Sole proprietorship in Denmark, i.e. enkeltmandsvirksomhed (Sole proprietorship), one of the most popular forms of doing business. It does not require share capital, is quick to set up, and ideal for self-employed individuals.
However, it's worth remembering the key principle: As an EMV owner, you are responsible for your own taxes.. You don't have an employer who will automatically deduct taxes from your salary. You must take it upon yourself to report your estimated profit, pay advance payments throughout the year, and settle the final accounts.
In Denmark, a sole proprietorship can primarily be accounted for in three ways:
✅ according to the ordinary rules of personal income tax,
✅ through corporate scheme,
✅ through capital gains tax regime.
What is profit in a sole proprietorship?
You pay tax not on your entire income, but on profit.
Profit = company revenue – company costs
🧾 Example
Mr. Adam runs a renovation company in Denmark.
Within a year, invoices were issued for:
500,000 DKK net
Company costs were:
180,000 DKK net
Calculation
500,000 DKK – 180,000 DKK = 320,000 DKK
This means the company's profit is 320,000 DKK And from this amount, the tax should be calculated.
Revenue is not profit
This is a very common mistake.
If the client pays the invoice for DKK 50,000, it does not mean the entire DKK 50,000 is your private income. From this amount, you may still have to pay:
materials,
✅ fuel,
leasing,
Accounting,
insurance,
✅ potential employee payouts,
ITP
Therefore, the business owner should look not only at the account balance but, above all, at the company's actual performance.
1. Ordinary personal income tax rules 🧍♂️
This is the simplest way to settle accounts for a sole proprietorship.
In this model, operating profit is treated as owner's personal income. This means that the company's profit is added to their private tax return.
In practice, the entrepreneur should enter the company's projected profit in forskudsopgørelse, which is a preliminary tax settlement.
Based on this, SKAT can calculate tax prepayments, which means B-skat. Read more about B-Skar here>B-Skat in a sole proprietorship
When is this model good?
This method might be good if:
The signature is simple.,
✅ the owner withdraws most of the profit privately,
The company does not have large investments.,
No large company loans.,
✅ The entrepreneur wants simpler accounting.
2. Business Scheme – when you want to leave profits in your company 🏢
Corporate scheme, often called VSO, this is a special tax system for business owners.
This model can be beneficial when a company achieves a larger profit, and the owner doesn't want to distribute everything privately. Part of the profit can remain in the company and be taxed at a temporary tax rate of 22%.
⚠️ Important: 22% is not always the final tax
This is very important.
Tax 22% under the business scheme is a tax temporary from retained earnings in the company.
This does not mean that the owner can withdraw the money privately and pay only 22%.
If the profit is later paid out privately, it will be added to your personal income. The 22% tax paid earlier will then be taken into account in the final tax settlement.
🧾 Example
Mr. Tomasz runs a transport company.
In 2026, the company achieved:
700,000 DKK profit
Mr. Tomasz personally needs:
DKK 400,000
The remainder will be kept in the company for:
✅ car purchase,
✅ repairs,
✅ fuel,
✅ business development,
✅ liquidity protection.
In such a situation corporate scheme may be advantageous because undistributed profits can remain in the company and be temporarily taxed at a rate of 22%.
When can VSO be beneficial?
The company scheme might make sense if:
✅ the company has higher profits,
✅ the owner does not pay out all profits privately,
✅ the company plans investments,
The company needs money for development.,
✅ the entrepreneur wants to plan taxes better.,
✅ The company has financial costs, e.g., interest.
⚠️ Requirement for good accounting
The company scheme requires a strict separation of business and private finances.
Needs to be guarded:
✅ how much money is left in the company,
✅ with the owner paid privately,
✅ what assets belong to the company,
✅ what assets are private.
This model is more complex than standard tax rules, so it's often worth seeking help from an accountant.
3. The Capital Gains Scheme — A Simpler Alternative 📊
The third model is capital gains tax regime.
This solution can be a simpler alternative to the corporate scheme. It involves, among other things, treating part of the company's profit as capital income rather than regular personal income.
This may have tax implications, especially when a company owns significant assets such as a car, machinery, equipment, or other company assets.
