Comparing Freelancer, Self-Employed, and Employee Status

WHO IS CONSIDERED A FREELANCER?

When referring to a freelancer, it usually implies a person who does not intend to start a typical company or own a permanent office. If someone is self-employed, they own a sole proprietorship, which means they can hire employees if they can afford it. Freelancers are not restricted to a particular industry, and could work as consultants, web designers, or IT programmers, among others. Freelancers generally have lower business costs and less financial risk. In Danish, a freelancer's income is called "honorar". Although honorar is a type of income that is different from salary or sales, we will refer to it as "income" for simplicity in this article.

FREELANCER RECEIVES INCOME B

From a tax perspective, a freelancer's income in Denmark is referred to as "B-income," just like for a sole proprietor, and the tax paid by a freelancer is called "B-tax." However, even though both the income and tax are labeled as "B," it does not necessarily mean that a freelancer is considered self-employed. The "B" label is simply used to inform the IRS that the income was not earned from a regular job ("A-income"). As a freelancer, it can be challenging to determine your tax status and accounting and VAT obligations. Although you may believe that you are a freelancer due to the contract you signed with your client, in Denmark, it is not possible to reject being an employee, despite what the signed freelance contract may say.

WHAT IS THE DIFFERENCE AMONG BEING AN EMPLOYEE, FREELANCER AND SELF-EMPLOYED?

When it comes to working as a freelancer in Denmark, it's essential to be prepared for three potential scenarios.

FREELANCER WHO IS CONSIDERED AN EMPLOYEE

According to Danish law, if a freelancer meets any part of the following criteria, they are considered an employee rather than a freelancer:

1. You have only one employer or one main client who provides you with work.
2. Your contract with the client is ongoing and does not have a specific deadline for completion.
3. The client provides you with specific instructions on the work you are to do and controls how you complete the work.
4. The client chooses the equipment and programs you should use to perform the work.
5. You are not permitted to hire other people to perform the work on your behalf.
6. You bear no financial risk associated with the work - you will still be paid regardless of the outcome of the work.
7. You do not incur any costs associated with performing the work.
8. Your client's brand name is used on all of the work you produce.
9. Your working hours and vacation time are set by the client.
10. The contract does not specify an end date.
11. The contract includes a notice period.
12. You are paid on an hourly, weekly, or monthly basis.
13. The client covers the costs associated with the work performed, including vacation pay and employee insurance.

Instead of invoicing their services, employees receive a pay stub

If you are classified as an employee in Denmark, you will receive a standard pay stub and you should not submit invoices for your services. Instead, the income you earn will be classified as "A-income," and the tax you pay will be referred to as "A-tax." Your employer or client will collect the A-tax and pay it to the IRS. Additionally, as an employee, you will be entitled to standard employment benefits, such as vacation pay and other benefits.

Employees are not allowed to deduct expenses in personal income

As an employee in Denmark, any expenses you incur related to your job cannot be deducted in the same way that they can be for a company. These costs are considered standard employment expenses and are recognized as such. The amount of tax deduction you can claim is lower than it would be for a company because costs can only be deducted from taxable income, not personal income. These costs must also be related to the income received from your employer. To declare related expenses, you would use the employee expenses field No. 58 on your tax return. Your income should be declared using the normal field No. 11 for salaries. As an employee, you do not have to deal with VAT payments regardless of how much income you have. Additionally, you are not responsible for bookkeeping.

A FREELANCER WHO IS NOT AN EMPLOYEE AND NOT SELF-EMPLOYED

In some cases, there may be a "true freelancer" who falls somewhere between being hired as an employee and being self-employed. When determining your status, it's important to consider all relevant factors and not rely solely on one or two. While some of the factors we've mentioned, such as working for a single client or having a contract without a specific deadline, may suggest that you are a freelancer, it's essential to look at the bigger picture of your working arrangement. Ultimately, there is no single factor that is fully sufficient to specify your situation, so you need to consider all relevant factors when determining your status.

There are several factors that may suggest that you are a true freelancer rather than an employee or self-employed:

1. You have multiple clients or work for different companies at the same time.
2. You assume a certain level of financial risk in your work and have control over your own profits.
3. You do not plan on running a large-scale company and prefer to work independently.
4. Your contract terms may vary depending on the client.
5. Your projects are short-term and have a defined scope.
6. Your work has a limited time frame.
7. You have control over how you complete your work and are not given specific instructions by your client.
8. Your client cannot control or supervise your work.
9. You are paid once the project is completed and delivered to the client.
10. You use your own "company" brand name on all work and documentation you produce.
11. You are responsible for covering the costs of your office, computer, office supplies, phone, and other necessary expenses.
12. You have the ability to work for different clients simultaneously.
13. You can hire employees to help you complete projects.
14. You are responsible for creating advertisements to attract new clients and projects.
15. You may face civil liability if you make mistakes or errors in your work.
16. You are required to register as a VAT payer and collect and pay VAT.
17. You are not entitled to paid vacation or sick leave.
18. The decision to take a vacation is up to you and is not subject to any specific rules or requirements.
19. The contract you have with a client may be terminated at any time without notice, although most contracts do have some form of notice period. The wording of the contract should not resemble that of an employment contract.

What deductions are possible in the case of a freelancer?

As a freelancer in Denmark, you are able to deduct your business expenses from your income for tax purposes. However, your expenses cannot exceed your income, so you cannot end the year with a deficit as a sole proprietor can.

The company that pays your honorarium must declare the income in box 12 on their tax return. If the company fails to declare your fee in box 12, they must enter the amount in box 15.

As a freelancer, you must declare your costs in box 29 on your tax return. It is important to document all details of your costs to ensure accurate reporting.

Freelancers often have to pay VAT

If a freelancer's income (also known as revenue or sales) exceeds DKK 50,000 in a 12-month period, their entire income will be subject to VAT, and they must comply with VAT regulations. Additionally, any sales made before reaching DKK 50,000 will also be subject to VAT in this case. The VAT rate in Denmark is a 25% charge without VAT, so the VAT for the first DKK 50,000 in sales will be 20% of that amount.

However, it's important to note that not all freelancers are required to pay VAT, even if their sales exceed DKK 50,000 for 12 months. Exemptions may apply to certain professions such as actors, musicians, artists, journalists, bloggers, speakers, writers, and translators.

SELF-EMPLOYED FREELANCER

The distinction between being an employee, a true freelancer, and self-employed can be a bit complicated, as it largely depends on the specifics of the individual's work situation.

In general, a freelancer is someone who works independently and provides services to clients on a project-by-project basis, while a self-employed individual typically runs their own business and may have employees, an office, and other infrastructure to support their work.

However, there is some overlap between these categories, and a freelancer may begin to look more like a serious business as their financial risk increases and their plans expand to include staff and other resources. In this case, the conditions that apply to the freelancer would be similar to those for a self-employed individual, but on a smaller scale.

What a PMV is?

In Denmark, it is possible to run a small sole proprietorship that does not have to pay VAT, as long as your sales do not exceed DKK 50,000 in a 12-month period. To do this, you will need to register a PMV (Privat Mindre Virksomhed), which is a smaller version of a sole proprietorship.

If you expect your sales to exceed DKK 50,000, it's better to register as a VAT payer from the start. If your PMV does exceed DKK 50,000 in sales for 12 months, the sales you had before reaching DKK 50,000 will be subject to VAT, and you will have to pay a VAT rate of 20% on all previous sales.

The PMV is issued a CVR number, but does not require VAT registration. Later on, you can convert the PMV into a sole proprietorship and keep the same CVR number when registering for VAT.

In summary, a PMV is a smaller version of a sole proprietorship that is issued a CVR number but does not require VAT registration, as long as sales do not exceed DKK 50,000 in a 12-month period. A sole proprietorship owns a CVR number and is also registered for VAT.

What is a sole proprietorship?

In Denmark, the terms "self-employed" and "sole proprietorship" are interchangeable. If a sole proprietorship expects their sales to exceed DKK 50,000 in a 12-month period, they must register as a VAT payer.

The primary goal of a sole proprietorship is to generate a profit and establish the typical costs associated with running a business, such as marketing, employees, office rent, computers, machinery, and other expenses.

Compared to a freelancer, a sole proprietorship has more financial risk with clients, but there is no set amount that can be used to determine the level of financial risk. Ultimately, it depends on the individual business and its specific circumstances.

Some factors indicating that you are a sole proprietorship include:

1. You work for more than one customer

2. You enter into contracts with different terms

3. Your projects are short-term and have defined scopes

4. You work within a limited time frame

5. It's up to you to determine how you do your work

6. Your working hours are flexible and depend on your preferences

7. You choose what equipment and programs to use

8. You are not instructed by the client on how to do your work

9. The customer does not control your work

10.   You receive payment once you deliver the project or reach specific milestones

11.   You place your company name on the work and documents that you deliver to the customer

12.   You are responsible for covering the costs of your office, computer, office supplies, telephone, and other expenses

13.   You may also work for other clients.

14.   You have the option to hire employees if you want to.

15.   If you make mistakes or deliver projects late, there is a financial risk involved.

16.   You can create ads to attract new projects.

17.   There may be civil liability if you make a mistake.

18.   You are required to pay Value Added Tax (VAT).

19.   You are not entitled to paid vacation or sick leave.

20.   You can decide when to take vacation time.

21.   Your contract can be terminated without notice.

People who work as freelancers and operate their own businesses need to follow accounting rules. We suggest using e-conomic to handle your accounting. When you run a business on your own, you need to report it on your tax return by filling out specific field numbers on the SKAT Borger form:

Profit: 111;

Deficit: 112;

Income, interest: 114;

Expenses, interest: 117.

WHAT IF I’M UNSURE IF I’M AN EMPLOYEE, FREELANCER OR SOLE PROPRIETOR?

