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Denmark — 11 min
Are you ready to take control of your career and go it alone?
If so, Denmark is a great place to begin your self-employed journey.
With a culture that values creativity, innovation, and work-life balance, this Nordic nirvana is the perfect place to turn your entrepreneurial dreams into reality, while the capital, Copenhagen, is one of the world’s top destinations for remote work.
Before you get started, though, you’ll need to understand how to:
Register your business in Denmark
Avoid misclassification as an employee
Create compliant contracts that protect you
Invoice and collect payments from around the world
In this article, we’ll cover all these things. We’ll also help you navigate your tax obligations as a self-employed worker, and discuss some of the other risks and liabilities you should be aware of — leaving you with a warm sense of hygge.
First, it’s important to clarify how Denmark defines independent contractors.
Independent contractors are workers who provide paid services to another party. However, they are classified differently to employees, and are not entitled to the same benefits, such as paid leave, sick days, and maternity/paternity leave.
See also: Why businesses hire contractors vs. international employees
On the flip side, contractors have more freedom and flexibility in the way they work. In Denmark, you’re generally considered an independent contractor if you:
Provide your own equipment and working space
Determine your own work schedule
Perform work for other companies
Set your own rates
Are able to delegate or subcontract work
Set your own working hours
Work without direction or supervision
It’s important to be correctly classified to avoid penalties and fines.
To work as an independent contractor in Denmark, you’ll need to choose a legal structure for your business. Some of the most popular models include:
Sole proprietorship (enkeltmandsvirksomhed): A simple structure that is ideal for independent, individual contractors. You have full control of the enterprise, although there is no legal separation between you (the owner) and the business; you are personally responsible for all its debts and liabilities. Note that, in Denmark, you can also create a personally owned small business (personligt ejet mindre virksomhed, or PMV). This is similar to a sole proprietorship (i.e. sole ownership and personal liability), but with limitations in terms of earnings, hiring, and the location of your clients.
Stakeholdership (interessentskab, or I/S): A simple partnership agreement. Again, there is no legal separation between the individual and the business; you and your partners are personally responsible for any debts and liabilities.
Private limited company (anpartsselskab, or ApS): A formal, legal entity that is separate from you, the individual. All income and losses are attributed to the company as opposed to you personally. It must have an executive board, keep and report accounts, and possess starting capital of at least DKK 40,000 (around $6,000).
There are pros and cons to each structure, but most independent contractors choose the sole proprietorship model, as it is fairly simple to set up and operate. If you’re unsure, the Danish Company Guide (Virksomhedsguiden) has a short test you can take to identify the most suitable structure.
If you do opt for this model, you’ll need to register with the Danish Business Authority (Erhvervsstyrelsen). You will need a Danish social security (CPR) number and a Danish work permit to complete this process.
You will then receive a Central Business Registration (CVR) number, which acts as your official business ID.
If you don’t already have one, you will also need a NemID to access certain government websites and services. It can take around five days to receive a NemID.
You’ll also need to set up:
A Digital Post account: Most Danish government services send correspondence digitally. Therefore, you’ll need to configure access to an account.
A NemKonto: This is a bank account where you can receive payments from the Danish government. You will need to ask your bank to set up a NemKonto for your business.
Note that, if you expect your business to earn more than DKK50,000 (around $7,300) in the first year, you will also need to register for VAT. VAT is discussed further in the taxation section of this article.
As an independent contractor, it’s down to you to handle your invoices and payment collection. Unfortunately, this means billing each client individually and collecting payment through their preferred payment method — which can be inefficient and time-consuming.
Some of the most common ways to collect payments include:
Digital transfer services like PayPal and Wise
These methods all have their own pros and cons. For instance, bank and digital transfers can be pretty quick, but often come with hefty service fees. And if you have clients in other countries besides Denmark, the payment collection process can be even more complicated.
Alternatively, you can use a trusted solution like Remote. Our platform is a simple, secure, and reliable way to get paid quickly in Danish kroner — and with no hidden fees. Learn more about how our platform can help.
As an independent contractor, you’re also responsible for paying your own taxes and social contributions.
In Denmark, sole proprietors have some flexibility over their tax structure. You can either:
Pay personal income tax on your business profits (as is the case in most countries)
Pay a preliminary tax and, in exchange, deduct and keep your interest expenses on your personal income
Sign up for the return on capital tax scheme
If you don’t choose any of these options, you will automatically be assigned to pay personal income tax on your business profits.
