Self-assessment – “Forskudsopgørelse”
How do you pay tax in Denmark as a sole proprietor?
When you run your own business, as a sole proprietorship, you make partial payment during the year in ten equal instalments.
The ten partial payments are estimated and not based on your actual profit.
We call this estimate a “self-assessment” since you have to estimate your profit yourself.
The self-assessment you declare on a particular online form called the “Forskudsopgørelse”.
The online form is accessible from SKAT Borger, which is the website of the Danish tax office called “Skattestyrelsen”.
The tax you pay from normal employment is called A-tax.
The tax you pay from the profit of a sole proprietorship is called B-tax.
Tax summary – “Årsopgørelse”
When the year is finished you pay your final tax in Denmark as a sole proprietor based on your actual taxable profit.
The taxable profit comes from the accounting and financial reports done by your accountant with some adjustments made relating to tax rules.
The information about your taxable profit is submitted to the tax office on your tax return each year.
The tax return your accountant submit to the tax office at the latest six months after the year ends.
This final tax summary we call “årsopgørelse” in Danish.
It is essential to submit the tax return on time.
Being late with the tax return can get you a fine of up to 5.000 DKK.
Sometimes you will end up getting a tax refund (when having overpaid income tax); other times, you will need to pay more in tax (when having paid too little income tax).
It all depends on how accurate your self-assessment was.
To avoid being charged interest on paying tax too late, you want to make the self-assessment as precise as possible.
And remember to update your self-assessment during the year if needed.
How to pay B-tax
The ten payments relating to your B-tax, which comes from the expected profit in your sole proprietorship, will be split into ten equal instalments.
Payments are made on the 20th of each month from January to May, with no taxes paid in June.
And also from July to November, with no tax due in December.
Automatically bank transfers can be set up through your bank.
Manual bank transfers are done using the payment ID shown inside the tax office website “SKAT Borger”.
If you transfer the tax from a foreign bank account abroad, e.g. a REVOLUT bank account, you pay the tax using IBAN/SWIFT.
Changing your estimate throughout the year
Since the tax is based upon an estimate, the self-assessment, the reality may not reflect your assessment later on.
Things very often change during the year – you might acquire new clients and increase your profit or lose some clients and make less profit than expected.
At any given time, you can alter the previously estimated profit and thus regulate the tax.
Do you want to learn how to register your sole proprietorship and get a CVR?
You can read our blog here which will give you more information on how to register your sole proprietorship on VIRK and get your CVR number.
Do you want to learn about the special tax scheme for sole proprietors that will lower your tax to 22% on profits not withdrawn from the business?
You can read our blog here about the business tax scheme which will give your more information on how to lower your tax to 22% on profit not withdrawn from the business.
(last update of this blog: 28.3.2022)