → DKK 4M over 25 years)
4. Short hold (DKK 2.5M → DKK 2.8M over 3 years)

Key Assumptions:

• Land value = 35% of total value (provincial) or 50% (Copenhagen)
• Linear property value growth (simplification)
• No inflation adjustment (conservative — overstates taxable gains)

What’s Excluded:

• Luxury properties over DKK 15M
• Holiday homes (sommerhus)
• Rental investment property
• Commercial property

Layer 2 — Consequence Simulation

Affected Population

~1.4 million Danish owner-occupied households

Segmented into:

• Provincial homeowners (~900K) — Lower land values, modest appreciation
• Copenhagen/urban (~500K) — Higher land values, stronger appreciation
• Long-term holders 15+ years (~400K) — Often asset-rich, cash-poor
• Recent buyers <5 years (~250K) — Bought expecting zero capital gains tax
• Prospective first-time buyers (~300K) — Affected by market fluidity

The Model

Type: Static comparison model What it does: Calculate total tax burden under current vs proposed system for each scenario

Formula (Proposed System):

Total Tax = (LVT × Land Value × Years) + (Profit Tax × (Gain - LVT Paid))

The LVT credit is the key mechanism — every year of LVT paid reduces the taxable gain at sale by that amount.

Four Scenarios Compared

Scenario 1: Provincial House, Modest Appreciation

Profile: Typical provincial home, 14-year hold Purchase: DKK 2,000,000 (land: 35% = DKK 700,000) Sale: DKK 3,000,000 Gain: DKK 1,000,000

Current System:

• Annual cost: ~DKK 17,500/year (0.7% of average value)
• Total over 14 years: DKK 245,000
• Tax on gain at sale: DKK 0 (fully exempt)

Proposed System:

• Annual LVT: DKK 7,000/year (1% of DKK 700K land value)
• LVT paid over 14 years: DKK 98,000
• Taxable gain: DKK 1M - DKK 98K = DKK 902,000
• Profit tax (10%): DKK 90,200
• Smoothed over 10 years: DKK 9,020/year
• Total: DKK 98,000 (LVT) + DKK 90,200 (profit tax) = DKK 188,200

Result: 💚 DKK 56,800 cheaper (23% savings)

Scenario 2: Copenhagen Apartment, Strong Appreciation

Profile: Central Copenhagen apartment, 9-year hold Purchase: DKK 3,000,000 (land: 50% = DKK 1,500,000) Sale: DKK 6,000,000 Gain: DKK 3,000,000

Current System:

• Annual cost: ~DKK 27,000/year
• Total over 9 years: DKK 243,000
• Tax on DKK 3M gain: DKK 0

Proposed System:

• Annual LVT: DKK 15,000/year (1% of DKK 1.5M land)
• LVT paid over 9 years: DKK 135,000
• Taxable gain: DKK 3M - DKK 135K = DKK 2,865,000
• Profit tax (10%): DKK 286,500
• Smoothed over 10 years: DKK 28,650/year
• Total: DKK 135,000 + DKK 286,500 = DKK 421,500

Result: ⚠️ DKK 178,500 more expensive

But: This is the only scenario that’s more expensive. And it taxes a DKK 3M gain that’s currently completely untaxed. The annual installment (DKK 28,650/year) is manageable in the context of a DKK 3M realized gain.

Scenario 3: Long-Term Family Home (25 Years)

Profile: Family home held for a generation Purchase: DKK 1,500,000 (land: DKK 525,000) Sale: DKK 4,000,000 Gain: DKK 2,500,000

Current System:

• Total over 25 years: DKK 475,000

Proposed System:

• Annual LVT: DKK 5,250/year
• LVT over 25 years: DKK 131,250
• Taxable gain: DKK 2.5M - DKK 131K = DKK 2,369,000
• Profit tax: DKK 236,900
• Total: DKK 368,150

Result: 💚 DKK 106,850 cheaper (22% savings)

Scenario 4: Short Hold, Small Gain

Profile: Recent purchase, 3-year hold Purchase: DKK 2,500,000 (land: DKK 875,000) Sale: DKK 2,800,000 Gain: DKK 300,000

Current System:

• Total over 3 years: DKK 63,000

Proposed System:

• Annual LVT: DKK 8,750/year
• LVT over 3 years: DKK 26,250
• Taxable gain: DKK 300K - DKK 26K = DKK 274,000
• Profit tax: DKK 27,400 (smoothed over 5 years = DKK 5,480/year)
• Total: DKK 53,650

Result: 💚 DKK 9,350 cheaper (15% savings)

Summary: Who Benefits?

