If you’re an entrepreneur or digital nomad frustrated by complex tax regimes and state-imposed costs, you’re not alone. Many globally minded professionals are searching for business structures that offer flexibility, transparency, and the potential for tax optimization. Denmark’s sole proprietorship status—known locally as Enkeltmandsvirksomhed—is a popular option, but it comes with unique conditions and obligations. This guide breaks down the essentials for 2025, using the latest data to help you make informed decisions.
Understanding the Enkeltmandsvirksomhed: Denmark’s Sole Proprietorship
The Enkeltmandsvirksomhed is Denmark’s answer to the sole proprietorship. It’s designed for individuals who want to operate a business and invoice clients without the administrative burden of forming a separate legal entity. This structure is widely used by freelancers, consultants, and small business owners across Denmark.
Key Features at a Glance
| Feature | Details (2025) |
|---|---|
| Status Name | Enkeltmandsvirksomhed |
| Legal Entity | No separate legal entity; owner is personally liable |
| Eligibility | Danish citizens and residents |
| Registration | Via Danish Business Authority (Virk.dk) |
| Taxation | Profits taxed as personal income (progressive rates up to approx. 52.07% in 2025) |
| VAT Registration | Required if turnover exceeds DKK 50,000 (approx. $7,200) in 12 months |
| Social Security | Covered by general Danish system; no separate contribution |
Personal Liability: What You Need to Know
Unlike limited companies, the Enkeltmandsvirksomhed does not create a legal barrier between your personal and business assets. If your business faces debts or legal claims, your personal wealth is on the line. This is a crucial consideration for anyone seeking to minimize risk exposure.
Taxation in 2025: Rates and Realities
Profits from a Danish sole proprietorship are taxed as personal income. For 2025, the top marginal rate—including municipal, state, and labor market contributions—can reach approximately 52.07%. This is among the highest in Europe, and it’s a figure that should factor heavily into your planning.
Pro Tip 1: Track all deductible business expenses meticulously. Every krone you can justify as a business cost reduces your taxable profit and, by extension, your personal tax burden.
VAT Registration: When Is It Mandatory?
If your business turnover exceeds DKK 50,000 (about $7,200) in any 12-month period, you must register for VAT. This threshold is relatively low, so even modestly successful freelancers will need to comply. VAT registration is handled through the Danish Business Authority’s portal.
Pro Tip 2: Monitor your rolling 12-month turnover. If you’re approaching the DKK 50,000 ($7,200) threshold, consider timing invoices or business activities to optimize your VAT obligations.
Social Security: No Extra Contributions
Denmark’s system is streamlined in one respect: there are no separate social security contributions for sole proprietors. Your coverage is integrated into the general Danish system, which is funded through your personal taxes.
Registration Process: Fast and Digital
Setting up an Enkeltmandsvirksomhed is straightforward. Registration is completed online via Virk.dk. You’ll need a Danish CPR number and NemID/MitID for authentication. Most applications are processed within a few days.
Pro Tip 3: Prepare all documentation in advance—proof of address, identification, and business plan details—to streamline your registration and avoid delays.
Case Example: Freelance Consultant in Copenhagen
Consider a freelance IT consultant based in Copenhagen. In 2025, she invoices DKK 300,000 (about $43,200) over the year. After deducting DKK 50,000 ($7,200) in business expenses, her taxable profit is DKK 250,000 ($36,000). She is taxed at progressive personal rates, potentially reaching the 52.07% top bracket. Because her turnover exceeds DKK 50,000 ($7,200), she must register for VAT and charge it on her invoices.
Summary: Is Denmark’s Sole Proprietorship Right for You?
- The Enkeltmandsvirksomhed is accessible, fast to set up, and widely used in Denmark.
- Personal liability is unlimited—there’s no legal separation between you and your business.
- Profits are taxed as personal income, with rates up to 52.07% in 2025.
- VAT registration is mandatory above DKK 50,000 ($7,200) turnover in any 12 months.
- No separate social security contributions—everything is integrated into the Danish system.
For more details, consult the official resources:
- Virk.dk: Start Enkeltmandsvirksomhed
- SKAT: Taxation of Sole Proprietorships
- Business in Denmark: Sole Proprietorship
By understanding the rules and leveraging every available optimization, you can make Denmark’s sole proprietorship status work for your business and your freedom in 2025.