After considering the factors mentioned earlier, it's not always possible to determine whether you are an employee, freelancer or sole proprietor with absolute certainty. In some cases, it may be obvious that you're running a sole proprietorship, while in others, it might be clear that you're an employee. However, in many cases, it can be challenging to make this determination. If you're unsure, you can seek confirmation from the tax office. They can provide you with written confirmation of your classification as a freelancer, but it typically costs around DKK 400.

Key tax and social security differences between freelancers, self‑employed and employees in Denmark

In Denmark, your tax and social security situation depends strongly on whether you are treated as an employee, a freelancer or self‑employed (sole proprietor). The status affects how your income is taxed, who pays labour market contributions, how you report to SKAT, and what social benefits you are covered by.

Basic tax framework: A‑income vs. B‑income vs. business income

All three groups pay tax under the Danish personal tax system, but the way income is categorised and reported is different.

• Employees receive A‑income. The employer withholds tax and 8% labour market contribution (AM‑bidrag) before paying your salary. The employer reports everything to SKAT via e‑Indkomst.
• Freelancers treated as employees also receive A‑income from the client, with tax and AM‑bidrag withheld in the same way as for regular employees.
• Freelancers not treated as employees typically receive B‑income. No tax is withheld by the client; you must pay tax and AM‑bidrag yourself via preliminary tax (B‑skat).
• Self‑employed (sole proprietors) have business income. You calculate your profit (revenue minus deductible expenses) and pay tax and AM‑bidrag on that profit, usually via the business tax scheme (virksomhedsordningen) or the capital return scheme (kapitalafkastordningen), if you choose to use them.

Everyone pays 8% AM‑bidrag on earned income before other income tax is calculated. On top of this, you pay municipal tax (typically around 24–27%), health contribution (included in municipal tax), church tax if applicable (around 0.4–1.3%) and state tax. State tax is split into a bottom tax and a top tax. The top tax (topskat) is currently 15% on the part of your personal income above approximately DKK 588,900 (after AM‑bidrag and before interest deductions), with a slightly higher threshold if you contribute to certain pension schemes.

Who withholds and pays tax and AM‑bidrag?

• Employees: The employer withholds AM‑bidrag and A‑tax each month based on your tax card. You receive net salary. You do not have to make advance tax payments yourself on this income.
• Freelancers with B‑income: The client pays the full gross amount to you. You must ensure that your preliminary income assessment (forskudsopgørelse) includes expected B‑income so SKAT can calculate your monthly B‑tax instalments. If you do not adjust it, you risk a large residual tax bill with interest and possible surcharge.
• Self‑employed: You are responsible for reporting expected business profit on your preliminary assessment and paying B‑tax and AM‑bidrag. You also file an annual business tax return (udvidet selvangivelse) with accounts for your business.

VAT (moms) and invoicing obligations

VAT rules differ depending on whether you are considered an employee, a freelancer with B‑income, or self‑employed running a business.

• Employees never charge VAT on their salary. Employment income is outside the scope of VAT.
• Freelancers with B‑income may or may not be considered to run an independent economic activity. If SKAT regards your work as a business (for example, you have several clients, bear financial risk and organise your own work), you must register for VAT once your taxable turnover exceeds DKK 50,000 over a 12‑month period. Below this threshold, registration is voluntary.
• Self‑employed must register for VAT when their taxable turnover exceeds DKK 50,000 in any 12‑month period, unless the activity is VAT‑exempt (for example certain health, financial or educational services). Once registered, you must issue invoices with 25% Danish VAT to Danish business clients and report VAT periodically (usually quarterly for small businesses).

If you are VAT‑registered, you can deduct input VAT on business purchases, which can significantly reduce your costs compared with a freelancer who is not VAT‑registered or an employee who cannot deduct VAT personally.

Deductible expenses and business schemes

The scope of deductible expenses is one of the biggest differences between employees, freelancers and self‑employed persons.

• Employees can deduct only limited work‑related expenses, and often only above a certain minimum. Typical deductions include transport between home and workplace (befordringsfradrag), union fees and unemployment insurance (A‑kasse). Other job‑related expenses are deductible only if they are necessary and not reimbursed by the employer, and even then, only above a relatively low threshold.
• Freelancers with B‑income can usually deduct necessary expenses directly related to earning that B‑income, such as software, professional equipment, a share of phone and internet, and sometimes travel costs. However, the rules are stricter and less flexible than for full business income, and you do not automatically have access to the business tax schemes unless SKAT accepts that you run a business.
• Self‑employed can deduct a broad range of business expenses, including office rent, equipment, professional insurance, marketing, accounting fees, business travel and in some cases a proportion of home office costs. You may also use the business tax scheme (virksomhedsordningen) to separate business and private finances, deduct interest expenses in the business and defer tax by retaining profit in the business at a lower intermediate tax rate. Alternatively, the capital return scheme (kapitalafkastordningen) allows you to treat part of the profit as capital income.

Because of these differences, two people with the same gross income can end up with very different net income depending on whether they are employees, freelancers or self‑employed.

Social security, holiday pay and sickness benefits

Denmark does not have a separate social security contribution system like many other countries. Most social benefits are financed through general taxation, but your status still affects what you are entitled to and who pays for it.

• Employees are covered by the Danish labour market model. Employers pay contributions such as ATP (Labour Market Supplementary Pension), industrial injury insurance and often additional pension and insurance schemes under collective agreements. Employees are entitled to paid holiday (typically 5 weeks per year, with holiday pay accrued at 12.5% of salary or paid as paid leave), paid sickness leave for a certain period, and often better maternity/paternity conditions through collective agreements.
• Freelancers treated as employees usually have the same rights as employees for the specific engagement, including holiday pay and, in some cases, sickness and maternity benefits according to the contract or collective agreement.
• Freelancers with B‑income and self‑employed are not automatically covered by employer‑funded schemes. You still have access to public benefits such as maternity benefits and sickness benefits (sygedagpenge), but the conditions and waiting periods can be different, and you must often document your income and business activity. You must arrange your own pension savings and insurance (for example, loss of earnings insurance, health insurance and accident insurance).

For example, employees accrue holiday pay automatically through their employer, whereas self‑employed persons must set aside money themselves to cover time off, as they do not receive salary or holiday pay when not working.

Pension contributions and ATP

Pension is another key difference between the three statuses.

• Employees often have mandatory occupational pension schemes where the employer pays a significant share, for example 8–12% of salary, while the employee contributes 4–6%. In addition, the employer pays ATP contributions (a fixed amount depending on working hours).
• Freelancers treated as employees may be included in the same pension scheme if the contract or collective agreement requires it.
• Freelancers with B‑income and self‑employed do not receive employer pension contributions or ATP. You must set up and pay your own pension savings, for example a rate pension, life annuity or retirement savings account. Contributions to certain pension schemes are tax‑deductible within annual limits, which can reduce your taxable income and possibly keep you below the top tax threshold.

Unemployment insurance and A‑kasse

Unemployment benefits in Denmark are not automatic. You must be a member of an unemployment insurance fund (A‑kasse) and meet income and membership conditions.

• Employees can qualify for unemployment benefits based on their salary income, provided they have been members of an A‑kasse and have earned enough income within the qualifying period.
• Freelancers with B‑income and self‑employed can also be covered, but they must choose an A‑kasse that accepts self‑employed members and meet specific rules regarding business activity, closure of the business and documented income. It is generally more complex to qualify as self‑employed than as an employee.

Administrative burden and reporting to SKAT

The more independent your status, the more administrative responsibility you have.

• Employees have minimal administration. The employer reports income and withholds tax. You mainly need to check your preliminary and annual tax assessments and update them if your situation changes.
• Freelancers with B‑income must keep track of invoices, payments and expenses, adjust their preliminary tax assessment, and possibly register for VAT if their activity qualifies as a business.
• Self‑employed must keep proper accounts, file VAT returns on time, submit an extended tax return, and manage business schemes if they use them. Many choose to work with an accountant to avoid errors and penalties.

Incorrect classification or missing registrations (for example, not registering for VAT when required) can lead to retroactive tax and VAT claims, interest and fines. In addition, if SKAT later decides that you were in fact an employee rather than a freelancer or self‑employed, the client may be held liable for unpaid A‑tax, AM‑bidrag and holiday pay, while you may lose some deductions you claimed as a business.

Choosing the correct status in Denmark is therefore not only a legal question but also a financial and practical one. Understanding the tax and social security differences between employees, freelancers and self‑employed persons helps you plan your income, pension and benefits and avoid unpleasant surprises from SKAT.

How to register correctly with SKAT: employee, freelancer or self‑employed?

In Denmark you must be registered correctly with the Danish Tax Agency (SKAT / Skattestyrelsen) before you start working. The way you register – as an employee, freelancer with B‑income, or self‑employed (sole proprietor) – affects how tax, labour market contributions and VAT are handled.

Registering as an employee (lønmodtager)

If you are hired on a normal employment contract and receive a payslip, you are an employee. Your employer is responsible for withholding tax and labour market contribution (AM‑bidrag) and reporting your income to SKAT.

To be correctly registered as an employee you should:

• Obtain a Danish CPR number and MitID
• Register for tax in TastSelv on skat.dk (if you are new to Denmark)
• Fill in or update your preliminary income assessment (forskudsopgørelse) with expected annual salary
• Make sure your employer has your CPR number and your main tax card (hovedkort)

AM‑bidrag of 8% is deducted from your gross salary before income tax is calculated. Income tax is then calculated according to the Danish progressive system, including municipal tax, church tax (if applicable) and state tax. In 2024 the top‑tax threshold (for the highest state tax bracket) is around DKK 588,900 of personal income after AM‑bidrag.

Registering as a freelancer with B‑income

Many freelancers in Denmark are not considered self‑employed businesses but private individuals with B‑income (B‑indkomst). This is common if you:

• Invoice only occasionally
• Do not take on significant financial risk
• Do not have a real business structure, premises or employees

In this case the client pays your invoice without withholding tax, and you are responsible for declaring and paying tax yourself.

