Tax in a sole proprietorship

Beregning af enkeltmandsvirksomhedens skat

Does dealing with tax for your sole proprietorship feel like a maze? We understand. You have to fill out numerous boxes on skat.dk while also figuring out which tax scheme to use.

To make matters worse, the rules and options are typically written in such incomprehensible language that it feels like sitting in a meeting with Einstein and Niels Bohr while they enthusiastically discuss the latest in quantum mechanics.

General information about tax for sole proprietorships

As we mentioned at the beginning of this post, tax can be a bit of a maze. You might feel this especially when you are in the middle of it and need to choose your path. You have three different routes to choose from. One path is marked with the Personal Tax Act, while the others are called the Business Tax Scheme and the Capital Return Scheme.

Fortunately, there is no wrong path, but you should carefully consider which one is right for you. The path you choose can have a significant impact on the requirements placed on you and your opportunities for tax deductions.

In the following, we will go through the three different taxation methods, starting with the Personal Tax Act.

Pay tax for your sole proprietorship using the rules of the Personal Tax Act

skat i en enkeltmandsvirksomhed — You can pay tax for your sole proprietorship using three different methods

As with many other things in the Kingdom of Denmark, you must pay tax on your earnings. When it comes to your sole proprietorship's tax, it is the profit you are taxed on. Fortunately, it is straightforward and similar to how regular employees pay tax.

If your business has a profit of 375,000 DKK in a given tax year, that is exactly the amount you must pay tax on. Those 375,000 DKK are your salary.

It is quite simple and therefore makes good sense to use. However, there are not many tax benefits, which is why many people turn to the other taxation methods.

Taxation of your sole proprietorship under the Business Tax Scheme

Unlike the Personal Tax Act, which you read about above, the Business Tax Scheme is slightly more complex. This is because it opens up more tax opportunities, requires greater administrative focus, and involves some relatively complex calculations.

Fortunately, this doesn't have to scare you away; there is always a solution for difficult things – even when it comes to your sole proprietorship's tax.

The Business Tax Scheme allows you to pay tax like a corporation. This means that the profit in your business is taxed at 22%. The portion of the profit that you pay out to yourself as salary must subsequently be taxed from the 22% up to your personal tax rate.

This can be an advantage if you do not need the entire profit for yourself, as you can retain the profit in your business at a low tax rate of 22%. With the personal tax scheme, the entire profit would be taxed at your personal tax rate. If, for example, you pay top-bracket tax, you can leave some of the money in the business and pay it out to yourself when you are no longer paying top-bracket tax.

Another advantage of the Business Tax Scheme is that you get higher deductions on your business-related debt. Specifically, you get a significantly higher deduction on your interest expenses. If you have debt, this method for your sole proprietorship's tax can be advantageous.

På Reportability har vi et værktøj, der sætter dig i stand til at beregne din enkeltmandsvirksomheds skat og danne et årsregnskab. Du skal følge 5 trin, og derefter står du med en fuld guide, der viser dig, hvordan du skal indberette på Skat. Du kan altid få hjælp af vores revisorer i chatten.

What are the requirements for using the business tax scheme (virksomhedsordningen) for your sole proprietorship's taxes?

If you want to use the business tax scheme for your sole proprietorship's taxes, there are a few requirements you must meet.

First and foremost, you must separate your business finances from your personal finances, which you are most likely already doing. This means using a dedicated account for your business. This is the account where you only pay 22% tax on the profit.

In addition, it is also a requirement that you maintain bookkeeping that complies with the requirements of the Danish Bookkeeping Act. If you use a bookkeeping program like Dinero, Billy, Uniconta, e-conomic, or Dynaccount, the program automatically ensures that you comply with the legislation in this area. However, you should be aware that your digital bookkeeping system must be approved by the Danish Business Authority. You can see an overview of which bookkeeping systems are approved here.

As a final requirement, you must also prepare an annual report. You can read more about annual reports for sole proprietorships by clicking here.

Pay tax in your sole proprietorship using the rules of the capital return scheme (kapitalafkastordningen)

The capital return scheme is the final option for your sole proprietorship's taxes. The advantage of the capital return scheme is that a portion of your business profit is taxed as capital income. You pay less tax on the portion of the profit that becomes capital income.

There are not the same requirements for using the capital return scheme as those you read about for the business tax scheme. Therefore, there are no requirements for annual reports or bookkeeping. In that way, it is a simpler form of taxation than the business tax scheme, which still provides good savings regarding your sole proprietorship's taxes. However, you do not have the option to save up profit at a low tax rate of 22%. Currently, this scheme is more valuable than the Personal Tax Act because the capital return is adjusted according to the market interest rate. The market interest rate is currently 2%, which provides an advantage right now (last updated: Oct. 2025).

Get help calculating your sole proprietorship's taxes

Enkeltmandsvirksomhed skat — At Reportability, you can calculate your sole proprietorship's taxes easily and quickly

Even though business tax might seem relatively simple to understand in writing, it is often a different matter to manage in reality. This is especially true if you want to use a taxation method other than the Personal Tax Act.

This is because you have to perform several complicated calculations, and it is also important that you know where to enter your various amounts in the boxes on skat.dk.

To avoid errors, it is a good idea to get professional help. At Reportability, we have created a tool that enables you to calculate your sole proprietorship's taxes without needing to go to an accountant.

To use our tool, you need to use a bookkeeping system, transfer your figures, and answer a series of questions. The tool then calculates your sole proprietorship's taxes. Finally, you will have a complete annual report, allowing you, for example, to meet the requirements of the business tax scheme. In addition, you also get an overview that shows you where to enter your figures in the tax return boxes.

The tool is always updated with the latest legislation, ensuring you don't miss out on deductions and that you report correctly.

You can create an account by clicking the link below and trying it out for free in a demo version. If you need help, you can message our expert accountants in the chat, which you'll find in the bottom right corner.

What can you deduct as a sole proprietorship?

Generally speaking, you can claim deductions for expenses that enable you to run your business. So, what kind of expenses enable you to run your business? You can see them right here:

Purchase of goods
Inventory and machinery
Legal and accounting fees (e.g., for your purchase from Reportability)
Costs related to internet and telephony
Expenses for premises such as rent, maintenance, repairs, and cleaning
Use of a car
Electricity and heating
Insurance

Three ways to get a handle on your sole proprietorship's taxation

There are three paths you can take to report your financial year's results and your sole proprietorship's taxes. You can choose to do it yourself, go to an accountant, or use our tool, which enables you to be your own accountant.

Do it yourself

It is always possible to do things yourself. If you use the Personal Tax Act, it is relatively easy to report to the tax authorities, but you miss out on some of the benefits offered by the other methods.

Unless you are sharp at auditing and finance, we do not recommend that you attempt to use the capital return scheme or the business tax scheme without consulting an accountant.

Go to an accountant

You can go to an accountant and have them finalize your annual accounts for you.

Be your own accountant by using our tool

You can also choose to be your own accountant, learn about taxes and annual reports, and gain hands-on experience with your company's finances by using our tool—and likely save a penny or two in the process.

Our tool consists of 5 simple steps. You only need to upload your bookkeeping and answer a few questions. After that, you will have your annual report and an overview telling you exactly which figures to enter on skat.dk, ensuring everything is completely under control.

We are always ready to help you in the chat if you get stuck or have a question.

Read more about us or try the tool for free in a demo version by creating an account. Follow the buttons below to see how you can calculate the tax for your sole proprietorship.