Important: Neither B-skat nor sole proprietorship provides limited liability. You are personally responsible for all debts and obligations.
B-Skat (B-Tax)
B-indkomst (B-income) is income where no employer withholds tax on your behalf. You self-assess and pay taxes directly to SKAT.
What Qualifies as B-Income
Freelance work - Consulting, design, development, etc.
Consulting fees - Project-based or hourly work
Rental income - Airbnb, property rental
Contract work - Work where you invoice the client
Side projects - Paid work outside your main employment
How B-Skat Works
Perform work - Complete project or service
Issue invoice - Include your CPR number and "B-skat" note
Report income - Declare on your annual tax return (årsopgørelse)
Pay taxes - SKAT will calculate tax owed based on total income
Tax Rates
Component
Details
Recommended set-aside
45-55% of B-income
Tax calculation
Based on total annual income (A + B income combined)
Labour market contribution
Exempt from B-income (as of 2026, applies from age 18)
Payment timing
Can adjust forskudsopgørelse (preliminary tax assessment) to avoid large bills
Key Risk: Set aside at least 45-55% of all B-income immediately. Tax on B-income is not automatically withheld, and you can face large tax bills if unprepared.
When B-Skat is NOT Enough
Turnover exceeds 50,000 DKK in 12 months (VAT registration required)
You need to hire employees
You want limited liability protection
Clients require you to have a company (CVR number)
Sole Proprietorship (Enkeltmandsvirksomhed)
A sole proprietorship is a simple business structure where you and the business are legally the same entity.
Key Features
Feature
Details
Minimum capital
0 DKK - No capital requirement
Registration cost
Free (via Virk.dk)
Liability
Unlimited - personally liable for all business debts
CVR number
Yes - assigned upon registration
Business name
Can use your own name or register a trade name
Taxation
All profits taxed as personal income
How to Register
Go to Virk.dk - Denmark's official business portal
Choose "Enkeltmandsvirksomhed"
Provide details - Name, address, business activity
Receive CVR number - Usually same day
Register for VAT - If turnover > 50,000 DKK/year
Advantages vs B-Skat Only
CVR number - Some clients require this for invoicing
Business bank account - Easier to open with CVR
Professional appearance - Registered business vs personal invoicing
Expense deductions - Clearer business expense tracking
VAT registration - Can charge VAT and reclaim VAT on business expenses
Disadvantages
No limited liability - Personal assets at risk
Not suitable for investors - Can't issue shares or equity
Annual reporting - Must file business tax returns
Harder to scale - Difficult to bring on partners or employees
Recommendation: Sole proprietorship is good for freelancers and consultants with low liability risk. If you plan to raise capital, hire employees, or have significant contractual obligations, skip to ApS.
Earnings & VAT Thresholds
VAT Registration Threshold
50,000 DKK in taxable sales over any rolling 12-month period
Below threshold: VAT registration optional
Above threshold: Must register for VAT and charge 25% on invoices
Registration: Via Virk.dk, usually takes 1-2 days
VAT reporting: Quarterly or annual, depending on turnover
Can reclaim 25% VAT on business expenses (software, equipment, etc.)
Simpler invoicing and accounting
Must file VAT returns quarterly/annually
Income Tax Thresholds
There is no minimum earnings threshold for declaring B-income or sole proprietorship profits. All income must be reported, regardless of amount.
Set aside 45-55% for taxes (exact rate depends on total income)
Personal allowance: First ~50,000 DKK/year often tax-free (verify current rates)
Progressive taxation: Higher total income = higher marginal tax rate
Contracts & Invoicing
Can You Sign Contracts?
Yes - You can sign contracts under B-skat or as a sole proprietor.
Status
Contract Signing
B-skat (no company)
Sign as individual, use CPR number for invoicing
Sole proprietorship
Sign as business owner, use CVR number
ApS (limited company)
Sign on behalf of company, use CVR number
Important Distinctions
Freelance/Contractor vs Employee: Make sure your contract defines you as an independent contractor, not an employee. If SKAT determines you're actually an employee, tax consequences can be severe for both you and the client.
Freelance Contract Should Include:
Defined scope of work - Specific deliverables, not ongoing employment
Fixed price or hourly rate - Clear payment terms
Independence - You control when/where you work
Multiple clients - Not exclusive to one company
Own equipment - Use your own tools/computer
Invoice-based payment - You send invoices, not on payroll
Invoicing Requirements
All invoices must include:
Your name and address
CPR (B-skat) or CVR number (sole proprietor/company)
Client details - Name, address, CVR if applicable
Invoice number - Sequential numbering
Date and payment terms
Description of work
Amount - Separate VAT line if VAT-registered
When to Incorporate (ApS)
Move from B-skat or sole proprietorship to ApS when:
Strong Signals to Incorporate
Raising external capital - VCs and angels require equity structure (ApS/A/S)
Bringing on co-founders - Need formal ownership/equity split