To register B‑income correctly:

• Log in to TastSelv on skat.dk
• Update your preliminary income assessment and add expected B‑income under “Other personal income” (Anden personlig indkomst)
• Set aside money for AM‑bidrag (8%) and income tax on all B‑income

B‑income is included in your personal income and taxed together with your salary, if you also have employment. You do not automatically have to register a business or charge VAT just because you have B‑income, but if your activity is considered an independent economic activity and your annual turnover exceeds DKK 50,000 over a 12‑month period, you must register for VAT as self‑employed.

Registering as self‑employed (sole proprietor / enkeltmandsvirksomhed)

If you run an independent business on your own account and risk, you are usually considered self‑employed. Typical indicators are:

• You have several clients and market your services actively
• You decide how, when and where the work is done
• You use your own tools and equipment
• You bear the financial risk and can make a profit or a loss

Most self‑employed freelancers choose to register a sole proprietorship (enkeltmandsvirksomhed).

To register as self‑employed:

1. Go to virk.dk and create or log in with your MitID
2. Register your business (start virksomhed) as an enkeltmandsvirksomhed
3. Indicate expected annual turnover and whether you must be VAT registered
4. If your expected turnover exceeds DKK 50,000 in any 12‑month period, register for VAT (moms)
5. Choose tax scheme for business income (standard personal taxation or business tax scheme – virksomhedsskatteordningen – if relevant)

Once registered, you receive a CVR number. You must then:

• Charge 25% VAT on taxable sales once you are VAT registered
• Report VAT via TastSelv Erhverv according to your reporting frequency (typically quarterly for small businesses)
• Report business income and expenses annually on your tax return (oplysningsskema)

Key tax and reporting differences

The practical differences in registration are mainly about who withholds tax and who reports what:

• Employee: Employer withholds AM‑bidrag and tax and reports salary to SKAT. You only need to keep your preliminary income assessment updated.
• Freelancer with B‑income: Client pays gross amount. You declare B‑income on your tax return and pay AM‑bidrag (8%) and income tax yourself, usually via adjusted preliminary tax (forskudsskat).
• Self‑employed: You issue invoices, charge VAT if registered, keep accounts, report VAT and declare business profit or loss as personal income. You still pay AM‑bidrag of 8% on business income.

How to avoid misclassification when registering

Danish authorities look at the actual working relationship, not just what you call it. If you register as self‑employed but work under conditions similar to an employee (one main client, fixed hours, client control, no real business risk), SKAT and other authorities may reclassify you as an employee. This can lead to:

• Recalculation of tax and AM‑bidrag
• Liability for the client to pay employer contributions and holiday pay
• Loss of some business deductions for you

Before you register, review your situation carefully and, if in doubt, seek professional advice so that your registration with SKAT matches your real working conditions.

VAT (moms) obligations for freelancers and self‑employed in Denmark

In Denmark, VAT (moms) is a central part of running a freelance or self‑employed business. Understanding when you must register, how much VAT to charge, and how to report it to SKAT is essential to avoid penalties and unexpected tax bills.

When do freelancers and self‑employed need to register for VAT?

You must register for VAT with the Danish Tax Agency (SKAT) if your taxable turnover exceeds DKK 50,000 within any 12‑month period. This applies to most freelancers and self‑employed sole proprietors who sell services or goods in Denmark.

If you expect to reach the DKK 50,000 threshold, you should register before you cross it. You can also choose to register voluntarily even if your turnover is lower, for example to be able to deduct input VAT on your business expenses.

Some activities are exempt from VAT (for example certain health services, financial services and some educational services). If your work falls under a VAT‑exempt category, you normally cannot charge VAT and you also cannot deduct input VAT on your purchases.

Standard VAT rate and what it applies to

Denmark has a single standard VAT rate of 25%. There are no reduced VAT rates for services or goods that are relevant for typical freelancers or self‑employed persons.

As a rule, you must charge 25% VAT on:

• Consulting and advisory services (IT, marketing, design, translation, etc.)
• Creative and professional services (photography, graphic design, copywriting, coaching, etc.)
• Most sales of goods and digital products

VAT is calculated on the total invoice amount for your service or product, excluding VAT. You then add 25% VAT on top and clearly show it on the invoice.

How to issue invoices with VAT

Once registered, your invoices must meet Danish VAT requirements. As a freelancer or self‑employed person, your invoice should normally include:

• Your name or business name and address
• Your Danish CVR number (VAT number)
• The client’s name and address
• Invoice date and a unique, sequential invoice number
• Clear description of the service or product supplied
• Net amount (without VAT)
• VAT amount (25%) stated separately
• Total amount including VAT

If the supply is VAT‑exempt or subject to special rules (for example reverse charge for certain cross‑border B2B services within the EU), this should be clearly indicated on the invoice.

VAT reporting periods and deadlines

Your VAT reporting frequency depends on your business turnover:

• Quarterly VAT reporting – the most common for small freelancers and self‑employed. You report and pay VAT four times per year.
• Half‑yearly VAT reporting – available only for very small businesses under a certain annual turnover threshold set by SKAT.
• Monthly VAT reporting – required for larger businesses above a higher turnover threshold.

SKAT assigns your reporting frequency when you register. Each period has a specific deadline, typically one month and 10 days after the end of the VAT period. You must submit your VAT return and pay any VAT due by this deadline, even if your VAT for the period is zero.

Input VAT deduction on business expenses

When you are VAT‑registered, you can usually deduct the VAT you pay on goods and services used for your VAT‑liable business (input VAT). This reduces the amount of VAT you have to pay to SKAT.

Common examples of expenses where freelancers and self‑employed can often deduct input VAT include:

• Computer equipment, software and office supplies
• Professional tools and equipment
• Business phone and internet (often partially deductible if also used privately)
• Co‑working space or office rent, if VAT is charged
• Advertising, marketing and website costs
• Professional courses and some travel expenses related to your business

Certain expenses have limited or no VAT deduction, for example representation, meals and entertainment. Private expenses are never deductible. If an expense is partly private and partly business, you may only deduct the business‑related share of the VAT.

Freelancers vs. self‑employed: who handles VAT?

If you are treated as an employee, you do not charge VAT on your salary; your employer handles all tax and VAT obligations related to the business.

If you are a freelancer without an employment relationship and you meet the criteria for being VAT‑liable, you must:

• Register for VAT (CVR)
• Charge 25% VAT on your invoices (unless your service is VAT‑exempt)
• Report and pay VAT to SKAT on time

If you are self‑employed (sole proprietor), the same VAT rules apply: you handle VAT registration, invoicing, reporting and payment yourself.

Cross‑border services and reverse charge

Many freelancers and self‑employed people in Denmark work with foreign clients. VAT treatment depends on where your client is established and whether they are a business or a private person:

• B2B services to clients in other EU countries: in many cases, you do not charge Danish VAT. Instead, you apply the reverse charge mechanism, and the foreign business accounts for VAT in its own country. You must include the client’s VAT number and a note about reverse charge on the invoice, and you may have to report the sale in EU sales listings.
• B2C services to private customers in other EU countries: you often have to charge Danish VAT, unless special rules apply (for example for certain digital services with specific EU VAT rules).
• Services to clients outside the EU: many services supplied to customers outside the EU are zero‑rated for Danish VAT, meaning you do not charge Danish VAT but can still deduct input VAT on related expenses.

Because cross‑border VAT rules are complex and depend on the exact type of service, it is important to check the specific rules or get professional advice before invoicing foreign clients.

Consequences of not complying with VAT rules

If you fail to register for VAT on time, do not charge VAT when you should, or submit incorrect or late VAT returns, SKAT can:

• Demand payment of unpaid VAT for previous periods
• Charge interest and surcharges on late payments
• Impose fines for missing or incorrect VAT reporting

For freelancers and self‑employed persons, unexpected VAT claims can significantly affect cash flow. Keeping proper bookkeeping records, saving all invoices and receipts, and reconciling your VAT regularly helps you stay compliant and avoid problems.

Choosing the correct status (employee, freelancer or self‑employed) and handling VAT correctly from the start makes it easier to manage your finances, plan your tax payments and build a stable business in Denmark.

Deductible business expenses: what each status can and cannot deduct

Business expenses are treated very differently in Denmark depending on whether you are an employee, a freelancer with B‑income, or fully self‑employed (sole proprietor or company owner). Understanding what you can and cannot deduct has a direct impact on your taxable income and your effective tax rate.

General rule for deducting expenses in Denmark

For all categories, the basic principle is the same: an expense is deductible only if it is incurred to acquire, secure or maintain your income. Private expenses are never deductible, and mixed private/business expenses are only deductible for the clearly documented business part.

Employees: limited and standardised deductions

As an employee, you are taxed on A‑income and have relatively few options to deduct work‑related costs, because your employer is expected to provide the tools and cover most expenses.

Typical deductions for employees include:

• Work‑related travel between home and workplace (befordringsfradrag): standard mileage deduction based on the distance between home and your regular workplace and the number of working days. The deduction is calculated automatically in your tax assessment if you enter the distance and days in your preliminary income assessment.
• Union fees and unemployment insurance (A‑kasse): deductible up to a statutory annual maximum set by SKAT. Amounts above this cap are not deductible.
• Work‑related expenses paid by yourself (e.g. small tools, professional literature, work clothing that is not suitable for private use): only deductible to the extent they exceed a relatively low minimum threshold per year. Many employees do not reach this threshold, so they effectively get no additional deduction.

Employees cannot deduct:

• Normal clothing, even if only used at work
• Commuting by car or public transport beyond the standard mileage scheme
• Home office costs (rent, electricity, internet) unless very strict conditions are met and the space is used almost exclusively for work
• Depreciation of computers, phones or other equipment if they are mainly for private use or provided by the employer

Freelancers with B‑income: more flexibility, but still limited

If you are a freelancer who receives B‑income but is not registered as self‑employed (enkeltmandsvirksomhed), you are still taxed as a private individual. However, you can deduct documented expenses that are directly related to earning your B‑income.

