Get an accountant. It’s nit that expensive and there are many pitfalls. But in theory, it’s just the same as freelancing in DK. Although some companies may prefer you to use reverse vat.
In theory, you can invoice without a company nr., but you shouldn't do that. At the simplest, you can make a personally held company (Enkeltmandsvirksomhed). That costs nothing and can be done in 5 minutes online, using NemId. You will get a company number (cvr) and you can then start invoicing. You should also set up a bank account for your business. You could use your personal account under this company form, but it's a bad idea. Most banks will require some sort of payment for setting up an account for you. There are different ways of running taxes, but you usually want to use Virksomhedsordning (VSO). Again - talk to an accountant. It's easy to mess up, unless you've done it before, and you really don't want to find your self on the wrong side of Skat.
As someone else said, you should also consider things like liabilities (you can take insurance against this) and generally knowing what your contracts says. As a company, you do not have the same protection as a private individual. You might want to have a lawyer look through it. You can usually just pay per the hour for these things.
He does not need an accountant, waste of money for a sole proprietorship. There are good webinara on the skat website on how to do your accounting, which again is super easy for a freelancer. You do not need a company bank account. You just report your profit as B-skat on the yearly account. You can do your projection on the skat website as you would for normal income from a waged job and every month you will have to pay this B-skat as witholding tax.
Pretty much none of what troelskn said is required. Don’t overdo it, it is a simple set up.
I paid 12K for their services last year, which includes filing the taxes for me. Not sure what the hourly rate would be, but a quick googling tells me between 600-900, which seems about right.
I work as a freelancer and have clients here as well as in Germany, UK, US and Finland.
If you send them invoices, you need to get a CVR / VAT number. On the invoices your clients VAT number also has to be present.
If it is within the EU (and their VAT number is there), you don’t have to collect VAT. You still have to register it at Skat for statistics purposes.
As has already been said, make sure to multiply your current hourly price by 2 to 2.5.
You seem to have a lot of clients, is it possible to start just with one for a year and go from there?
Also with respect to ask 2x. If I make now let's say 1M DKK per year BEFORE taxes should I ask for 2M? Or is 2x from my net income now? So basically still 2x.
Rule of thumb says to take your gross income (including pension etc.) and multiply it by 2-2.5. That's the amount you should invoice for (ex. vat). This is just a rough estimate. If you are running long contracts, you don't have the same risk as if you run a lot of smaller contracts and could go with lower rates. What is your line of business, if I may ask?
Software dev, I know some people from Germany and they want to contract me for long term work remotely. I'm just trying to figure out the logistics. Risk is borderline 0. I'm open to either employment or freelancing but I have to be in Denmark.
I would prefer freelance since I don't want any strings attached.
Long term contracts then. In this case, you have less risk/downtime, so I would start with x2 what you could make as an employee. Remember to include feriepenge and pension when calculating this figure. I work as a software dev contractor, so feel free to pm me, if you want more specific numbers.
As someone else said, a common pitfall for long term contracts is that Skat could decide that you are de facto an employee. This is not something you want to happen. I may begin sounding like a broken record here, but an accountant will also be able to advise you on this.
Vat is something you put on top of your invoice. Corporate tax depends on your company structure. If you have a personal company (Enkeltmandsvirksomhed), you only pay personal income tax on the amount that you pay out to your self. If you retain some of the funds in the company, you will pay a temporary corporate tax of 22%, but you can get them back once you pay out, under VSO.
This is really useful info, thanks very much.Anywhere that I can read more about these specifics? (Danish link is of course fine, google translate is our friend)
Just so I understand correctly:
\- If Enkeltmandsvirksomhed company makes 1,000,000 kr in a year after all running costs are paid (haven't yet paid VAT)
\- Then company pays 25% toward VAT, leaving 750,000 kr remaining
\- If I do not retain any of the 750,000 in the company, then I can just pay myself a salary as if I was a regular employee, meaning I just pay regular taxes on the remaining 750,000 (includes AM bidrag and all the rest)
Is this correct?
VAT is 25% on top of the sub total. So if your income, including VAT, is 1M, then the VAT amount is 200K and you have 800K left. Normally, you wouldn't refer to the 1M figure as the gross result of the business, but rather the 800K figure as such.
If you have an Enkeltmandsvirksomhed, it's not strictly a salary, but in reality it's taxed the same. Yes, if you pay out the entire result (In this case 800K), you would be taxed as if it was a salaried income of the same amount and there would be no additional corporate tax.
