When you freelance in Denmark, a world of opportunities may open up to you. You are in charge of all aspects of your professional life. This means that you can choose what goods or services you want to offer, what your work hours will be, how you will market your business and more. Freelancing in Denmark is hard work, but you will find that it is infinitely rewarding on many levels. Now that you have decided to become a freelancer or self-employed person in Denmark, you may be ready to get started on your new endeavor. What does it take to start and work as a freelancer in Denmark?
How to Register to Work as a Freelancer or Self-Employed Person in Denmark
In Denmark, the Danish Commercial Code enables you to start a sole proprietorship business. With this type of business entity, the business and the individual are considered to be the same, so this is the business structure that is suitable if you want to become a freelancer in Denmark. To open a freelance business in Denmark, you must apply for a work permit. There are extra steps in the application process for foreigners. For example, EU and EEA residents must provide an EU residence document.
All aspiring freelancers regardless of nationality must request a Nem ID and a CPR number. You will need to have a Denmark passport or driver’s license in order to obtain these important numbers. In addition, you must formally register your sole proprietor business with the Danish Business Authority. Once the registration process is complete, you will be given a CVR number. This number must be displayed on all invoices that you generate and must be used when communicating with public entities on various matters.
Pay Taxes as a Freelancer or Self-Employed Person in Denmark
All residents in Denmark are required to pay income taxes. This country has a progressive tax scheme, and the highest tax rate charged is approximately 51%. Taxes pay for a wide range of services and benefits that Danes can enjoy throughout their lives. For example, residents enjoy free tuition, and students receive a monthly stipend to cover living expenses. Parental leave, healthcare and unemployment are some of the other services provided.
Freelancers are also responsible for VAT, or value-added tax. In Denmark, freelancers are required to pay 25% VAT. While many other EU countries have a step-down VAT scheme that offers a discounted rate for specific business activities, Denmark does not. However, some business activities may trigger specific deductions. VAT registration is optional for those who earn less than 50,000 DKK, and it is required for those who earn more. Once you are registered for VAT, you must pay the tax on all income regardless of your income amount.
As you open a freelance business in Denmark, it is important to note that your VAT rate is based on where the buyer of your goods or services is located rather than on where your business is located. It can be challenging to keep up with VAT rates and to ensure that you are properly registered to pay VAT in each country that you do business in. Xolo’s products for freelancers include a VAT calculator to simplify the process.
How to Get Paid and Invoice as a Freelancer or Self-Employed Person in Denmark
To remain compliant with tax codes, freelancers must issue an invoice for each sale of goods or services. There are specific requirements for the invoices. For example, all invoices must have a sequential and unique invoice number. They must indicate the date that the invoice was issued as well as the name, address and registration number for your business. The customer’s name and address must be displayed clearly. The invoice should also itemize the goods or services sold with a detailed description. The VAT rate also needs to be written on the invoice. If there is a VAT exemption, the reason for that exemption must be provided. The amount of VAT owed must also be provided on the invoice, and it should be in euros or Danish kroner. All invoices that you issue must remain on file for at least seven years.
You should have separate business and personal bank accounts. All of your business activities should run through the business bank account. The income reflected in the business account should correspond with the invoices that you generate and file away.
How to Manage Your Finances When You Freelance in Denmark
If you are like most freelancers in Denmark, you will have a few startup expenses before you start earning money. Once you start paying expenses and earning income, you should have a solid financial management system in place. That system should enable you to easily keep track of income and expenses. By doing so in real-time, you will have accurate financial details about your business when you need to make an important decision. You also need a system to quickly generate invoices that are in compliance with regulations.
How to Launch a Business as a Freelancer in Denmark
Before you open a freelance business in Denmark, it is important to select your business entity carefully. Each entity has its own taxation rules and legal ramifications. For many who want to become a freelancer or self-employed person in Denmark, a sole proprietorship makes sense. This has the easiest setup process, and it does not require any additional operational steps, such as preparing a separate business tax return. If you decide to run your freelance business as a sole proprietorship, you can open your new business with minimal effort. What is required to start your business?
- Obtain the necessary work and residence visas if you are a foreign national.
- Apply for your work permit for your desired business activities.
- Request a NemID and a CPR number.
- Register your business with the Danish Business Authority to receive a CVR number.
- Open a business bank account using your new CVR number.
- Register to pay VAT in Denmark and other countries where you wish to do business.
- Set up an effective financial management system. Consider using a streamlined platform to simplify the process.
- Create or find a template that you can use to generate VAT invoices.
- Develop a marketing strategy, such as by creating a business website, establishing social media accounts for your freelancing activities and more.
Did you know that you do not have to operate your freelancing business in Denmark? With Xolo Leap, you can register and operate your Estonian business from anywhere while still remaining compliant with all regulations and requirements. Starting a EU remote business is never easier with Xolo Leap and e-Residency!
Become and Work as a Freelancer in Denmark
While there are many factors to consider before you open a freelance business in Denmark, the decision to move forward with this professional goal will undoubtedly be met with rich rewards. These rewards span from great potential profits to an improved quality of life and more. Before you can start making money by freelancing in Denmark, however, you must walk through all of the required steps to open your business. Each step will take time and effort to complete, so it makes sense to get started with the process today.
While you could progress slowly through the steps to become a freelancer in Denmark on your own, this is not necessary. With great products like Xolo Leap and Xolo Go available, you can get the assistance that you need with some of the important setup steps. These advanced solutions also can help you to manage your business’s finances so that you can spend more time focusing on running your new business. Become a freelancer working on your own and have your solo business up and running with us!