Common deductible expenses for B‑income freelancers:

• Professional tools and equipment necessary to perform the assignment (e.g. software licences, specialised hardware, instruments)
• Professional courses and education directly related to your current freelance work
• Travel expenses for specific assignments (transport, accommodation, meals within reasonable limits), when not reimbursed by the client
• Professional liability insurance and other business‑related insurances

However, B‑income freelancers usually cannot deduct:

• General home office costs as a percentage of rent or mortgage interest, unless the room is used almost exclusively for work and can be clearly separated from private use
• Depreciation of larger assets in a structured way (as a business would do); in practice, SKAT may treat some purchases as private if they are also suitable for private use
• Losses from your freelance activity against other income in the same flexible way as self‑employed persons

In short, you can deduct necessary, clearly documented costs directly tied to specific assignments, but you do not have the full range of business deductions available to registered self‑employed persons.

Self‑employed (sole proprietors and companies): full business deduction rules

As a registered self‑employed person, you run a business in the eyes of SKAT. This gives you access to the broadest range of deductions, but also more bookkeeping and documentation requirements.

Typical deductible expenses for self‑employed

• Operating costs: rent for business premises, electricity, heating, water, cleaning, office supplies, telephone and internet used for the business.
• Equipment and depreciation: computers, phones, machinery, furniture and other assets used in the business. These are usually depreciated over several years according to Danish tax depreciation rules, instead of being fully deducted in the year of purchase.
• Car and transport: you can either use the business mileage scheme for a private car used for business purposes or register the car as a business asset and deduct actual costs. The method must be chosen and applied consistently.
• Marketing and sales: website costs, advertising, graphic design, business cards, online marketing tools and platforms.
• Professional services: accounting, bookkeeping, legal advice, business consulting, payroll services.
• Insurance: professional liability, business interruption, equipment insurance and other business‑related policies.
• Travel and representation: travel to clients, trade fairs, conferences and reasonable representation expenses (e.g. client meals) within the limits accepted by SKAT.
• Education and courses: continuing professional training directly related to your current business activity.

Home office for self‑employed

If you run your business from home, you may be able to deduct a proportion of your housing costs. The rules are strict: the room must be used primarily for business, and the deduction is often calculated as a percentage of the total area and actual costs (rent, utilities). SKAT pays close attention to mixed private/business use, so documentation and a realistic allocation are essential.

What self‑employed cannot deduct

Even as self‑employed, you cannot deduct:

• Purely private expenses (food at home, normal clothing, private travel)
• Fines and penalties
• Private health insurance and similar personal benefits, unless they are taxed as salary in a company structure according to specific rules

Impact on your taxable income and cash flow

For employees, deductions are largely standardised and have a limited impact on tax. For freelancers with B‑income, targeted deductions can reduce the taxable B‑income, but the scope is narrower than for a full business. For self‑employed persons, consistent deduction of all legitimate business expenses and correct depreciation of assets can significantly reduce taxable profit and improve cash flow.

Because Danish rules distinguish carefully between private and business use, and between B‑income and business income, choosing the right status and documenting your expenses properly is crucial. If you are unsure whether a cost is deductible for your specific status, it is often more efficient to clarify this before you incur the expense than to correct it later in a tax audit.

Social benefits and pension rights depending on your status (holiday pay, sickness, maternity, ATP, pension)

In Denmark, your access to social benefits and pension depends strongly on whether you are treated as an employee, a freelancer (income B) or self‑employed (sole proprietor). The rules are not only important for your security, but also for how much you need to save privately for holidays, sickness and retirement.

Holiday pay (feriepenge)

Employees are covered by the Danish Holiday Act. You earn 2.08 days of paid holiday for each month of employment, which equals 25 days (5 weeks) per holiday year when you work full time. Holiday pay is typically 12.5% of your qualifying salary, paid into FerieKonto or a similar holiday scheme. Many employees also receive a 1% holiday supplement under collective agreements.

Freelancers who are legally considered employees (for example, paid via payroll with A‑income and holiday pay) are covered by the same rules. Your client must calculate and pay your holiday pay just like for any other employee.

Freelancers with income B and self‑employed persons are not covered by the Holiday Act. You do not earn statutory paid holiday and no one pays holiday pay for you. You must set aside your own “holiday pay” from your gross income and plan for unpaid time off. A common rule of thumb is to reserve at least 8–12% of your turnover for holidays, but the exact amount depends on your pricing and desired income level.

Sickness benefits (sygedagpenge)

Employees normally receive salary during sickness from their employer for up to 30 calendar days, if they meet the employment requirements. After this period, the municipality can pay sickness benefits (sygedagpenge) if you still meet the conditions. The maximum public sickness benefit is adjusted regularly, but is capped at a weekly amount corresponding to a full‑time income; your employer cannot receive reimbursement above this cap.

Freelancers who are treated as employees and paid via payroll are usually covered by the same rules as employees. The client may be obliged to pay salary during sickness or you may receive sickness benefits directly from the municipality, depending on your contract and how your work is structured.

Self‑employed and freelancers with income B are not automatically entitled to sickness benefits from the first day of sickness. As a starting point, you can receive sickness benefits from the municipality after a waiting period of 2 weeks, provided that:

• you have had a certain minimum income from self‑employment in the period before you become sick, and
• you are actively working in your business and pay tax in Denmark.

You can shorten or remove the waiting period by taking out voluntary insurance for self‑employed with Udbetaling Danmark. With this insurance, you can choose coverage from day 1, day 3 or after 2 weeks of sickness. The premium depends on the chosen coverage and your insured income. If you rely on your own business as your main income, this insurance is often crucial to avoid large income gaps during longer sickness periods.

Maternity, paternity and parental benefits

Employees are generally entitled to maternity, paternity and parental leave benefits (barselsdagpenge) if they meet the employment and income requirements. The typical model allows:

• 4 weeks of maternity leave before birth and 14 weeks after birth for the mother
• 2 weeks of paternity leave for the co‑parent in connection with the birth
• a longer period of shared parental leave that can be divided between the parents

Many employees are covered by collective agreements or company policies that provide full or partial salary during part of the leave, on top of the public benefits. In those cases, the employer receives reimbursement from the municipality up to the public benefit cap.

Freelancers who are treated as employees and paid via payroll can also qualify for parental benefits if they meet the same income and employment conditions. Whether you receive full salary or only public benefits depends on your contract and whether your client has agreed to pay salary during leave.

Self‑employed and freelancers with income B can receive maternity and parental benefits if they:

• have had a certain minimum income from self‑employment in the qualifying period, and
• are actively working in their business before the leave begins.

The benefit amount is based on your documented income from self‑employment, up to the same maximum rate as for employees. However, you will not receive salary from an employer, so your total income during leave is usually lower than for an employee with a good collective agreement. It is therefore important to plan your cash flow and savings before starting a family if you are self‑employed.

ATP – the Danish Labour Market Supplementary Pension

ATP (Arbejdsmarkedets Tillægspension) is a mandatory supplementary pension scheme.

Employees automatically pay ATP contributions when they work at least 9 hours per week for an employer. The contribution is a fixed amount depending on your working hours. For full‑time employees, the total ATP contribution is split so that the employer pays the largest part and the employee pays a smaller part, which is deducted from salary. The exact amounts are adjusted regularly, but the principle remains the same: the more hours you work, the higher the ATP contribution.

Freelancers who are considered employees for ATP purposes are also covered. If you are paid via payroll and meet the hour requirement, your client must register and pay ATP contributions for you.

Self‑employed and freelancers with income B are not automatically covered by ATP. You can choose to join ATP voluntarily if you meet certain conditions, but many self‑employed do not do this and instead rely on private pension savings. If you are self‑employed for many years without ATP or other pension schemes, your total pension in retirement can be significantly lower than that of a long‑term employee.

Occupational pension and private pension savings

In Denmark, a large part of employees are covered by occupational pension schemes through collective agreements or company policies. It is common that:

• the employer pays around two‑thirds of the pension contribution, and
• the employee pays around one‑third via a deduction from salary.

The total contribution rate is often in the range of 12–18% of salary, depending on the sector and agreement. These schemes usually include life insurance, disability cover and sometimes health insurance.

Freelancers treated as employees can also be included in such occupational schemes if their client is covered by a collective agreement or offers a company pension. In practice, many short‑term freelance contracts do not include pension, so you may need to negotiate it specifically or set up your own private pension.

Self‑employed and freelancers with income B do not have an employer who pays pension contributions. You are fully responsible for building your own pension. You can use different Danish pension products, such as ratepension, livrente or aldersopsparing, and get tax deductions for certain types of contributions up to annual limits. If you do not actively save a significant share of your income for pension, you may have to rely mainly on the public state pension (folkepension) and any ATP or other small schemes in retirement.

Unemployment benefits (a‑kasse)

Unemployment insurance in Denmark is voluntary and managed by unemployment funds (a‑kasser). Employees can join an a‑kasse and, if they meet the membership and income requirements, receive unemployment benefits (dagpenge) when they lose their job.

Freelancers can also join an a‑kasse. Whether you are insured as an employee or as self‑employed depends on how your work is organised. If you are mainly working for one client and paid via payroll, you are usually insured as an employee. If you run your own business with multiple clients, you are normally insured as self‑employed.

Self‑employed persons can receive unemployment benefits if they:

• are members of an a‑kasse that covers self‑employed,
• meet the income and membership requirements, and
• close or significantly reduce their business when they apply for benefits.

The calculation of unemployment benefits for self‑employed is based on your previous income from the business, up to a maximum daily rate. Because the rules are complex, it is important to discuss your specific situation with an a‑kasse before you rely on unemployment benefits as a safety net.

