Freelancer or Employee in Denmark? Key Tax Risks

This guide explains when a freelancer may be treated as an employee in Denmark, and why contracts, invoices and CVR registration are not enough on their own.

Last updated: May 2026

In Denmark, the distinction between a freelancer, an employee and a fee earner is not decided by the title in the contract, the use of an invoice, or whether the person has a CVR number. The decisive question is how the working relationship functions in practice.

This has become an increasingly important issue for Danish businesses using consultants, freelancers, solo self-employed specialists and external service providers. A flexible setup can be perfectly legitimate, but if the relationship in reality resembles employment, the tax and legal consequences can be significant.

For companies, the risk is not only theoretical. If a freelancer is later considered to be an employee, the business may be held responsible for withholding A-tax and labour market contribution, correcting payroll reporting and handling other employment-related obligations. For freelancers, the classification affects taxation, deductions, VAT treatment, the possibility of using the Danish business tax scheme, employment rights and the overall financial risk connected to the work.

The most important principle is simple: Danish authorities and courts look at the reality of the relationship, not just the wording of the agreement.

“Freelancer” is not always a tax category

In everyday language, many people use the word freelancer for anyone who is not a traditional employee. For Danish tax purposes, however, the analysis is more nuanced.

A person may be treated as:

• an employee (lønmodtager)
• an independent business operator (selvstændigt erhvervsdrivende)
• a fee earner or honorarium recipient (honorarmodtager), who is neither an employee nor genuinely self-employed

This distinction matters because the tax treatment is different in each case.

An employee normally receives A-income. The employer must withhold A-tax and labour market contribution before the salary is paid.

A genuinely self-employed person operates a business for their own account and risk. They normally invoice clients, report business profit, pay tax through their preliminary income assessment and may deduct ordinary business expenses according to the rules for business activities.

A fee earner may receive B-income for personal work outside an employment relationship, but that does not automatically mean that they are running a real business. This can be relevant for one-off consulting work, lectures, creative work, side activities or other personal services where there is no employment relationship, but also no independent business in the tax sense.

This is why it can be misleading to ask only: Can we pay this person as a freelancer? The better question is: What is the actual nature of the work, the risk and the relationship?

Why the classification matters

The classification affects several key areas:

• who is responsible for reporting and paying tax
• whether the company must withhold A-tax and labour market contribution
• whether the income is treated as A-income, B-income or business profit
• whether VAT has been charged and deducted correctly
• whether the freelancer can deduct business expenses
• whether the person can use the Danish business tax scheme (virksomhedsordningen)
• whether the person may have rights to holiday pay, notice periods and other employee protections
• whether the company has employer responsibilities in relation to the work

In other words, this is not just a contractual formality. It can affect the company’s tax exposure, the freelancer’s personal tax position and the overall compliance risk for both parties.

A CVR number and invoices are not enough

A common misunderstanding is that a person automatically becomes self-employed if they register a CVR number, send invoices and charge VAT. That is not the case.

A CVR number shows that a business has been registered, but it does not decide whether a specific working relationship is independent business activity. Likewise, an invoice does not by itself prove that the work was performed as an independent business.

If the facts show that the person is working under the company’s instruction, as part of its organisation, without real financial risk, the arrangement may still be treated as employment for tax purposes.

This point is especially important for businesses that use freelancers as a long-term replacement for employees. If the freelancer works almost full-time for one company, uses the company’s systems, follows internal instructions and receives fixed monthly payment, the tax authorities may look through the contractual label.

The core test: own account and risk

Danish tax practice is based on an overall assessment of the actual relationship between the parties. No single factor is decisive. The key question is whether the person performs the work as an independent business for their own account and risk, with the purpose of making a profit.

A genuinely self-employed person usually has real commercial independence. That means the person can organise the work, bear costs, take on several clients, make a profit, suffer a loss, and be responsible for the quality and delivery of the service.

By contrast, an employee performs personal work in a service relationship. The work is usually carried out under the employer’s instruction and for the employer’s account and risk.