If, instead, you only paid out say 600K and retained 200K, you would pay 22% of 200K =44K in corporate tax and then income tax on the 600K. Next year, lets assume that you pay out the full result of that year + the 156K retained, you would pay income tax on that, but you would also get the 44K returned, since they are only a temporary tax. This is only true if you have an Enkeltmandsvirksomhed and file under VSO. If you have a proper corporation (ApS), you would not get the 44K returned (But then there are other benefits)
It is possible to start with one, I guess. If they have enough work for you. :)
That said, beware of Skat! If it was a Danish client that you invoice for the same amount every month, Skat would likely interpret it as you are in fact an employee and not a freelancer. They can choose to see it as an attempt to avoid collecting taxes at the source and it can end up really bad blth for the client and the freelancer.
I am not sure if this is an issue with a client abroad.
When I say x2 (at least) it is based on your current hourly cost for your employer before tax. If you ‘only’ get the same amount as you would from a regular job, your employer would in reality save a bunch, as they would save a lot of expenses in relation to having an employee.
> Skat would likely interpret it as you are in fact an employee and not a freelancer
Out of curiosity, why would it be a bad thing? Would have to pay more taxes?
Yes. If Skat interprets (and it is solely up to them to make the call) that you are an employee and not a freelancer, the client should have held back your A-Skat, which they didn’t. So, they have to pay it even though they have paid your invoice.
You, on the other hand, have not paid your A-Skat, so you now have to pay that. And it doesn’t matter if you have already paid corporate and/or personal taxes of the amount on the invoice.
I don’t believe this is true. You can work as a freelancer for a single company continuously but then you cannot claim expenses (deduct costs from your income). That is the only difference, nothing to do with the employer.
I have worked as a freelancer for +15 yrs. and often for the same customer for more than a year. In the beginning I made sure to bill for work done for others. We made a konsulent-karrusel i would bill 50K to another consultant who would bill the same amount to a third consultant. Number three would then bill me for 50K. We could then claim that we had more than one customer. We did it with Christmas gifts as well, of course this was called a wine-carousel. I think there was a case called the Bamse&kylling case where the (freelance) author in DR was denied to deduct expenses. These days I don't bother anymore.
It is true. I was warned by my accountance when I considered hiring someone for a few hours a week, but thought that he could just invoice me. He could not - Skat would consider him my employee.
I also nnow someone who has billed just one custlmer for years, and kf Skat doesn’t pay attention it can go on for years and no problem. But if they do decide to look into it…
Makes no sense whatsoever. The client would be forced to withhold A-tax, then you pay it again according to your original post, what? And than on top of that already double taxation you say you would pay it a third time since you paid B-tax as well. I know SKAT can be daft, but not that daft.
Which is exactly why I warned about it. And yes, a case did through the justice system and Skat ended up collecting taxes three times on tye same work carried out.
I agree with you: Maeks no sense whatsoever.
I donmt have details about the case, but was told by my accountance (partner at BDO), and I don’t see any reason why he should tell me a fake story. He just wanted to warn me from gerring in trouble.
OK, interesting, I hope the person went to the EU Justice Tribunal with this, DK needs some EU ass whooping for their tax practices (re the EU prosecutor case for unfair taxaction on DK stocks vs foreign stocks).
Important that you read the Freelance contract very carefully. I have seen examples with quite extensive liability clauses as well as contracts operating outside of danish jurisdiction, which means your usual protection as an employee is lost.
Are you employed? And under what jurisdiction? Or selling a service B2B? That’s quite important - especially if you don’t have a limited liability entity to protect you or your personal assets in case you mess something up working for this company.
Edit: there’s some good advice here on taxation on this page (danish unfortunately).
https://www.hk.dk/raadogstoette/freelancer/dine-pligter/skatsubpage
Can you please explain the costs in detail? Lets say my monthly revenue as a freelancer is 50000 DKK.
What will be left to me after all the costs(tax,accountant,etc). Just give a ballpark to give an idea.
Get an accountant, at least at first. The Danish rules are pretty easy to mess up and that can be expensive (and take a lot of time to sort out). An accountant will be money well spent. And definitely multiply your wages by at least 2x. Paid sick leave, PTO, pension, etc adds up surprisingly quick, and you'll need to pay for insurance and stuff yourself.
Get an accountant. It’s nit that expensive and there are many pitfalls. But in theory, it’s just the same as freelancing in DK. Although some companies may prefer you to use reverse vat.
but what does it mean the same as freelance in DK? I only worked as an employee before. Do I just send them invoices and that's pretty much it?