Other social benefits and security

All residents in Denmark with a CPR number and legal residence normally have access to the public healthcare system, regardless of whether they are employees, freelancers or self‑employed. You also build up rights to the state pension (folkepension) based on years of residence in Denmark, not on your employment status.

However, the level of your total income in retirement and during periods of sickness, unemployment or parental leave will differ significantly depending on your status. Employees with strong collective agreements usually have the highest level of security, while self‑employed and freelancers with income B must compensate by:

• building sufficient private pension savings,
• considering voluntary insurance for sickness and unemployment, and
• setting aside funds for holidays and periods without income.

Why your status matters for long‑term planning

When you choose between being an employee, freelancer or self‑employed in Denmark, you are also choosing a social security model. As an employee, many contributions are automatic and partly paid by your employer. As a freelancer or self‑employed, you have more flexibility and potential for higher gross income, but you must actively create your own safety net.

If you are unsure which benefits you are entitled to, or how to structure your contracts and pension savings, it is advisable to get professional advice. Correct classification and planning can make a substantial difference to your financial security in Denmark, both now and in retirement.

Contract essentials for freelancers and self‑employed to avoid being treated as employees

In Denmark, the wording and structure of your contract are crucial for showing the authorities that you are genuinely a freelancer or self‑employed and not in a hidden employment relationship. If SKAT or other authorities assess that you are in fact an employee, this can trigger retroactive tax, social contributions and employment law obligations for the client. A clear, well‑drafted contract helps document that you run an independent business and carry your own commercial risk.

Key elements that should appear in a freelance or self‑employed contract

To support a genuine freelance or self‑employed status, your contract should reflect that you operate independently and are not integrated into the client’s organisation like an employee. In practice, the following points are important:

• Parties and business details – The contract should be between the client and your business (for example, your sole proprietorship with a CVR number or your ApS), not you as a private individual. Include your CVR, address and bank account used for business.
• Scope of work defined as a service – Describe the assignment as delivery of a specific service or project, not as a job position. Avoid employee‑type titles such as “Marketing Manager” or “IT Employee”; instead use “Consultant”, “Freelancer” or “External Advisor”.
• Result‑oriented, not time‑based employment – Where possible, link payment to deliverables (e.g. fixed fee per project, milestone payments) rather than a pure monthly “salary”. Hourly rates are common in Denmark, but the contract should still emphasise that you are paid for services, not employed time.
• No typical employee benefits – The contract should clearly state that you are not entitled to holiday pay under the Holiday Act, paid public holidays, paid sickness, maternity benefits from the client, pension contributions, ATP or other employee benefits. As a freelancer or self‑employed person, you normally handle these yourself.
• Right to work for other clients – It should be explicit that you are free to have multiple clients and that the client does not have exclusivity, unless a limited non‑compete or non‑solicitation clause is clearly justified. A very strict exclusivity clause can indicate an employment relationship.
• Control over how the work is done – The contract should give you freedom to decide how, where and when you perform the work, within agreed deadlines and quality standards. Detailed day‑to‑day instructions, fixed working hours and mandatory presence at the client’s premises are strong employee indicators.
• Use of own tools and equipment – State that you normally use your own computer, software, tools, car or other equipment. If the client provides essential tools, clarify that this is only for security or practical reasons, not because you are part of their staff.
• Business risk and responsibility – The contract should show that you carry commercial risk: for example, you are responsible for correcting errors at your own cost, you may have to pay damages if you breach the contract, and you are not guaranteed continuous work or income.
• Professional liability and insurance – It is a strong signal of independence if you are required to have your own professional liability insurance or business insurance. This underlines that you run a business, not that you are covered as an employee.
• Invoicing and payment terms – Specify that you invoice the client (e.g. monthly or per milestone) and that payment terms follow standard business practice in Denmark, often 8–30 days. The contract should not refer to “salary”, “pay slips” or “holiday allowance” but to “fee”, “invoice” or “remuneration”.
• VAT (moms) handling – If you are VAT‑registered (mandatory when your taxable turnover exceeds 50,000 DKK in a 12‑month period), the contract should state that your fees are subject to 25% Danish VAT, and that you are responsible for charging and reporting VAT to SKAT.
• Duration and termination – Use a fixed project period or an ongoing agreement with a relatively short mutual notice period (for example, 1 month). Very long notice periods, probation periods or protection against dismissal similar to employees can be a red flag.
• No integration into internal HR policies – Clarify that you are not covered by the client’s staff handbook, collective agreements, bonus schemes, staff canteen subsidies, staff discounts or other internal employee policies, unless explicitly agreed as a commercial arrangement.

Clauses that may increase the risk of being treated as an employee

Certain clauses, or the combination of several, can make the relationship look like employment in the eyes of Danish authorities. You should be cautious with:

• Fixed working hours and mandatory presence – If the contract requires you to work, for example, Monday to Friday from 8:00 to 16:00 at the client’s office, this strongly resembles employment. If physical presence is needed, describe it as “as needed for meetings” rather than full‑time fixed hours.
• Exclusive relationship and long‑term full‑time engagement – A single client, full‑time workload and long‑term exclusivity can point towards employment. If this is commercially necessary, it is even more important that other elements clearly show independence (own tools, business risk, invoicing, no benefits).
• Employee‑like supervision – Daily reporting to a “manager”, performance appraisals, mandatory participation in staff meetings or team‑building activities can be interpreted as integration into the client’s organisation.
• Use of employee titles and email addresses – Having a title like “Head of Department” or a company email that does not clearly indicate consultant status can be problematic. If you need a company email or access card, make sure the contract states that this is purely for practical reasons.
• Guaranteed minimum income – Clauses that guarantee you a fixed monthly minimum payment regardless of work performed are closer to salary than to business income. If a retainer is used, link it to availability or a minimum number of hours or services.

Tax and reporting responsibilities in the contract

To avoid misunderstandings and support your status as freelancer or self‑employed, the contract should clearly allocate tax and reporting responsibilities:

• State that you are responsible for reporting your income to SKAT, paying your own income tax and AM‑bidrag (labour market contribution of 8%), and making on‑account tax payments (B‑skat) if you are self‑employed.
• Clarify that the client does not withhold A‑skat, AM‑bidrag or ATP, and that you are not on the client’s payroll system.
• If you are self‑employed, mention that you handle your own contributions to pension schemes and any voluntary unemployment insurance (A‑kasse) or early retirement schemes (efterløn).
• If you are VAT‑registered, specify that all prices are either “excluding VAT” or “including VAT” and that you issue VAT‑compliant invoices with your CVR number.

Practical tips when negotiating and signing contracts

When you negotiate with a Danish client, you often receive a standard contract that is written from an employment perspective. It is important to adjust it so that it reflects your independent status:

• Review all references to “employee”, “salary”, “holiday pay”, “working hours” and “manager” and replace them with terms that fit a freelance or self‑employed relationship.
• Ask to include a clause stating that both parties agree that you act as an independent contractor and that nothing in the agreement creates an employment relationship. This clause is not decisive on its own, but it helps document the intention.
• Make sure the contract allows you to work for other clients, unless there is a clearly limited and time‑bound non‑competition clause with reasonable compensation.
• Keep written evidence of your independence, such as separate business bank account, your own website, marketing materials, several clients and your own business insurance.
• Consider having your contract reviewed by an accountant or advisor familiar with Danish tax and labour rules, especially if the assignment is long‑term or high‑value.

A well‑structured contract cannot guarantee that the authorities will never reclassify you as an employee, because they always look at the actual working relationship. However, if your contract clearly reflects that you run an independent business, combined with your real‑life behaviour (multiple clients, own tools, business risk), you significantly reduce the risk of being treated as an employee for tax and social security purposes in Denmark.

How Danish authorities assess employment vs. freelance status (control, tools, risk, integration)

Danish authorities do not look only at what your contract is called. When SKAT or other authorities assess whether you are an employee, freelancer or self‑employed, they look at the actual working relationship. Several criteria are used together – no single factor is decisive – but some elements are especially important: control, tools and equipment, financial risk, and integration into the client’s business.

Control and independence

The level of control the client has over your work is one of the key indicators:

• Employee: The employer decides when, where and how you work. You follow internal rules, fixed working hours, holiday procedures and reporting lines. You are usually supervised and can be instructed in detail.
• Freelancer treated as employee: If a “freelance” contract in practice functions like a normal job – fixed schedule, regular presence at the client’s office, close supervision, obligation to attend staff meetings – authorities are likely to classify you as an employee, even if you issue invoices.
• Self‑employed freelancer: You decide your own working methods and usually your own working hours. The client buys a result or a service, not your time and presence. You are free to accept or decline assignments and to work for several clients at the same time.

Tools, equipment and workplace

Who provides the tools and where the work is carried out also matters:

• Employee: The employer provides the main tools and equipment (computer, phone, software licences, machinery, protective gear) and usually the workplace. If you mainly use the client’s systems and are integrated into their IT and security setup, this points to employment.
• Freelancer who is effectively an employee: If you are required to use the client’s equipment and systems on a daily basis, have a permanent desk, and are included in internal communication channels as staff, authorities may see you as an employee.
• Self‑employed: You normally provide your own tools and work from your own premises or remotely. Using the client’s systems for access or security reasons is possible, but the core business tools are yours and can be used for multiple clients.

Financial risk and opportunity for profit

Authorities also look at who bears the financial risk and who can make a profit beyond a fixed salary:

• Employee: You receive a fixed salary, holiday pay and possibly bonuses, regardless of whether the employer’s project is profitable. You do not risk making a loss on your work.
• Freelancer with B‑income only: If you are paid per hour or per task but have no real risk of loss (no significant business costs, no investment in equipment, no marketing expenses), you may still be considered closer to an employee for tax and social security purposes.
• Self‑employed: You can make a profit if you manage your business well, but you also carry the risk of loss. You have ongoing business expenses (insurance, accounting, software, marketing), you may invest in equipment, and you are responsible for collecting and paying VAT if your turnover exceeds the Danish VAT registration threshold of DKK 50,000 over a 12‑month period.