This is why the same person can, in principle, be self-employed in one activity and an employee or fee earner in another. Each activity and each working relationship must be assessed separately.

Typical signs of employee status

No single factor decides the outcome, but the following indicators often point towards employment:

• the company gives detailed instructions on how, when and where the work must be performed
• the person works mainly or exclusively for one company
• the relationship is ongoing rather than limited to a specific project
• the person receives regular, predictable payment, similar to a salary
• the person is paid by time spent rather than by a defined commercial result
• the company provides the equipment, systems, premises or working conditions
• the person is integrated into the company’s daily operations
• the person appears internally or externally as part of the company’s team
• the person does not carry real financial risk
• the person has limited responsibility for errors, delays or additional costs
• the person cannot freely organise the work or use substitutes
• the person is subject to non-compete or exclusivity clauses that limit other client work
• the arrangement continues without meaningful project boundaries

A common risk situation is the full-time freelancer who works every week for the same company, uses the company’s tools, follows internal instructions and is treated operationally like part of the team. In such cases, the invoice setup may not be enough to support self-employed status.

Typical signs of genuine self-employment

The following indicators usually support self-employed status:

• the freelancer works for multiple clients
• the work is based on specific assignments, deliverables or projects
• the freelancer decides how the work is carried out
• the freelancer uses their own tools, systems and professional setup
• the freelancer pays their own operating expenses
• the freelancer has business insurance or professional liability exposure
• the freelancer can make a profit, but can also incur a loss
• the freelancer is responsible for errors, defects, rework or additional costs
• the client’s obligation is limited to the specific assignment
• the freelancer can reject assignments and negotiate commercial terms
• the freelancer markets their services to the market generally
• the freelancer invoices based on the agreed work and carries business expenses

The key point is economic independence. A self-employed person should not simply be paid for personal labour under the client’s control. They should operate a business with its own risk, structure and commercial purpose.

The “honorarmodtager” middle category

Not every person who is outside employment is automatically self-employed. Danish tax practice also recognises situations where a person receives fees for personal work without being an employee and without operating a genuine business.

This is often referred to as honorar income. It may apply to certain one-off or limited activities, such as lectures, smaller creative assignments, occasional consulting tasks or other personal services.

This matters because B-income is not the same as business profit. The recipient may have to pay tax and labour market contribution themselves, but their deduction possibilities and reporting treatment may differ from a real business. For the payer, there may also be reporting obligations, even if no A-tax is withheld.

For businesses, the practical message is this: paying a person without payroll does not automatically mean that the person is an independent business. The income may be B-income, employment income or business income depending on the facts.

Tax consequences for the company

If a freelancer is reclassified as an employee, the company may face several consequences.

The most important risk is withholding liability. If the company should have treated the payment as salary, it may have been required to withhold A-tax and labour market contribution at the time of payment. If this was not done, the company may be held liable for amounts that should have been withheld.

The company may also need to correct payroll reporting, review prior periods and handle related employer obligations. Depending on the facts, there may also be questions about holiday pay, pension, employment terms or other employee-related claims.

This is why the issue should be reviewed before the cooperation becomes long-term or financially significant. Once the arrangement has been running for several years, the correction can become both expensive and administratively difficult.

Tax consequences for the freelancer

For the freelancer, reclassification can also be costly.

If income previously treated as business profit is later treated as salary or personal work income, the freelancer may lose deductions that were claimed as business expenses. This is especially relevant for travel expenses, home office costs, equipment, subcontractor costs or other expenses that were deducted on the assumption that the person operated an independent business.

The freelancer may also lose access to the business tax scheme if the conditions for self-employment are no longer met. If profits have been retained or taxed under the business tax scheme, a reclassification can create additional tax consequences.

In some cases, the person may have charged VAT on invoices. If the relationship is later treated as employment, VAT treatment may also need to be reviewed. This can affect both the freelancer and the company that deducted input VAT.