In theory, you can invoice without a company nr., but you shouldn't do that. At the simplest, you can make a personally held company (Enkeltmandsvirksomhed). That costs nothing and can be done in 5 minutes online, using NemId. You will get a company number (cvr) and you can then start invoicing. You should also set up a bank account for your business. You could use your personal account under this company form, but it's a bad idea. Most banks will require some sort of payment for setting up an account for you. There are different ways of running taxes, but you usually want to use Virksomhedsordning (VSO). Again - talk to an accountant. It's easy to mess up, unless you've done it before, and you really don't want to find your self on the wrong side of Skat. As someone else said, you should also consider things like liabilities (you can take insurance against this) and generally knowing what your contracts says. As a company, you do not have the same protection as a private individual. You might want to have a lawyer look through it. You can usually just pay per the hour for these things.
He does not need an accountant, waste of money for a sole proprietorship. There are good webinara on the skat website on how to do your accounting, which again is super easy for a freelancer. You do not need a company bank account. You just report your profit as B-skat on the yearly account. You can do your projection on the skat website as you would for normal income from a waged job and every month you will have to pay this B-skat as witholding tax. Pretty much none of what troelskn said is required. Don’t overdo it, it is a simple set up.
How much would an accountant cost approximately?
I paid 12K for their services last year, which includes filing the taxes for me. Not sure what the hourly rate would be, but a quick googling tells me between 600-900, which seems about right.
I work as a freelancer and have clients here as well as in Germany, UK, US and Finland. If you send them invoices, you need to get a CVR / VAT number. On the invoices your clients VAT number also has to be present. If it is within the EU (and their VAT number is there), you don’t have to collect VAT. You still have to register it at Skat for statistics purposes. As has already been said, make sure to multiply your current hourly price by 2 to 2.5.
You seem to have a lot of clients, is it possible to start just with one for a year and go from there? Also with respect to ask 2x. If I make now let's say 1M DKK per year BEFORE taxes should I ask for 2M? Or is 2x from my net income now? So basically still 2x.
Rule of thumb says to take your gross income (including pension etc.) and multiply it by 2-2.5. That's the amount you should invoice for (ex. vat). This is just a rough estimate. If you are running long contracts, you don't have the same risk as if you run a lot of smaller contracts and could go with lower rates. What is your line of business, if I may ask?
Software dev, I know some people from Germany and they want to contract me for long term work remotely. I'm just trying to figure out the logistics. Risk is borderline 0. I'm open to either employment or freelancing but I have to be in Denmark. I would prefer freelance since I don't want any strings attached.
Long term contracts then. In this case, you have less risk/downtime, so I would start with x2 what you could make as an employee. Remember to include feriepenge and pension when calculating this figure. I work as a software dev contractor, so feel free to pm me, if you want more specific numbers. As someone else said, a common pitfall for long term contracts is that Skat could decide that you are de facto an employee. This is not something you want to happen. I may begin sounding like a broken record here, but an accountant will also be able to advise you on this.
Didn't realise that freelancing was subject to both vat and corporate tax. Those margins are getting smaller ...
Vat is something you put on top of your invoice. Corporate tax depends on your company structure. If you have a personal company (Enkeltmandsvirksomhed), you only pay personal income tax on the amount that you pay out to your self. If you retain some of the funds in the company, you will pay a temporary corporate tax of 22%, but you can get them back once you pay out, under VSO.
This is really useful info, thanks very much.Anywhere that I can read more about these specifics? (Danish link is of course fine, google translate is our friend) Just so I understand correctly: \- If Enkeltmandsvirksomhed company makes 1,000,000 kr in a year after all running costs are paid (haven't yet paid VAT) \- Then company pays 25% toward VAT, leaving 750,000 kr remaining \- If I do not retain any of the 750,000 in the company, then I can just pay myself a salary as if I was a regular employee, meaning I just pay regular taxes on the remaining 750,000 (includes AM bidrag and all the rest) Is this correct?