Integration into the client’s business

The more you appear as part of the client’s organisation, the more likely you are to be treated as an employee:

• Employee: You are part of the organisational chart, have a company email, appear on the website as staff, and participate in staff meetings, performance reviews and internal training. You are covered by the employer’s internal policies and possibly a collective agreement.
• Freelancer treated as employee: If you are invited to all staff events, follow the same working rules as employees, and your role is permanent and essential to the core business (for example, a long‑term “freelance” accountant working full‑time only for one firm), authorities may reclassify you as an employee.
• Self‑employed: You are clearly external. You may join project meetings, but you are not part of the permanent staff structure. Your contract is for a defined project or scope of work, and you are free to organise your own business and other clients.

Number of clients and dependence on one client

Working for several clients is a strong indicator of self‑employment, but it is not an absolute requirement:

• High dependence on one client: If almost all your income comes from one client over a longer period and you work under their direction, authorities may see you as an employee, even if you have a CVR number and issue invoices.
• Multiple clients: Having several active clients, marketing your services publicly, and regularly seeking new assignments supports classification as self‑employed. It shows that you run an independent business and not just a disguised employment relationship.

Contract vs. reality

Danish authorities always prioritise the actual working conditions over the wording of the contract. Calling yourself a “consultant” or “freelancer” and issuing invoices does not automatically make you self‑employed. If a tax audit or a control case shows that:

• the client controls your daily work like an employer,
• you use the client’s tools and workplace as if you were staff,
• you bear no real financial risk, and
• you are integrated into the client’s organisation,

then SKAT and other authorities can reclassify the relationship as employment. This can lead to retroactive changes in tax, social contributions and holiday pay obligations for both you and the client.

To reduce the risk of misclassification, it is important to structure your agreements, invoicing, working methods and client portfolio in a way that clearly reflects your actual status – whether as an employee, a freelancer with B‑income, or a genuinely self‑employed sole proprietor in Denmark.

Working for one vs. multiple clients: impact on your classification

In Denmark, the number of clients you work for is an important indicator when SKAT and other authorities assess whether you are an employee, a freelancer with B‑income, or genuinely self‑employed. It is never the only factor, but it strongly influences how your work relationship is classified and who is responsible for tax, social contributions and employment rights.

Working for a single client

If you work almost exclusively for one client, the authorities will often look very closely at whether you are in fact an employee rather than a freelancer or self‑employed. This is especially true when:

• the client decides your working hours and place of work
• you use the client’s tools, systems, email address or uniform
• you are integrated into the client’s organisation (team meetings, fixed role, internal responsibilities)
• you do not bear any real financial risk (you are paid for hours worked, not for results, and you are not liable for defects)

In such cases, SKAT and the Labour Market authorities may consider you an employee, even if your contract calls you a “freelancer” or you invoice through your own CVR number. The client may then be required to treat your remuneration as A‑income, withhold A‑tax and AM‑bidrag (8% labour market contribution), and pay holiday pay and possibly other employment‑related costs.

If you are formally self‑employed but have only one main client over a long period, you should be prepared to document that you still run an independent business. This includes having your own business risk, the possibility to work for others, your own marketing, and the freedom to organise your work.

Working for multiple clients

Having several clients at the same time, or over a relatively short period, is a strong indication that you are self‑employed or a genuine freelancer rather than an employee. Authorities typically see multiple clients as a sign that:

• you actively run a business and are not economically dependent on a single payer
• you decide which assignments to accept and how to prioritise your time
• you carry a business risk (for example, periods without assignments, non‑payment, or fixed‑price projects)

However, multiple clients alone do not guarantee self‑employed status. If, for example, you work full‑time under employee‑like conditions for one client and only occasionally perform small tasks for others, the main relationship can still be classified as employment.

Economic dependence and “main client”

Authorities often look at how dependent you are on one client. As a rule of thumb, if one client accounts for the vast majority of your annual income, this increases the risk of being seen as an employee in that relationship. There is no fixed legal percentage, but if 75–80% or more of your income comes from one client over several years, this will typically trigger closer scrutiny.

To support self‑employed status, it is helpful if:

• no single client consistently accounts for almost all of your turnover
• you have a realistic possibility to replace a client and still continue your business
• you actively seek and accept assignments from different clients (for example, through marketing, a website, platforms, networking)

Short‑term vs. long‑term relationships

The length and continuity of the relationship with each client also matter. A long‑term, full‑time engagement with one client that continues year after year is more likely to be treated as employment, especially if you have fixed hours and a stable monthly payment.

By contrast, a series of separate projects for the same client, with clear breaks between them, project‑based fees and the freedom to work for others in between, is more consistent with freelance or self‑employed status. Clear project contracts, with defined deliverables, deadlines and prices, help to document this.

Practical implications for your classification

The way your client portfolio looks in practice affects:

• Tax treatment: whether your income is treated as A‑income (employee) or B‑income/business income (freelancer/self‑employed), and who withholds A‑tax and AM‑bidrag
• VAT (moms): as self‑employed you must register for VAT once your taxable turnover exceeds 50,000 DKK in a 12‑month period; employees never charge VAT on salary
• Social benefits and rights: employees may be entitled to holiday pay, notice periods, and other protections under Danish employment law; self‑employed must secure these privately
• Liability and risk: self‑employed typically bear the risk for errors, delays and business costs, while employees usually do not

How to reduce the risk of misclassification

If you want to operate as a freelancer or self‑employed in Denmark and avoid being reclassified as an employee, consider:

• actively building a client base with more than one significant client
• avoiding long‑term, full‑time arrangements that mirror a standard job, unless you are treated as an employee with A‑income
• using written contracts that clearly describe project‑based work, your independence and your business risk
• maintaining your own tools, insurance, website and marketing to show that you run a real business

Ultimately, Danish authorities look at the overall picture: the number of clients, the economic dependence on each, and how the work is actually organised. Your classification is based on reality, not just on what your contract or invoice says.

Changing your status: from employee to freelancer or self‑employed (and vice versa)

Changing your status between employee, freelancer and self‑employed in Denmark affects how you are taxed, which registrations you need with SKAT and virk.dk, and what social security coverage you have. Planning the transition carefully helps you avoid unexpected tax bills, missing VAT registrations or loss of benefits.

From employee to freelancer (income B)

If you start working as a freelancer while still being an employee, you normally receive salary as income A from your employer and freelance fees as income B from your clients. In this setup you are not considered self‑employed, and you do not have a CVR number.

Key points when you move from pure employment to income B freelance work:

• You must update your preliminary income assessment (forskudsopgørelse) in TastSelv and add expected income B for the year, otherwise SKAT will often tax it with a high default rate.
• Income B is taxed as personal income on top of your salary. It is subject to the same progressive tax brackets, including bottom tax, municipal tax and potentially top tax if your total personal income exceeds the top tax threshold.
• Clients usually pay you the full amount without withholding tax or labour market contribution (AM‑bidrag). You are responsible for paying AM‑bidrag and tax yourself via your annual tax return (årsopgørelse) and on‑account payments if required.
• You cannot charge VAT (moms) on income B unless you register as self‑employed and obtain a CVR number.
• You can deduct limited work‑related expenses, but not in the same broad way as a self‑employed business. Many costs that would be deductible as business expenses are not deductible against income B.

From employee to self‑employed (sole proprietor)

When you move from being only an employee to running your own business, you normally register as a sole proprietor (enkeltmandsvirksomhed) via virk.dk. You receive a CVR number and are treated as self‑employed for tax purposes.

Typical steps in the transition:

1. Decide whether you will keep your employment alongside your business or resign and rely fully on business income.
2. Register the business on virk.dk as “enkeltmandsvirksomhed” and choose the correct industry code (branchekode). At registration you indicate whether you expect to be VAT liable.
3. Register for VAT (moms) if your expected turnover in a 12‑month period exceeds the Danish VAT registration threshold. Once registered, you must charge 25% VAT on most services and file VAT returns on the schedule assigned to you (typically quarterly for smaller businesses).
4. Update your preliminary income assessment with expected business profit (revenue minus deductible expenses) instead of or in addition to salary income.
5. Set up a separate bank account for your business to keep private and business finances clearly separated, which simplifies bookkeeping and SKAT control.

As a self‑employed person, your business profit is taxed as personal income. You pay AM‑bidrag on the profit and then income tax according to the normal brackets. You can choose different tax schemes for self‑employed, such as the business tax scheme (virksomhedsordningen) or capital return scheme (kapitalafkastordningen), if you meet the conditions and it is beneficial for you.

From freelancer (income B) to self‑employed

Many people start as freelancers with income B and later move to full self‑employment when their activity becomes more regular and business‑like. Danish authorities will often expect you to register as self‑employed when you:

• Have several clients and actively market your services
• Carry financial risk (for example, you invest in equipment, software or premises)
• Have a clear intention to make a profit over time
• Work with a degree of independence similar to other businesses in your industry

When you convert from income B to self‑employed status:

• Register your business and obtain a CVR number via virk.dk.
• Register for VAT if your turnover requires it and start issuing invoices with 25% VAT where applicable.
• Stop treating new assignments as income B; instead, they become business revenue in your accounts.
• Start keeping proper bookkeeping records, including invoices, receipts and a simple chart of accounts.
• Review your contracts to ensure they reflect a business‑to‑business relationship rather than an employment‑like arrangement.

From self‑employed or freelancer to employee

Switching from self‑employed or freelance work to being an employee again changes your obligations significantly. As an employee, your employer withholds tax and AM‑bidrag, pays ATP and often contributes to pension and holiday pay. You no longer file VAT returns for that employment income.

