We would like to provide you with an overview of how to handle taxes as a self-employed person.

Tax rules for the self-employed

There are always a wide range of rules when it comes to taxes, and we won't be able to cover them all in this post. If you are looking for something specific that we don't cover here, please feel free to write to us in the chat in the bottom right corner. 

As a self-employed business owner, you have the option to decide how you want to be taxed. There are three different tax schemes you can choose from, which you can read more about in the following sections:

1. You can pay tax according to the Personal Tax Act

2. You can pay tax according to the Business Tax Scheme

3. You can pay tax according to the Capital Return Scheme

Regardless of which of these methods you choose, there will be various pros and cons.

Let's take a closer look at these three tax schemes:

The Personal Tax Act

Like so much else in Denmark, you must pay tax on your personal income.

And if you choose for your business to be taxed according to the rules of the Personal Tax Act, you will pay tax on the profit from your self-employed business.

Fortunately, the rules in the Personal Tax Act are simple and resemble the way an ordinary employee pays tax. In other words, if you have a profit of DKK 360,000 in a tax year, you pay tax on DKK 360,000 as if it were your salary. It doesn't get much easier than that. 

The advantage of the Personal Tax Act is that it is very simple and transparent, giving you a clear overview of your personal finances. On the other hand, there are not many tax benefits to be gained. It may therefore be a good idea to explore the options offered by the other taxation methods for your sole proprietorship.  

The Business Tax Scheme

You can also choose to be taxed according to the Business Tax Scheme, which opens up more tax opportunities. Conversely, it is also somewhat more complex than the Personal Tax Act because there are greater administrative requirements and more calculations to be made.

Fortunately, there is plenty of advice and help available, even when it comes to your business taxes.

The business tax scheme differs from the personal income tax act by allowing you to pay tax like a corporation. This means that your business profit is taxed at 22%. However, the portion of the profit you withdraw as salary must be taxed at the difference between the 22% and your personal tax rate.

It may be advantageous for you to use the business tax scheme if you do not need the entire profit for yourself, but instead wish to retain the business profit at a lower tax rate.

Another advantage of the business tax scheme is that you can get higher deductions for your interest expenses, which is particularly beneficial if you have taken on debt in your business. 

Requirements for the business tax scheme

There are a few requirements you should be aware of if you want to be taxed under the business tax scheme.

      1. Your business finances and personal finances must be separated with a separate bank account that only contains the business's finances

      2. You must perform bookkeeping that complies with the Danish Bookkeeping Act

      3. You must prepare an annual report

You can read more about these requirements here

Capital return scheme

The final option is to be taxed under the capital return scheme, which largely offers the same advantages as the business tax scheme.

When you are taxed under the capital return scheme, it means that part of your profit is taxed as capital income, and you pay less tax on that portion. However, the capital return scheme is less administratively burdensome than the business tax scheme because there are fewer requirements for your annual report and bookkeeping. On the other hand, you do not have the option to retain profit at the low 22% tax rate.

The capital return rate is currently 2% (2025), and it fluctuates from year to year because it is adjusted based on the market interest rate. For those using the capital return scheme, this means you gain a tax advantage by using this scheme compared to the personal income tax act.

Reporting tax as a self-employed person

As you choose which of the above tax schemes you would like to be taxed under as a self-employed person, it is also important that you understand how to report your tax as a self-employed business owner. 

You pay your tax on an ongoing basis, so it is important that you remember to fill in your expected profit or loss on your preliminary income assessment. Make sure to adjust the preliminary income assessment if you suddenly receive a large, unexpected order that will significantly change your business's revenue and, consequently, your final result. 

To do this, we always recommend that you keep your bookkeeping up to date. This ensures that you will be able to adjust your expected result continuously. When you keep an eye on your business's profit or loss throughout the year, you will end up paying the correct amount of tax. However, it is still important to take a look at your annual tax statement once the year has ended. 

You will receive your annual tax statement from the Danish Tax Agency (Skattestyrelsen), after which it is time to provide additional information on your tax return (also known as an information form) to ensure your annual tax statement is as accurate as possible. 

Annual tax statement for the self-employed

Once a business is registered in your name, your annual tax statement will look a little different. This is because there are additional fields you need to be aware of. Some of these fields relate to reporting your business's final profit or loss. 

As a self-employed person, you must file your own tax return, as the Danish Tax Agency does not have access to all your figures based solely on the information you provided during the year in your preliminary income assessment. 

The extra fields you need to fill out are often referred to as an "extended tax return." You will certainly also hear it called an information form. It goes by many names when dealing with the tax authorities, and we understand that working with an annual tax statement as a self-employed person can be confusing. If you want to know more about the information form, you can learn more here.

At Reportability, we help self-employed business owners every day with questions regarding annual tax statements and tax returns. These business owners use our tool to calculate their company's results and taxes, and you have the opportunity to do the same. 

You can try out our tool by creating an account, and you are also welcome to send our expert accountants a question in the chat if you need help.

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You must prepare an annual financial statement to be able to report

As a self-employed person who needs to report a profit or loss on their tax return, you might wonder how you actually arrive at a final result for the year. 

This is where a financial statement comes in. In your financial statement, you must calculate an income statement, which is a summary of your company's total revenue for the year minus the company's expenses. The difference between these figures is the company's profit or loss, which you are required to report on your annual tax statement as a self-employed person. 

In addition, you must also calculate the company's equity, which is the difference between the company's assets and liabilities. 

Does that sound like a mouthful? You should know that with our tool, these figures are calculated automatically once you have uploaded your bookkeeping data. Once you have completed all 5 of our steps, you will receive a complete guide that tells you exactly how to report your figures. 

You get a new deadline for reporting your figures

If this is your first time paying tax as a self-employed person, you should know that your reporting deadline will be moved. 

For years, you have been used to filing your tax return in mid-March. However, as a self-employed person, your deadline for filing your tax return is moved to July 1st. As usual, you still have the option to do it in mid-March. 

Deductions for the self-employed

As a general rule, you can claim deductions for all expenses that enable you to run your own business. This could include expenses for purchasing goods, accountants, vehicle use, insurance, and electricity or heating. There are many types of expenses that enable you to run your business, and you can learn about more of them by clicking here. 

Our tool also helps you keep track of your deductions, and you can always ask our staff in the chat which of your expenses you can claim as a tax deduction as a self-employed person. 

How do you pay tax as a self-employed person?

Just like everyone else in the country, as a self-employed person, you must of course pay ongoing tax on your business income.

Your taxation method and your preliminary income assessment determine how much you have to pay in tax and how high your monthly deductions are.

On the other hand, it is your tax return along with your annual accounts that the tax authorities use to determine whether you have paid too much, too little, or the correct amount of tax. Therefore, it is very important that you, as a self-employed person, provide the correct figures on your tax return, including your business's profit or loss.

We can help you with that! By using Reportability's online tool, you get the equipment to prepare your own tax accounts and submit them to the tax authorities in an easy and fast way.

Legislation, rules, and requirements are built into the tool. This way, we ensure that you generate an annual report that meets all tax requirements. Along with a complete annual report, you also get a guide that tells you exactly what to enter in the fields on your tax return.

Create an account today and avoid unnecessary and expensive mistakes, especially tax arrears, when you need to generate your annual report and fill in your information for the tax authorities.