The amounts you owe are based on self estimates (as you will not know your actual profit until the year ends), and are paid in 10 monthly installments. Note that you can adjust these estimates at any time throughout the year. In Denmark, you are subject to several taxes, including:
State tax. This is a national income tax of between 12.1% and 15% depending on your personal income.
Municipal tax. This is a local tax that varies depending on where you are based. On average, it is around 25% of your taxable income.
Labor market tax. This is another local tax of 8% on your personal income.
On the flip side, you can claim tax deductions for numerous business expenses, such as:
Tools and equipment
Professional services fees
Rent and utility bills for business premises
Your tax return will be made available online from March. It summarizes your income, deductions, and allowances, as well as the tax you’ve paid, and will tell you if you are eligible for a tax refund. You must submit any changes to your tax return by May 1, or face a fine of up to DKK5,000 (around $700).
If your business makes over DKK50,000 (or you expect it to) over 12 months, you need to register for — and charge your clients — VAT. You will also need to submit quarterly VAT returns using your VAT number.
Unlike many other countries, Denmark has a standard VAT rate of 25% with no lower rates (although some goods, such as media publications, are charged at 0%). Some provided services, such as those in the healthcare and education sectors, are exempt from VAT, although, if you provide one of these services, you will have to pay the payroll tax (lønsumsafgift) instead.
You must keep all VAT records for at least six years.
As a sole proprietor, you are personally liable for finance and tax debts, which means your private assets can be forcibly used to settle your business debts. Many independent contractors purchase liability insurance to help mitigate this risk.
It’s also important to cover yourself when drafting and signing agreements with clients. Our legal experts can provide you with fully compliant contract templates, for both Danish and international clients.
As a sole proprietor, you do not need to publish financial statements each year. However, under the Danish Bookkeeping Act, you do need to keep records of your accounts, including all your client invoices and business purchases.
You can either manage these records yourself using an accounting or bookkeeping tool, or hire a professional bookkeeper or accountant.
As we’ve mentioned, independent contractors are classified differently to employees. Many of the protections and benefits employees enjoy do not typically apply to contractors.
As a result, companies may deliberately misclassify you to circumvent their legal obligations, while at other times, it may happen accidentally. Whether it’s intentional or not, misclassification can result in penalties and fines for both you and your client.
As an independent contractor, you can work with your clients to ensure this doesn’t happen. Discuss your role and responsibilities with them, and review the working arrangement regularly.
If your working relationship changes over time and you become more integrated into a client’s company, you can ask to be converted into an employee.
Open a dialogue with your client and carefully discuss the risks and benefits of moving to an employer-employee relationship. In particular, be clear about how it can benefit both parties — not just you.
You can even suggest the help of a third-party solution, such as Remote, to ease the transition. Our global employment services help both parties stay compliant by taking care of key HR functions (like payroll management and benefits administration) in line with Danish law.
As you can see, there’s a lot to take on board when setting up as an independent contractor. Remote can help you with many of these challenges, allowing you to focus on growing your business and delivering to your clients. Here’s how:
Navigating all of your clients’ different invoicing, approvals, and payments systems can be complicated and time-consuming. And manual methods of invoicing and collecting payments can increase the risk of fees, errors, and delays.
Remote gives you access to a highly secure, streamlined dashboard that makes invoice management and international payments cost-effective and efficient. You can use our platform to get paid in Danish kroner hassle-free, without any hidden fees.
When you draft agreements and contracts for your clients, you run the risk of non-compliance with local labor laws — especially when working with international clients. Remote offers localized contracts tailored to Danish laws, ensuring that you stay compliant. Our legal experts can also provide guidance on complex issues, such as local classification and intellectual property protections.
With Remote, you no longer need to rely on spreadsheets and other manual tools to invoice for payments; we remove many of the inaccuracies and delays caused by archaic processes and manual management. Our platform lets you create invoices, submit them for approval, and subsequently get paid in your local currency without needing to switch to any other tool or software.
Tax management is notoriously complex work. Remote helps you quickly and efficiently deal with tax management by compiling data about your income based on your invoices and payments received.
Having the freedom and flexibility to work on your own terms is liberating. But your administrative responsibilities can distract from what you really want to be doing: helping your clients, delivering great work, and collecting invoices.
By using a stable, trusted platform like Remote, you can manage these obligations quickly and efficiently, allowing you to focus on your business goals. Specifically, we can help you:
Avoid intermediary fees and delays with international client payments
Draft compliant contracts for Danish and foreign clients
Enhance your invoice management and avoid manual processes
Comply with local labor laws regarding work practices
Our platform makes it quick, simple, and seamless to get started as an independent contractor. Learn more about how our expertise can save you time and resources today.
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