When you take up an employment contract:

• Update your preliminary income assessment so that salary becomes your main income and expected business income is reduced or set to zero if you close the business.
• If you stop trading completely, deregister your business and VAT on virk.dk. You must file a final VAT return and settle any outstanding VAT before the deregistration date.
• Keep your accounting records for the statutory retention period in case SKAT requests documentation later.
• If you keep some side activity, clarify whether it remains self‑employed business, income B or should be treated as part of your employment.

Closing, pausing or combining statuses

You can combine statuses in Denmark: for example, be an employee and run a VAT‑registered sole proprietorship at the same time. In that case, salary is taxed as income A, and business profit is taxed as self‑employed income, with separate VAT reporting for the business.

If your business activity becomes very small or irregular, you can:

• Keep the CVR number but deregister for VAT if your turnover falls below the registration threshold and you no longer expect to exceed it, or
• Fully close the business via virk.dk and treat any occasional work as income B, if SKAT accepts that it no longer qualifies as a business.

Each choice has consequences for your deductions, VAT obligations and social benefits. For example, closing a business may affect your eligibility for unemployment benefits (dagpenge) if you are a member of an unemployment fund (a‑kasse), because they assess whether you are available for the labour market as an employee.

Practical considerations before changing status

Before you change from employee to freelancer or self‑employed, or the other way around, it is important to:

• Estimate your total annual income under the new status and adjust your preliminary tax accordingly to avoid large underpayments.
• Check whether you must register or deregister for VAT and how often you will need to file VAT returns.
• Review your contracts to ensure they match the intended classification and do not create an employment relationship in practice.
• Consider pension, holiday pay, sickness and maternity coverage, as these differ significantly between employees and self‑employed.
• Plan your bookkeeping and documentation from day one, especially if you move into self‑employment.

Because Danish rules focus on the actual working relationship rather than the label in the contract, it is important that your day‑to‑day practice matches the status you choose. If you are unsure how to structure the change or which status fits your situation, professional advice can help you avoid reclassification by SKAT and unexpected tax or social security consequences.

Impact of each status on personal financial planning and access to credit in Denmark

Your status as an employee, freelancer or self‑employed person in Denmark has a direct impact on your net income, savings options and how banks assess you when you apply for a loan or mortgage. Understanding these differences helps you plan your finances realistically and avoid unpleasant surprises when you want to buy a home, finance a car or invest in your business.

Net income and predictability of cash flow

Employees in Denmark usually have the most predictable cash flow. Salary is paid on fixed dates, tax (A‑skat) and labour market contributions (AM‑bidrag of 8%) are withheld automatically, and holiday pay and pension contributions are often handled by the employer. This stability makes it easier to budget and to demonstrate regular income to banks.

Freelancers and self‑employed persons are taxed differently. Income is typically B‑income or business income, and you are responsible for paying AM‑bidrag and income tax yourself via preliminary tax (forskudsskat). Your monthly cash flow can vary significantly, especially if you work on projects or for several clients. This volatility means you should plan for a larger liquidity buffer than a typical employee, often at least 3–6 months of private expenses plus expected VAT and tax payments.

Tax planning and savings potential

Employees have limited room for tax optimisation. Most deductions are standard (e.g. employment allowance, transport deduction, union fees, unemployment insurance). Pension contributions via an employer pension scheme are often tax‑favoured, and the employer may contribute an additional 8–12% of your salary on top of your own contribution. This makes long‑term saving relatively simple and automatic.

Freelancers and self‑employed persons have more flexibility but also more responsibility. You can deduct documented business expenses from your taxable profit, which can reduce your overall tax burden. However, you must actively decide how much to set aside for pension, sickness and holidays, because there is no employer to do this for you. In practice, many self‑employed people need to treat pension savings, insurance and holiday funds as “mandatory expenses” in their budget to avoid under‑saving.

Pension and long‑term security

For employees, pension contributions are often built into the employment contract and collective agreements. Typical total contributions (employer plus employee) can easily reach 12–18% of salary, and payments are automatic. This improves your long‑term financial security and is positively viewed by banks when assessing your overall financial situation.

Freelancers and self‑employed persons must set up their own pension schemes, for example rate pension, life‑long annuity or retirement savings (aldersopsparing). Contributions are generally tax‑deductible up to statutory limits, but there is no automatic mechanism forcing you to save. If you do not actively contribute, your long‑term pension position can be significantly weaker than that of a comparable employee, which may affect how lenders view your future repayment capacity.

Access to credit and mortgages

Danish banks and mortgage institutions assess creditworthiness based on stable, documented income, existing debt, savings and your overall financial behaviour. Your status strongly influences how easy it is to meet their requirements.

Employees usually find it easier to obtain credit. A permanent, full‑time position with a steady salary, documented on payslips and annual tax statements, is considered low risk. If you have a reasonable debt‑to‑income ratio and some savings, banks are often willing to offer consumer loans and mortgages on standard terms.

Freelancers and self‑employed persons are assessed more cautiously. Banks typically want to see:

• Several years of financial statements for your business (often at least 2–3 years)
• Stable or growing turnover and profit, not just one strong year
• Clear separation between business and personal finances
• Realistic tax and VAT provisions, so that future tax bills do not threaten your repayment ability

If your income fluctuates strongly from year to year, banks may calculate your “average income” over several years and use a conservative figure when assessing how much you can borrow. This can limit the size of the mortgage or loan you can obtain compared with an employee with the same average income but more stable earnings.

Required documentation for lenders

Employees usually need to provide recent payslips, an employment contract and the latest annual tax assessment (årsopgørelse). This is relatively simple and quick.

Freelancers and self‑employed persons are often asked for:

• Annual tax assessments for several years
• Approved financial statements for the business (if you run a sole proprietorship or company)
• Overview of ongoing contracts and major clients
• Documentation of any business loans and leasing agreements

The more transparent and well‑organised your accounts are, the easier it is to convince the bank that your income is reliable enough to service long‑term debt.

Risk profile and personal financial buffers

Employees benefit from a lower personal income risk: if you lose your job, you may have access to unemployment benefits (A‑kasse) and notice periods, and you do not carry business‑related financial risk. This allows some employees to manage with a smaller emergency fund, although a buffer is still advisable.

Freelancers and self‑employed persons carry both market risk (losing clients or contracts) and business risk (unpaid invoices, investment in equipment, fixed costs). Danish banks are aware of this and expect you to have stronger buffers. In practice, this means:

• A private emergency fund covering several months of living costs
• Separate savings or credit facilities to cover VAT and tax payments
• Possibly additional insurance, such as loss of earnings or business interruption cover

Without these buffers, your financial situation can deteriorate quickly during a downturn, which is why lenders may classify you as higher risk and offer less favourable terms or lower credit limits.

Practical planning tips depending on your status

If you are an employee, focus on optimising your pension contributions, using available tax deductions and maintaining a clean credit history. This will usually be enough to secure good access to credit in Denmark.

If you are a freelancer or self‑employed, treat your status as a small business owner in your personal financial planning. Prepare realistic budgets, keep your accounts up to date, set aside money for tax and VAT as you earn it, and build both business and private buffers. Consistent, well‑documented financial behaviour over several years is often the key factor that improves your access to credit and helps you be treated similarly to a stable employee by Danish banks and mortgage providers.

Common mistakes foreigners make when choosing their status in Denmark

Many foreigners in Denmark choose “freelancer” or “self‑employed” status because it sounds flexible and simple. In practice, Danish tax and labour rules are strict, and a wrong choice can lead to back taxes, missing social benefits and problems with clients. Below are the most common mistakes we see and how to avoid them.

1. Assuming “freelancer” is always self‑employed

In Denmark, “freelancer” is not a legal category by itself. You can be treated as:

• an employee (A‑income, tax withheld by the client), or
• a person with B‑income (freelancer without a business), or
• self‑employed (sole proprietor with a registered business).

A frequent mistake is to send invoices as a “freelancer” and think this automatically makes you self‑employed. If SKAT considers you an employee, the client may be required to pay withheld tax, holiday pay and social contributions, and you may have to correct your tax returns.

2. Not registering correctly with SKAT and the Danish Business Authority

Another common error is starting to work and issue invoices without proper registration. Typical problems include:

• Not registering as self‑employed via virk.dk when you actually run a business with commercial risk and several clients
• Registering a sole proprietorship even though you only have one client and work under their control – in practice you are an employee
• Reporting all income as A‑income even though part of it should be B‑income or business income

This leads to wrong preliminary tax (forskudsopgørelse), unexpected tax bills and sometimes fines for late or missing registration.

3. Ignoring VAT (moms) obligations and thresholds

Foreigners often overlook Danish VAT rules. The most typical mistakes are:

• Not registering for VAT when your taxable turnover from business activities exceeds 50,000 DKK within a 12‑month period
• Charging VAT when you are not registered, or failing to charge VAT when you are required to
• Confusing VAT rules for services to Danish clients with rules for clients in other EU countries or outside the EU

If SKAT finds that you should have been VAT‑registered, you can be required to pay VAT retroactively on your turnover, plus interest and possible surcharges.

4. Misunderstanding deductible expenses

Many newcomers either deduct too much or too little. Common errors include:

• Deducting private expenses (rent, phone, car) as business costs without a clear business connection or proper documentation
• Not using the correct rules for home office deductions and business use of a private car (for example, using kilometre rates vs. actual costs)
• Assuming that employees can deduct the same range of expenses as self‑employed persons

Over‑deduction can trigger tax audits and corrections; under‑deduction means you pay more tax than necessary.

5. Overlooking social benefits and holiday rights

Foreigners often underestimate how much status affects social benefits in Denmark. Typical mistakes:

• Leaving a secure employment with paid holiday, sickness pay, maternity/paternity rights and ATP contributions, without understanding that as self‑employed you must finance these yourself
• Assuming you earn holiday pay (feriepenge) as a freelancer with B‑income or as self‑employed – you do not, unless you pay yourself a salary through a company
• Not joining an unemployment insurance fund (A‑kasse) or choosing the wrong membership type for your status

This can result in gaps in pension savings, no coverage during sickness or maternity, and weaker protection if you lose your income.