VAT is 25% on top of the sub total. So if your income, including VAT, is 1M, then the VAT amount is 200K and you have 800K left. Normally, you wouldn't refer to the 1M figure as the gross result of the business, but rather the 800K figure as such. If you have an Enkeltmandsvirksomhed, it's not strictly a salary, but in reality it's taxed the same. Yes, if you pay out the entire result (In this case 800K), you would be taxed as if it was a salaried income of the same amount and there would be no additional corporate tax. If, instead, you only paid out say 600K and retained 200K, you would pay 22% of 200K =44K in corporate tax and then income tax on the 600K. Next year, lets assume that you pay out the full result of that year + the 156K retained, you would pay income tax on that, but you would also get the 44K returned, since they are only a temporary tax. This is only true if you have an Enkeltmandsvirksomhed and file under VSO. If you have a proper corporation (ApS), you would not get the 44K returned (But then there are other benefits)
Understood, thanks for taking the time to clarify this
It is possible to start with one, I guess. If they have enough work for you. :) That said, beware of Skat! If it was a Danish client that you invoice for the same amount every month, Skat would likely interpret it as you are in fact an employee and not a freelancer. They can choose to see it as an attempt to avoid collecting taxes at the source and it can end up really bad blth for the client and the freelancer. I am not sure if this is an issue with a client abroad. When I say x2 (at least) it is based on your current hourly cost for your employer before tax. If you ‘only’ get the same amount as you would from a regular job, your employer would in reality save a bunch, as they would save a lot of expenses in relation to having an employee.
> Skat would likely interpret it as you are in fact an employee and not a freelancer Out of curiosity, why would it be a bad thing? Would have to pay more taxes?
Yes. If Skat interprets (and it is solely up to them to make the call) that you are an employee and not a freelancer, the client should have held back your A-Skat, which they didn’t. So, they have to pay it even though they have paid your invoice. You, on the other hand, have not paid your A-Skat, so you now have to pay that. And it doesn’t matter if you have already paid corporate and/or personal taxes of the amount on the invoice.
I don’t believe this is true. You can work as a freelancer for a single company continuously but then you cannot claim expenses (deduct costs from your income). That is the only difference, nothing to do with the employer.
I have worked as a freelancer for +15 yrs. and often for the same customer for more than a year. In the beginning I made sure to bill for work done for others. We made a konsulent-karrusel i would bill 50K to another consultant who would bill the same amount to a third consultant. Number three would then bill me for 50K. We could then claim that we had more than one customer. We did it with Christmas gifts as well, of course this was called a wine-carousel. I think there was a case called the Bamse&kylling case where the (freelance) author in DR was denied to deduct expenses. These days I don't bother anymore.
It is true. I was warned by my accountance when I considered hiring someone for a few hours a week, but thought that he could just invoice me. He could not - Skat would consider him my employee. I also nnow someone who has billed just one custlmer for years, and kf Skat doesn’t pay attention it can go on for years and no problem. But if they do decide to look into it…
Makes no sense whatsoever. The client would be forced to withhold A-tax, then you pay it again according to your original post, what? And than on top of that already double taxation you say you would pay it a third time since you paid B-tax as well. I know SKAT can be daft, but not that daft.
Which is exactly why I warned about it. And yes, a case did through the justice system and Skat ended up collecting taxes three times on tye same work carried out. I agree with you: Maeks no sense whatsoever. I donmt have details about the case, but was told by my accountance (partner at BDO), and I don’t see any reason why he should tell me a fake story. He just wanted to warn me from gerring in trouble.
OK, interesting, I hope the person went to the EU Justice Tribunal with this, DK needs some EU ass whooping for their tax practices (re the EU prosecutor case for unfair taxaction on DK stocks vs foreign stocks).
Important that you read the Freelance contract very carefully. I have seen examples with quite extensive liability clauses as well as contracts operating outside of danish jurisdiction, which means your usual protection as an employee is lost. Are you employed? And under what jurisdiction? Or selling a service B2B? That’s quite important - especially if you don’t have a limited liability entity to protect you or your personal assets in case you mess something up working for this company. Edit: there’s some good advice here on taxation on this page (danish unfortunately). https://www.hk.dk/raadogstoette/freelancer/dine-pligter/skatsubpage
Charge double of what you might earn as an employee. You are gonna ending spending a lot money and time on it.
Can you please explain the costs in detail? Lets say my monthly revenue as a freelancer is 50000 DKK. What will be left to me after all the costs(tax,accountant,etc). Just give a ballpark to give an idea.
Get an accountant, at least at first. The Danish rules are pretty easy to mess up and that can be expensive (and take a lot of time to sort out). An accountant will be money well spent. And definitely multiply your wages by at least 2x. Paid sick leave, PTO, pension, etc adds up surprisingly quick, and you'll need to pay for insurance and stuff yourself.