Denmark is often mentioned in European debates about land value taxation, as it is one of the few countries that applies a recurring tax on the value of land alone (“Grundskyld”). At first glance, this appears close to the long-standing proposal for a land value tax inspired by Henry George. In practice, however, the Danish system functions quite differently and provides only limited support for improving access to land for new entrants and ecological farmers.
A land value tax in form, but not in effect
Landowners—whether private households or farmers—pay an annual municipality tax on the assessed value of their land. For agricultural land, the rate is capped at 0.7%. In economic terms, this is far too low to influence land markets: it neither discourages speculation nor prevents the steep rise in land prices that Denmark has experienced in recent years.
Capital gains taxation shapes market dynamics
When farmland is sold, capital gains are taxed at around 42%, but Denmark offers several mechanisms to postpone taxation:
intra-family transfers can push the tax obligation into the next generation,
reinvesting the full sale price into a new farm can defer taxation until the farmer eventually leaves agriculture.
A concrete example: How capital gains taxation works in practice
To illustrate how Denmark’s capital gains rules affect land transfers, consider the following example:
A farmer buys a farm in 2013 for 10 million DKK and sells it in 2025 for 15 million DKK. The capital gain of 5 million DKK is taxed at roughly 42%, resulting in an immediate tax bill of 2.1 million DKK if the sale happens on the open market.
If the farm is sold to a family member, this tax payment can be postponed: the tax obligation is simply transferred to the next generation and becomes due only when the farm is eventually sold outside the family.
Clarifying the reinvestment rule
Another mechanism allows farmers to postpone taxation if they reinvest the entire selling price into another farm. Importantly, taxation is not applied to each individual sale, but only if there is a net gain across the entire chain of sales and purchases.
Using the same example:
The farmer sells the first farm for 15 million DKK (5 million gain)
She reinvests the full 15 million into a new farm
The taxable gain is carried over but not taxed at this moment
If the new farm is later sold for 15 million DKK, there is no net gain, so no tax is due
If the new farm is sold for 18 million DKK, the net gain is 3 million, and only this amount is taxed (typically when the farmer leaves agriculture)
This system facilitates relocation and restructuring for established farmers—without imposing immediate tax burdens—but it also means that farmers with accumulated gains can roll them forward for decades. This increases their liquidity compared to new entrants, who do not have capital gains to defer and therefore struggle to compete in the land market.
Tax depreciation privileges established farmers
Danish rules allow accelerated depreciation on machinery and buildings, which effectively provides liquidity advantages to established farmers. Over time, this reduces their tax burden and enables them to pay higher prices for neighbouring land. For new entrants, this results in a competitive disadvantage in land acquisition.
Liberalisation increases competition for land
Since 2015, Denmark has significantly liberalised its land legislation. Anyone can buy farms, regardless of agricultural training or residency. As a result:
energy companies acquire land for solar and wind installations,
private investors buy land for CSR “rewilding” projects,
urban expansion and infrastructure reduce agricultural area,
high commodity prices increase the purchasing power of larger farms.
In this environment, newcomers and organic farmers often struggle to compete.
Implications for access to land
While Denmark technically has a land value tax, its design and rate do not significantly counteract speculation or rising land prices. Tax incentives and market liberalisation strengthen established farms and corporate actors. Consequently, the Danish system does not function as a tool to improve access to land for new farmers.
Conclusion
Denmark provides an important example for European land policy discussions. It demonstrates that:
a land value tax must be sufficiently high,
must not be undermined by postponement mechanisms,
and must be embedded in a broader regulatory framework
to genuinely support equitable access to land.
For access-to-land movements, Denmark serves as a reminder:
The form of a land tax is not enough—its design determines whether it contributes to land justice.