6. Working like an employee but invoicing as a freelancer

One of the biggest risks is “false self‑employment”. Typical signs are:

• You work mainly or only for one client
• The client decides your working hours, place of work and how tasks must be done
• You use the client’s tools, equipment and systems
• You do not carry real financial risk and are paid regularly like a salary

If the authorities decide you are in fact an employee, the client may have to pay withheld tax, social contributions and holiday pay retroactively, and your tax situation may need to be corrected. This can damage your relationship with the client and your reputation.

7. Ignoring written contracts or using foreign templates

Many foreigners work without a proper Danish contract or use templates from their home country. Common issues include:

• Contracts that describe you as “self‑employed” but contain strong control, fixed working hours and other elements typical for employment
• No clear clauses on responsibility, risk, tools, insurance and substitution (right to send a replacement)
• Missing information about VAT, payment terms and who covers which expenses

Poorly drafted contracts make it easier for authorities to reclassify your status and harder to defend your position in case of a dispute.

8. Not planning taxes and payments during the year

Employees in Denmark have tax withheld automatically. Foreign freelancers and self‑employed often forget that they must:

• Update their preliminary tax assessment (forskudsopgørelse) when income changes
• Set aside money for tax and VAT during the year
• Pay B‑tax in instalments if they have B‑income or business income

Without planning, it is easy to spend the gross income and face a large tax bill later, sometimes with interest and surcharges for late payment.

9. Choosing status only for “tax savings”

Some foreigners choose self‑employment or B‑income only to reduce tax in the short term. They focus on deductions and lower withholding, but ignore:

• Loss of employee benefits and employer‑paid pension
• Higher personal risk and responsibility for insurance, sickness and maternity coverage
• How banks and mortgage providers assess freelancers and self‑employed when granting loans

A status that looks attractive for tax reasons can be disadvantageous for long‑term financial security and access to credit.

10. Not asking for professional advice early enough

Finally, many foreigners wait until there is a problem – a tax audit, a letter from SKAT or a conflict with a client – before seeking help. By then, options are limited and corrections can be costly.

Discussing your situation with a Danish accountant or tax adviser before you sign contracts or start invoicing can help you choose the correct status, register properly and avoid expensive mistakes later.

Case examples: typical profiles of an employee, a freelancer and a self‑employed person in Denmark

Below are simplified, realistic examples that illustrate how Danish rules typically apply in practice. They are not exhaustive, but they help you see whether your own situation is closer to an employee, a freelancer or a self‑employed person in Denmark.

Example 1: Typical employee – full‑time marketing specialist

Anna is a marketing specialist working for a Danish company in Copenhagen.

Key characteristics:

• She has a written employment contract with a fixed monthly salary of DKK 38,000 before tax.
• The company decides her working hours (37 hours per week), place of work and how tasks must be performed.
• She uses the company’s computer, software and office, and is integrated into the organisation (team meetings, manager, internal systems).
• She cannot send someone else to do her work and she does not bear any financial risk if a project fails.
• The employer withholds A‑tax and AM‑bidrag (8% labour market contribution) and reports everything to Skattestyrelsen via eIndkomst.
• She receives holiday pay under the Danish Holiday Act, is covered by employer‑paid ATP, and may have an employer pension scheme (for example 8% employer contribution, 4% employee contribution).

Tax and social security consequences:

• All her salary is taxed as A‑income. She does not invoice her employer and she does not charge VAT.
• She can only deduct limited work‑related expenses personally (for example transport deductions and certain union fees) and cannot deduct general business costs as a company would.
• She is covered by standard employee protections (holiday, notice periods according to her contract or collective agreement, possible sick pay, etc.).

Anna’s profile is clearly that of an employee: strong employer control, no business risk, one main payer, and income reported as salary.

Example 2: Typical freelancer – Income B, not self‑employed

Mark is a graphic designer who occasionally takes on projects for Danish companies alongside his part‑time job.

Key characteristics:

• He does not have a registered sole proprietorship and is not registered for VAT.
• He works from home on his own laptop and design software, which he paid for himself.
• He has a few short‑term assignments per year, often for the same two or three clients, but he does not actively market himself as a business.
• He issues simple fee notes or invoices without VAT and is paid a fixed amount per project (for example DKK 8,000 for a logo design).
• Clients do not withhold A‑tax or AM‑bidrag; they report his pay as B‑income if required, or he reports it himself.

Tax and social security consequences:

• His freelance earnings are taxed as B‑income. He must ensure that his preliminary tax assessment (forskudsopgørelse) includes expected B‑income so Skattestyrelsen can calculate B‑tax instalments.
• He can deduct certain documented expenses directly related to earning this B‑income (for example software subscriptions used only for freelance work), but he does not have the full range of business deductions that a registered self‑employed person has.
• He is not required to register for VAT as long as he is not considered to be carrying on an independent economic activity and his activity remains limited and more “hobby‑like”.

Mark’s profile is typical for a freelancer with B‑income: he is not treated as an employee, but he also does not run a fully fledged business. If his activity grows, Skattestyrelsen may expect him to register as self‑employed and possibly for VAT once he exceeds the VAT threshold of DKK 300,000 in a 12‑month period.

Example 3: Self‑employed consultant – sole proprietor with VAT registration

Sofia is an IT consultant who runs her own sole proprietorship (enkeltmandsvirksomhed) in Denmark.

Key characteristics:

• She has registered her business with the Danish Business Authority (Virk) and has a CVR number.
• She is registered for VAT because her annual turnover exceeds DKK 300,000.
• She negotiates her own hourly rate (for example DKK 900 + 25% VAT per hour) and signs consultancy agreements with several Danish and international clients.
• She decides when and where she works, can send a subcontractor if the contract allows it, and bears the financial risk if she underestimates the time needed or loses a client.
• She uses her own equipment, pays for software licences, professional insurance and possibly a co‑working space.

Tax, VAT and social security consequences:

• She invoices clients with 25% Danish VAT for work subject to Danish VAT rules and reports VAT quarterly or monthly, depending on her registration.
• Her business profit (revenue minus deductible expenses) is taxed as personal income. She can choose between different tax schemes for the self‑employed, such as the business tax scheme (virksomhedsordningen) or the capital return scheme (kapitalafkastordningen), if she meets the conditions.
• She can deduct a wide range of business expenses: office rent, equipment, phone and internet used for business, travel costs, marketing, accounting fees and more, as long as they are documented and business‑related.
• She is not automatically covered by employee benefits such as holiday pay, sick pay or employer pension contributions. She must arrange her own pension, insurance and savings.

Sofia’s profile is clearly self‑employed: she runs an independent business with several clients, VAT registration, business risk and broad deduction rights.

Example 4: “Freelancer” reclassified as employee

Jonas is a software developer who has been invoicing one Danish tech company as a “freelancer” for two years.

Key characteristics:

• He works 37 hours per week only for this one company, year‑round.
• The company decides his working hours, requires him to be present at the office most days, and he uses their equipment.
• He participates in internal meetings, has a company email address and appears on the company website as part of the team.
• He invoices a fixed monthly amount (for example DKK 45,000 + VAT) but has no real business risk and cannot send a substitute.

Risk of reclassification:

• Based on control, integration and lack of business risk, Skattestyrelsen and other authorities may consider him an employee rather than a self‑employed consultant.
• If reclassified, the company may be liable for unpaid A‑tax, AM‑bidrag, holiday pay and possibly other employee‑related obligations for the period in question.
• Jonas may have to correct his tax returns, and VAT he charged could be challenged if the underlying relationship is considered employment rather than independent economic activity.

This example shows that calling yourself a “freelancer” and issuing invoices is not enough. Authorities look at the actual working relationship, not just the contract label.

Example 5: Part‑time employee with a small self‑employed side business

Lena works 30 hours per week as an employed nurse in a Danish hospital and runs a small yoga teaching business in her spare time.

Key characteristics:

• Her hospital job is standard employment with salary, A‑tax, AM‑bidrag, holiday pay and pension.
• She has registered a sole proprietorship for her yoga business and occasionally rents a studio to run classes.
• Her annual yoga turnover is around DKK 120,000. She has not yet exceeded the DKK 300,000 VAT threshold, but she monitors it.
• She advertises online, sets her own prices and schedules, and bears the risk if not enough students sign up.

Tax and VAT consequences:

• Her salary from the hospital is taxed as A‑income and handled by the employer.
• Her yoga income is self‑employed income. She declares business revenue and expenses in her annual tax return and pays tax on the profit.
• As long as her turnover stays below DKK 300,000 in a 12‑month period and she is not otherwise required to register, she can remain outside the VAT system. If she expects to exceed the threshold, she must register for VAT and start charging 25% VAT on her classes, unless an exemption applies.

Lena’s situation shows that you can be an employee and self‑employed at the same time, with different tax and reporting rules applying to each activity.

These examples are simplified, but they reflect how Danish authorities typically assess status in practice. If your situation does not clearly match one profile, it is important to get individual advice and, if needed, a written assessment before choosing whether to register as an employee, freelancer with B‑income or self‑employed in Denmark.

WHAT ARE THE RISKS FOR YOU AND THE CLIENT IF YOU ARE FOUND TO BE AN EMPLOYEE RATHER THAN A FREELANCER OR SOLE PROPRIETOR?

There are two main consequences to consider if you incorrectly classify yourself as a sole proprietor rather than an employee. Firstly, your client may be liable for a tax bill, as they were supposed to withhold personal income tax from your earnings, and they may also face penalties for non-compliance with various regulations. Some of these claims may arise due to your actions, such as if you wrongfully terminate a contract or fail to receive vacation time. Secondly, if you have deducted costs as a sole proprietor on your personal income tax return, these expenses will be subject to different tax rules, which may result in a lower tax deduction. Additionally, if you have reported a deficit in the past, it will be changed to zero income, which will increase the amount of tax you owe.