Goodwill in a Business Sale: The Full Guide

Goodwill is rarely just one question — it's at least four: What's it actually worth? How is it taxed? How is it depreciated in the accounts? And what rules apply if the deal is between related parties, like family? This guide brings it all together. Want the short version on how goodwill affects the price negotiation itself instead? Read our article on what goodwill is, and how it affects the price.

Note: This article describes Danish tax and accounting rules for goodwill specifically.

What is goodwill, fundamentally?

Goodwill is the part of a company's value in a business sale that can't be attributed to specific, measurable assets — but which still has genuine economic value. It covers things like established customer relationships, brand and reputation, trained know-how, supplier agreements, and a well-functioning organization. For tax purposes, goodwill is typically defined as the combined value of expectations of future earnings not already tied to other specific assets or rights.

Taxable goodwill: how it's taxed when you sell

How goodwill is taxed depends critically on whether the deal is an asset purchase or a share purchase — see the difference in our article on asset purchases vs. share purchases.

• In an asset purchase, goodwill is sold as an independent intangible asset. The gain is taxed on you as seller under depreciation rules — if you're a personal owner, the gain is included in your personal income; if it's a company selling, the gain is taxed as ordinary corporate income.
• In a share purchase (selling shares), goodwill isn't sold separately — it's part of the overall business, and is therefore included in the ordinary share gain, taxed under the Share Gains Tax Act. See our walkthrough of when you pay 42% tax on shares.

This is one reason the choice between an asset purchase and a share purchase has such significant tax implications — not just for the buyer, but very much for you as seller too.

The buyer's deduction: depreciating goodwill

If the buyer has acquired goodwill as part of an asset purchase, the acquisition cost can be depreciated for tax purposes at up to 1/7 per year — that is, on a straight-line basis over a minimum of 7 years. Depreciation can begin in the year the agreement transferring goodwill takes effect. This right to deduct is part of what makes an asset purchase attractive to many buyers, and should always be part of the negotiation over how the price is split between the different assets, including goodwill.

Accounting treatment of goodwill

Beyond the tax side, purchased goodwill must also be treated in the accounts as an intangible fixed asset. Under the Danish Financial Statements Act — unlike under IFRS — goodwill must still be amortized on an ongoing basis. The business must estimate the expected useful life itself, based on how long it expects goodwill to actually contribute to earnings. If the useful life can't be reliably estimated, it must be set at 10 years. There's no longer a fixed 20-year cap as there historically was — the realistic estimate of useful life is what matters now.

The new rules from April 2025: valuing goodwill between related parties

If you sell to a fully independent, external buyer, it's generally the negotiated price you actually agree on that forms the tax basis — market value is considered to be what an independent buyer is actually willing to pay. The situation is different when the transfer happens between related parties — for example a generational transfer within the family, or between affiliated companies. Here, goodwill must be valued at market value, and since April 11, 2025, the schematic calculation method many advisors have relied on has changed significantly:

• The old goodwill circular has been repealed. Circular No. 44 of March 28, 2000, which for decades formed the basis for the schematic calculation, no longer applies to transfers from and including April 11, 2025. It's been replaced by a new statutory provision in Section 12a of the Danish Estate and Gift Tax Act.
• The calculation period has been extended from 3 to 5 years. The new method is based on a weighted average of the business's operating result for the past 5 financial years, up from 3 years previously.
• The imputed owner's salary has been adjusted. A calculated owner's salary is deducted from the result before goodwill is calculated — this is now set at a minimum of DKK 250,000 and a maximum of DKK 1 million.
• The capitalization factor has changed. The new rate is based on the capital yield rate plus 3%, meaning the rate is adjusted continuously in line with interest rate developments — unlike before, when the rate was more static.
• Goodwill's expected lifespan is now explicitly factored in. The capitalization factor is set taking into account how long the goodwill is expected to last — typically 5 to 9 years — with the extraordinary return assumed to decline on a straight-line basis over that period.

The purpose of the reform has, among other things, been to make the schematic calculation more accurate relative to the business's real earning power and current interest rate level, after the old circular was criticized for years for producing values far from what an actual buyer would pay.

When should the schematic method be used — and when not?

The schematic method is primarily relevant when there's no independent, negotiated price to rely on — typically for transfers within the family or between affiliated companies, including in connection with the tax models for generational transfers, where reduced gift and estate duty requires a correct valuation. If, on the other hand, you sell to an external, independent buyer after genuine negotiation, it's generally the price you agree on that forms the basis — provided it can be documented to reflect a genuine market negotiation.

What affects the actual size of goodwill when selling a business?

Beyond the tax calculation, a number of factors in practice determine how much a buyer is actually willing to pay for goodwill:

• Owner dependency: Are customer relationships and reputation tied to you personally, or to the business as a whole? Particularly in consulting, advisory and other professional services, Danish courts have previously debated how personal goodwill can genuinely be considered — but an overly strict "substitution principle" that entirely dismissed business goodwill in person-dependent industries has since been rejected by the courts. In practice, high owner dependency still means a buyer will price the uncertainty in as a discount.
• Stability of earnings: Steady, predictable earnings over several years typically give more robust — and thus higher — goodwill than fluctuating results.
• Composition of the customer base: Many, spread-out customers generally give more solid goodwill than dependency on a few large customers.
• The nature of the industry: Some industries — like advisory and services — traditionally have a high goodwill share of the total price, while others are priced more based on physical assets. An accurate normalized EBITDA is often the starting point, regardless of which method goodwill is ultimately calculated under.

VAT and goodwill

If goodwill is sold as part of a combined business transfer — that is, along with the rest of the business's assets, as a going concern — the transfer generally falls outside the scope of VAT, provided the buyer continues a similar activity and is or becomes VAT-registered. If goodwill is instead sold in isolation, outside a combined business transfer, the VAT treatment should always be specifically clarified with an accountant. See the general walkthrough in our article on tax and VAT when selling a business.

Frequently asked questions

Do the new 2025 rules also apply if I sell to an external, independent buyer?

No, generally the schematic method is primarily relevant for transfers between related parties. If you sell to an independent buyer after genuine negotiation, it's normally the negotiated price that forms the basis.

Can I still use the old goodwill circular if my deal was already being prepared before April 2025?

What matters is the valuation date, not when preparations started — the circular doesn't apply to valuations from and including April 11, 2025. If you're unsure which rules apply to your specific deal, clarify it with an advisor.

Why is goodwill more expensive to "sell" in an asset purchase than a share purchase?

It's not necessarily more expensive in itself — but taxation follows different rules (depreciation rules for an asset purchase, the Share Gains Tax Act for a share purchase), which can produce different tax outcomes depending on your specific situation. It's a central part of negotiating how the deal is structured.

Can a buyer always depreciate goodwill for tax purposes?

In an asset purchase, yes — at up to 1/7 annually. In a share purchase, the buyer doesn't get this depreciation right the same way, because goodwill itself isn't resold as an isolated asset.

Facing a valuation or negotiation of goodwill in a specific deal? Book a no-obligation call, or use our free valuation tool as a first step.