Three out of four scenarios are cheaper under the proposed system.

The one exception (S2) pays more because they realized a DKK 3M gain that’s currently fully tax-free. The profit tax brings their effective tax rate on that gain to 16% — which is hard to characterize as unfair.

Layer 3 — Empathy Mapping

Stakeholder Analysis

Who’s affected? How do they feel about it? What are their vulnerabilities?

Median Provincial Homeowner (~700K households)

Relationship: Core beneficiary Financial Impact: DKK 35K-110K better off over typical hold period Quality of Life: Lower annual cost throughout ownership; no lump-sum shock at sale

Vulnerabilities: None — this group clearly benefits

Copenhagen High-Appreciation Owner (~200K households)

Relationship: The one group paying more Financial Impact: Up to DKK 180K more on a DKK 3M gain Quality of Life: Annual installment of ~DKK 28K for 10 years post-sale

Vulnerabilities:

• Some in this group are asset-rich but not income-rich (e.g. long-term owners on pension)
• Retirees on fixed income face highest burden

Mitigation: Extend existing tax freeze mechanism to allow LVT deferral for cash-poor owners

Asset-Rich, Cash-Poor Long-Term Owner (~150K households)

Profile: Older homeowner in appreciated property, pension-level income

Relationship: Mixed — Lower annual LVT than current system for most, but urban owners may face higher burden

Financial Impact: Broadly neutral to positive Quality of Life: Improved cash flow during ownership; profit tax spread over 10 years manageable

Vulnerabilities:

• High vulnerability to annual cash flow pressure if in high-value urban property
• Solution: Extend existing Danish tax freeze mechanism to LVT — allow deferral until sale with interest

Recent Buyer 2020-2025 (~250K households)

Relationship: Psychological resistance — bought expecting zero capital gains tax

Financial Impact: Actually better off financially (see S4) Quality of Life: Lower annual cost + modest profit tax at sale

Vulnerabilities:

• Feels like rule change mid-game even though they benefit
• Solution: 12-month opt-in window to register cost basis from day one of new system

First-Time Buyer / Prospective Homeowner (~300K households)

Relationship: Indirect beneficiary

Financial Impact: Indirect — improved market fluidity may increase supply Quality of Life: More properties available as lock-in effect decreases

Vulnerabilities:

• Benefits are uncertain and depend on market adjustment (not modeled)

Danish Government and Municipalities

Relationship: Revenue authority

Financial Impact: Unknown — aggregate revenue modeling not included here (flagged as gap) Quality of Life: More stable revenue base than profit-at-sale-only system

Vulnerabilities:

• Municipal grundskyld is currently local — transition to national LVT requires intergovernmental transfer review

Heirs Inheriting Property (~30-40K per year)

Relationship: Neutral

Financial Impact: Inheritance not treated as sale; LVT credit transfers intact Quality of Life: No forced sale to cover tax; cost basis resets to inherited value

Vulnerabilities: None — proposal preserves inheritance-friendly treatment

Minority Stress Test

Three vulnerable groups explicitly tested:

Test 1: Retirees in High-Value Urban Properties

Scenario: Copenhagen retiree, fixed pension, home worth DKK 8M, held 20+ years

Outcome: LVT at 1% on ~DKK 4M land value = DKK 40,000/year. This exceeds current rate for some in this group.

Mitigation: ✅ Extend existing tax freeze mechanism to LVT — allow deferral until sale with interest accrual. Already established in Danish law.

Test 2: Recent Buyers Expecting Zero Capital Gains Tax

Scenario: Bought DKK 3M home in 2023, expecting zero tax at sale in 2030

Outcome: Actually better off financially — lower annual cost + profit tax at sale nets positive

Mitigation: ✅ Opt-in window of 12 months to register cost basis and begin accumulating credit from day one. Optional grandfathering for pre-reform buyers.

Test 3: Rural Low-Value Property Owners

Scenario: Home worth DKK 800K in rural Jutland, 10% land value ratio, held 15 years

Outcome: LVT at 1% on DKK 80K = DKK 800/year. Current system: ~DKK 5,600/year.

Mitigation: None required — this group benefits massively.

Net Welfare Assessment

Conclusion: The proposal produces net positive welfare outcomes for the majority of Danish homeowners.