VAT: why the issue is not only about income tax

VAT is another important angle. Employees are generally not considered to be carrying out independent economic activity for VAT purposes in relation to their employer.

This means that if a person is in reality performing work as an employee, the work should not normally be treated as a VATable service supplied by an independent business. If VAT has been charged on invoices, and the client has deducted that VAT, both parties may need to consider whether the VAT treatment was correct.

For genuine self-employed contractors, VAT registration and VAT invoicing may be fully appropriate. The problem arises when VAT invoicing is used for what is, in substance, personal work under employer-like control.

Recent Danish practice: offshore divers

A well-known Danish Supreme Court case illustrates the issue clearly. A company had engaged around 100 offshore divers as independent contractors for an offshore project in the North Sea. The agreements described the divers as self-employed, and the work was formally structured through consultancy arrangements.

However, the Supreme Court found that the divers could not be regarded as having performed the work as independent businesses for their own account and risk. Instead, they were considered employees for Danish tax purposes.

The Court looked at the real circumstances of the work. Among other things, the divers were part of the company’s project execution, their financial risk was limited, and the company had a level of responsibility and control that pointed towards employment. As a result, the company had an obligation to withhold tax and labour market contribution.

The lesson is clear: a contract can support the intended classification, but it cannot override the factual reality of the working relationship.

Recent practice: the consultant with one main client

A more recent Danish tax case also shows the practical risk for consultants. In that case, a consultant had historically worked for several companies, but in the relevant period he worked for only one foreign client. He invoiced regularly, based on a fixed daily rate, and the work continued over a longer period.

The tax authorities and the appeal body considered the relationship to resemble employment. The fact that the consultant had significant travel and accommodation expenses did not, by itself, prove real business risk, because such expenses could also arise for an employee working abroad.

The consequences were serious: the consultant could not treat the income as ordinary business profit in the way originally assumed, and the deduction of expenses was restricted according to the rules applicable to employees.

This example is important because many consultants believe that high expenses automatically prove self-employment. They do not. The expenses must be business risk of the kind normally connected with running an independent business.

Working through a company does not automatically solve the problem

Some consultants operate through their own ApS. This can be a sensible structure in many situations, but it does not automatically remove the classification risk.

If the individual owner performs personal work for one client under conditions resembling employment, the tax authorities may still examine whether the income should in reality be attributed to the individual as employment income.

This area is particularly sensitive because the money may have passed through a company, salary may have been paid from the company to the owner, and VAT may have been charged. If the setup is later reclassified, the tax consequences can become complex.

The practical point is that an ApS is not a magic shield. The underlying relationship still needs to look like a genuine business-to-business arrangement.

Industries where the risk often appears

The issue can arise in many industries, but it is especially common where companies rely on flexible labour or long-term consultants.

Examples include:

• IT consultants and software developers
• project managers and interim managers
• marketing consultants and creative specialists
• construction and installation work
• transport and logistics
• platform-based work
• healthcare and care-related services
• offshore, engineering and technical specialists
• foreign contractors working in Denmark

These sectors often use project-based or external labour models. That can be legitimate, but the risk increases when the same individual becomes operationally integrated into the client’s organisation.

Red flags for businesses

Businesses should pay special attention if:

• the same freelancer works almost full-time for the company
• the cooperation continues for a long period without clear project boundaries
• the freelancer receives fixed monthly payments
• the freelancer invoices the same number of days every month
• the freelancer has a company email address, company equipment and internal access like an employee
• the company controls the freelancer’s working hours or daily tasks
• the freelancer participates in internal staff meetings like an ordinary employee
• the freelancer has no meaningful business expenses or financial exposure
• the freelancer does not work for anyone else
• the freelancer is restricted from working for other clients
• the contract says consultant, but the daily reality looks like employment

These factors do not automatically mean that the person is an employee. However, they should trigger a closer review.

Practical steps for companies

If your business works with freelancers or consultants, it is worth reviewing both the contract and the day-to-day practice. The two must be aligned.