🧾 Example
Mr. Marek runs a company that owns a company car and expensive machinery.
The company is making a profit, but the owner doesn't want to use the full corporate tax regime because it's too complicated for him.
In such a situation, it's worth checking whether capital gains tax regime may be a more beneficial and simpler solution.
When can a capital gains tax arrangement make sense?
This model might be worth considering if:
✅ the company has company assets,
The owner wants a simpler alternative to VSO.,
✅ the company has financing costs,
✅ The entrepreneur wants to check a more favorable income split.
🔍 Model Comparison
| Model | For whom? | Pros | Drawbacks |
|---|---|---|---|
| Standard tax rules | Simple companies | Simplest settlement | Less flexibility |
| Corporate Scheme | More profitable companies | The possibility of retaining profits within the company | More complex accounting |
| Capital Gains Regime | Companies with assets or funding | Simpler alternative to VSO | Less flexible than VSO |
🧾 How to pay taxes step-by-step?
1. 📌 Calculate estimated profit
Estimate
✅ revenue,
✅ costs,
✅ predicted profit,
✅ potential loss.
2. 🖥️ Update tax assessment (tax card for the current year)
Enter the company's expected result in the SKAT system.
3. 💳 Pay with B-skat
If SKAT calculates B-skat, pay the tax during the year.
It's not worth waiting until the end of the year because a large tax surcharge may arise.
4. 📚 Keep Accounts
Collect and book:
✅ sales invoices,
✅ cost bills,
✅ bank statements,
✅ VAT documents,
✅ leasing and loans,
✅ Agreements and other company documents.
5. 📅 Settle the tax year
After the end of the year, the final operating result must be reported in the annual settlement.
For people running a business, the annual settlement deadline usually falls on July 1.
⚠️ Most Common Mistakes
❌ 1. Missing profit entry in advance statement
This could cause a large tax surcharge at the end of the year.
❌ 2. Confusing a business account with a private one
In a sole proprietorship, it is necessary to maintain order between company and private finances.
3. Paying the full invoice amount
For every major payment, it's worth setting aside money for VAT, taxes, and costs.
❌ 4. Lack of VAT control
Moms are not the private income of the entrepreneur. If the company is registered for VAT, remember to settle it.
❌ 5. Choosing the wrong tax model
Not every company needs a business scheme. However, with larger profits, it's worth checking if another model would be more beneficial.
Simple safety rule
If you run a sole proprietorship, don't treat the entire amount in your account as money to spend.
From each invoice, it's worth setting aside funds for:
tax,
✅ Holiday Allowance, PAYROLL TAX (if you have employees),
✅ VAT / moms,
Accounting,
✅ insurance,
✅ future costs,
✅ weaker months.
Which model to choose?
It is impossible to choose the best model without analyzing the specific situation.
Standard tax rules can be good for simple businesses.
The business scheme can be beneficial for larger profits, investments, and retaining money within the company.
The capital gains tax scheme can be an interim solution, especially if the company has assets or financing.
The choice of model should depend on profit, costs, investment plans, and how much money the owner withdraws privately.
Summary
A sole proprietorship in Denmark is simple to set up but requires a responsible approach to taxes.
Key principles:
✅ You pay tax on your profit, not on your total revenue,
✅ enter the expected profit in the forecast statement,
✅ tax can be paid as a B-skat,
✅ after the end of the year, the company's results must be settled,
✅ you can choose one of three tax models,
✅ 22% under the corporate tax scheme is a temporary tax,
✅ For larger profits, it is worth consulting with an accountant about the choice of model.
Need help with taxes for your sole proprietorship?
You lead Sole proprietorship in Denmark Or are you planning to start a business?
We can help you check:
✅ how to set up B-skat,
✅ how to enter profit in the annual report,
✅ whether to choose ordinary tax rules,
✅ can the corporate scheme be beneficial,
Does the capital casting order make sense?,
✅ how to avoid a large tax surcharge.
Not sure where to start? Need more information or advice?
📞 Call us: +45 35 13 13 10 (Mon-Fri, 8:00am-6:00pm)
📧 Write: helpy@your-adviser.dk
