Many new landlords are looking into how the much-discussed Business Tax Scheme for residential rentals can be utilized.
And that is a very good idea. When you rent out a property, there are a number of things you need to keep track of. One of them is the tax scheme. If you rent out a property, your rental activity is considered commercial leasing. Roughly speaking, this means two things.
- That your rental income is taxable
- That you have the option to choose between three different tax schemes, each with its own advantages
The three tax schemes are: the Personal Tax Act, the Capital Return Scheme, and the Business Tax Scheme. All tax schemes have their own specific pros and cons. We will cover all of them here, but we will focus primarily on the Business Tax Scheme for rentals.
If you do not pay top-bracket tax and have few or no interest expenses associated with the property, the Personal Tax Act might be the optimal solution for you.
You will learn more about this, and much more, in this blog post.
Business Tax Scheme for rentals – what are the benefits?
The Business Tax Scheme is the tax arrangement that offers the most tax benefits for landlords. We have outlined the most important advantages for you as a property owner. At the same time, it is also the tax scheme that requires the most administrative work.
But let us first take a closer look at the tax benefits, and then we can tell you about the administrative tasks afterwards.
High tax value for interest expenses
One of the major advantages of the Business Tax Scheme for rentals is that you get a high tax value for your interest expenses if you have debt on the property. You receive a full deduction for your interest expenses through the Business Tax Scheme. Therefore, the scheme is a smart choice if you have debt on your property.
Save your profit with the Business Tax Scheme
The Business Tax Scheme also offers advantages regarding the profit from the property. You can save the profit within the scheme, where it is taxed at 22%. This provides two additional benefits. First and foremost, the profit can be used to pay down debt with low-taxed funds, which the other schemes do not allow you to do.
You can also choose to pay out the profit to yourself. The profit you withdraw is taxed again, moving from 22% to your personal tax rate. If you pay the top-bracket tax, there may be good reasons to keep the profit within the scheme. The profit can instead be used to smooth out your income if you receive a lower salary for a period.
Things to keep in mind
On the less fun side, the business tax scheme is also an absolute administrative heavyweight. To use the scheme, you must separate your private finances from your property rental finances. This means you must have a separate account for your property rental if you want to take advantage of the tax benefits.
If you need help calculating your property rental tax and deductions under the business tax scheme, you can use our online tool. If you run into any issues, you can always get in touch with one of our property rental experts via the chat.
Once you are finished, you will receive a complete overview telling you exactly which figures to enter on your preliminary income assessment and tax return.
If you are not interested in that, you are more than welcome to read on. You can also visit our page on property rental.
What are the alternatives to the business tax scheme?
There are two alternatives to the business tax scheme that we mentioned at the beginning of this post. They are called the capital return scheme and the Personal Tax Act. Let's start with the first one.
The capital return scheme for property rental
The capital return scheme allows you to calculate a capital return on your property rental. If you use the capital return scheme, you will pay less tax on a portion of the profit. It is the capital return itself that is taxed at a lower rate.
Administratively, this solution is not nearly as burdensome as the business tax scheme, because you do not need to set up a separate bank account or perform bookkeeping, as is the case with the business tax scheme. The capital return scheme is particularly useful if you have very low or no debt on your property. This is because you must pay off debt with fully taxed funds when using the capital return scheme. This is the opposite of how it works in the business tax scheme, for example.
The capital return itself is adjusted according to the market interest rate, and therefore it constitutes a percentage. The market interest rate has been 0% in recent years, but this has changed, and at the time of writing, it is 2% (rate updated 2025). This means that users of the scheme receive a small financial gain.
The capital return scheme only provides real value to you when the market interest rate rises. Now that the capital return is at 2% (2025 rate), you gain tax advantages by using the capital return scheme. Since the capital return scheme only differs from the standard tax rules regarding the capital return base, there is currently a difference depending on whether you choose to use the capital return scheme or the Personal Tax Act.
The Personal Tax Act is the easy alternative to the business tax scheme
The Personal Tax Act is the default tax scheme. This means it is the solution you automatically encounter on skat.dk. To use one of the other tax schemes, you must actively choose either the capital return scheme or the business tax scheme.
Under the Personal Tax Act, profit is taxed as if it were ordinary employment income. This means you do not get the tax benefits described above for the capital return scheme (which currently is not worth much) or the business tax scheme. You are already familiar with this scheme, as you have most likely used it as an employee at some point in your life. From an administrative perspective, the Personal Tax Act is the simplest method, but it is certainly not the most advantageous, as the total tax burden is high.
How to access the business tax scheme
There are generally three ways to access the business tax scheme.
- You can learn the law yourself
- You can get help by going to an accountant
- You can use Reportability and get ready to report in 5 easy steps
The business tax scheme is often the most advantageous tax scheme, but it is also the most difficult to use because it is complex. This complexity makes the business tax scheme hard to understand for most people who are not trained accountants. Those who try to learn the business tax scheme on their own typically end up making mistakes that lead to tax penalties.
If you want to try it yourself, take a closer look at box 147 on your tax return. This is where you opt into the scheme. Be aware that the tax authorities may change the box numbers from time to time.
As a second option, you can go to an accountant. This is a good solution if you want to ensure everything is handled correctly, but accountants usually charge a high fee, which can make the value of the deductions feel low.
Finally, you can use Reportability. We have developed an online tool that gives you the ability to use the business tax scheme for rental properties all by yourself. We have built the legislation into the tool, which calculates your deductions when you enter the information we ask for.
You handle everything in 5 simple steps, and afterwards, you are told exactly which figures to enter in the various boxes on Skat.dk. If you need it, we will help you every step of the way via our chat.
Do you need help with the business tax scheme?
Business tax scheme for rental properties? It is not that difficult with Reportability. Hop over to Reportability and read much more about how we can help you right here.
You can also visit skat.dk and read more about the special tax schemes for residential landlords.
Video explanation