A good starting point is to:

• define the assignment clearly in the contract
• describe the deliverables, not just the working hours
• avoid treating freelancers as ordinary staff members
• avoid giving detailed day-to-day instructions unless necessary for the assignment
• make sure the freelancer has real independence in how the work is performed
• document the freelancer’s financial risk and business setup
• avoid open-ended arrangements that look like permanent employment
• review long-term freelancer relationships regularly
• check whether the freelancer has other clients
• check whether payment terms reflect a commercial assignment
• avoid using freelancer setups only to avoid payroll obligations
• seek professional advice before the setup becomes a problem

For higher-risk relationships, it may also be relevant to consider whether the person should be hired as an employee, whether the assignment should be restructured, or whether a binding answer should be requested from the tax authorities.

Practical steps for freelancers

Freelancers should also be careful. If you want to be treated as genuinely self-employed, your business setup should support that position.

This may include:

• having more than one client where possible
• using your own tools, software and equipment
• setting your own prices and commercial terms
• carrying your own business expenses
• having professional liability or business insurance where relevant
• keeping a website, portfolio or other market-facing profile
• issuing clear invoices based on assignments or deliverables
• avoiding arrangements where you are effectively part of one client’s internal organisation
• documenting your independence and business risk
• reviewing whether your income should be reported as business profit, B-income or salary

The goal is not to create artificial paperwork. The goal is to ensure that the actual setup matches the tax position you are using.

When should you review the setup?

A review is especially relevant when:

• a freelancer starts working mainly for one client
• the cooperation changes from a short project to an ongoing arrangement
• monthly invoices become predictable and salary-like
• the freelancer gets access to the company’s internal systems and routines
• the freelancer stops working for other clients
• the company wants the freelancer to follow internal working hours
• the freelancer works through an ApS but personally performs all the work
• the amounts involved become significant
• the cooperation crosses borders or involves foreign contractors

It is much easier to adjust the setup at the beginning than after several years of invoices, VAT returns, tax returns and deducted expenses.

What about employment law?

This article focuses mainly on tax and accounting. However, employment law may also become relevant.

If a person is treated as an employee rather than a freelancer, questions may arise about holiday pay, notice periods, sickness, collective agreements, pension, insurance and other employment rights.

These questions are not always identical to the tax analysis, but the underlying facts often overlap. For example, instruction, integration, economic dependence and personal work can be relevant in more than one context.

If the relationship is legally sensitive, it is advisable to involve both a tax/accounting advisor and an employment lawyer.

How Andreas Regnskab can help

At Andreas Regnskab, we help businesses and self-employed professionals understand the tax and accounting consequences of their working arrangements in Denmark.

We can assist with:

• reviewing the practical setup from a tax and bookkeeping perspective
• identifying potential A-tax and AM-contribution risks
• assessing whether invoicing and VAT treatment appear consistent with the relationship
• reviewing whether income is likely to be business profit, B-income or salary
• helping freelancers understand deduction and reporting consequences
• ensuring that bookkeeping reflects the actual relationship correctly
• coordinating with legal advisors where employment law questions arise

We do not recommend waiting until the tax authorities raise the issue. If the working relationship is unclear, an early review is usually much cheaper than a correction later.

Conclusion

The direction in Danish practice is clear: the actual working relationship matters more than the wording of the agreement.

A freelancer is not automatically self-employed just because they issue invoices. A CVR number, VAT registration or an ApS structure can support a business setup, but they do not decide the classification on their own.

For a genuine business-to-business relationship, there should be real independence, genuine financial risk, commercial freedom and a working setup that reflects a business relationship rather than employment.

If your company relies on freelancers, or if you work as a solo consultant with one main client, it is better to review the setup early than to correct it after the tax authorities or courts have raised the issue.

This article provides general information only and should not be treated as legal advice. Classification depends on the specific facts of each case. If the setup is complex or high-value, professional advice should be obtained before decisions are made.

Frequently Asked Questions

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Practical risk management