The only group clearly worse off: High-gain urban sellers — currently receiving a significant untaxed windfall. Their additional burden is manageable through smoothing and difficult to characterize as unfair.

Confidence: Medium

Confidence Basis: Directional confidence is high. Magnitude confidence is medium due to reliance on illustrative data and absence of aggregate revenue modeling.

Layer 4 — Accountability Ledger

Six key decisions are documented with rationale and alternatives considered.

Decision 1: Scope Limited to Owner-Occupied Primary Residence

Why: Owner-occupied primary residence is the politically central case. Including rental property would require separate modeling.

Alternatives Considered: Including rental investment property — better treated as extension

Decision 2: Current System Baseline Assumes Full Capital Gains Exemption

Why: Danish law (Ejendomsavancebeskatningsloven §8) provides broad exemption for primary residence. Well established.

Alternatives Considered: Partial exemption scenarios not modeled

Decision 3: Smoothing Period 5-10 Years

Why: 10 years produces manageable annual installments even on large gains. 5 years for small gains reduces administrative tail.

Alternatives Considered: Flat 10-year period simpler; income-based smoothing more progressive but complex

Decision 4: Land-to-Value Ratios are Approximations

Why: Using 35% (provincial) and 50% (Copenhagen) avoids importing controversial Vurderingsstyrelsen methodology while remaining directionally accurate.

Alternatives Considered: Official assessments add precision but also controversy

Decision 5: No Inflation Adjustment

Why: Conservative assumption that overstates profit tax burden. Strengthens proposal’s credibility.

Alternatives Considered: Inflation adjustment at 2% would reduce taxable gains materially for long holds (e.g. 25-year gain of DKK 2.5M nominal → DKK 1.4M real)

Decision 6: Aggregate Revenue Not Modeled

Why: Requires transaction volume data from Danmarks Statistik not incorporated here. Absence explicitly flagged.

Alternatives Considered: Rough estimate possible from average transaction volumes — deferred to formal extension

Layer 5 — Fork Registry

This Document

Document ID: orp-dk-property-tax-001 Forked From: None (original proposal) Known Forks: None yet Responses: None yet

Invitation to Fork

This document is explicitly open for forking.

If you believe:

• The LVT rate should be different (0.5%? 1.5%?)
• The profit tax rate should be higher or lower
• The land value ratios are wrong
• The stakeholder analysis missed an important group
• The smoothing period should be different
• Inflation adjustment should be included

→ Fork this document, change the relevant fields, and publish your version.

The diff between your fork and this document will make the actual point of disagreement explicit and debatable.

Suggested Fork Starting Points

1. Alternative rate combinations — e.g. 0.5% LVT + 15% profit tax
2. Revenue neutrality analysis — Use Danmarks Statistik transaction data
3. Extension to rental property — Separate profit tax regime
4. Inflation-adjusted gains — Reduces taxable gains for long holds
5. Municipality-specific rates — Model Copenhagen vs rural differences
6. ATP integration — Allow pension savings to fund property purchases

Download and Validate

The complete validated YAML document is available:

# Download
curl -O https://gitlab.com/publicreason/orp/-/raw/main/examples/danish_property_tax_reform.yaml
 
# Validate
orp validate danish_property_tax_reform.yaml
 
# Expected output:
# ✓ Valid ORP document
# Compliance Level: ORP-Full
# Layers Present: 5/5 (Header + L1-L5)

What This Example Teaches

About ORP Protocol

1. All 5 layers work together — Each layer builds on the previous
2. Data honesty matters — L1 explicitly flags synthetic data and approximations
3. Stakeholders aren’t abstract — L3 names real groups with real vulnerabilities
4. Decisions are documented — L4 shows why choices were made
5. Disagreement is invited — L5 explicitly encourages forking

About This Proposal

1. Most homeowners benefit — 3 out of 4 scenarios show lower tax burden
2. High gains get taxed — The one group that pays more realized a DKK 3M untaxed windfall
3. Cash-poor owners are protected — Tax freeze mechanism extended to LVT
4. Recent buyers still benefit — Despite rule change mid-ownership
5. The system is simpler — One LVT rate + one profit tax rate vs complex current system

Next Steps

• Challenge this proposal — Fork it with your own assumptions
• Extend the analysis — Add aggregate revenue modeling
• Apply to your context — Use this structure for your own policy domain
• Contribute — Submit your ORP document as an example

Questions or feedback? Open an issue on GitLab.