The deduction related to guarantee commission is one of the most unknown and overlooked deductions. It is especially relevant in a year such as 2019 in which the interest rates have been historically low and many people have chosen to refinance their mortgage. Up to 100,000 Danes can get several thousand DKK with this deduction.
It is one of the select few deductions for expenses paid to banks and mortgage lenders that is not automatically reported. As such, you will need to figure out what you may be eligible to receive in deductions.
In this article, we will cover:
What guarantee commissions are
An example of a guarantee commission
Why these are not reported automatically
Whether you are eligible to receive any deductions
What is a guarantee commission?
A guarantee commission is a type of fee that a bank may charge e.g. in the event of refinancing a mortgage This is due to the fact that while the new loan is being reported to the state, i.e. registered, the bank is providing a guarantee for the loan. This may also occur if you are buying or selling your house.
Some banks take a percentage of the loan amount and, as a result, the fee can quickly run up to a couple of thousand DKK, especially if it takes a while to get the loan registered.
Below, you will find an example of what it may look like in a document from the bank.
Example of a guarantee commission
Why is this not reported automatically?
Guarantee commissions are one of the few bank-related deductions that still is not reported automatically. According to Henning Boye Hansen, the chief consultant from the auditing house BDO, this is because the legislation dates back to a time where not many loans were refinanced. As a result, the deduction was not as commonly used as in the previous years where the interest rates have fallen quite significantly.
Some banks remind their customers to report the deduction, but this is quickly forgotten on a busy day.
In other banks, such as Nordea Kredit, the customers often do not pay any guarantee commissions since a so-called fixed rate agreement have been put in place instead.
Check to see if you are eligible for any deductions
For many, the deduction for guarantee commissions is a hidden bonus that they are not aware they may be eligible to receive.
That is why we at Tax Helper have created an easy and intuitive platform that comfortably allows you to check whether you can receive the deduction and make it all the way to the finish line in terms of reporting your deductions to Skat. It is free to try out, and you only pay if you save money on your taxes.