Income Taxation of Self-employed Traders

Rune Nedergaard

Student thesis: Master thesis


This Thesis has been prepared with a view to clarifying the circumstances which may contribute towards tax optimisation for a self-employed individual in Denmark. Since the introduction of the Danish Business Tax Act in 1987 and the subsequent revision of the Act in 1992 (with effect as of assessment year 1993), self-employed individuals have had two options when it comes to taxation – taxation under the provisions of the Danish Personal Income Tax Act or of the Danish Business Tax Act; including the Business Taxation Scheme and the Capital Yield Taxation Scheme. The Thesis explains first and foremost the requirements to be met for being categorised as a self-employed individual. This includes an explanation of the practical dividing line between a person – as opposed to a self-employed individual – being regarded as an employee, a fee recipient or an operator of a leisure-time activity. Only where a person is regarded as being a self-employed individual, will that person be able to opt for income taxation under the Danish Business Tax Act; therefore, this subject is essential to the title question of this Thesis. A theoretical review will then be made of the Personal Taxation Scheme, the Business Taxation Scheme and the Capital Yield Taxation Scheme, respectively, with a view to identifying differences between the schemes. The theoretical review is followed up by cases to demonstrate the practical application of the three schemes in order to illustrate how and to what extent the three types of taxation allow for tax optimisation for self-employed individuals. By way of conclusion, the Thesis gives an in-depth account of the instant measures implemented by the Danish Government in respect of the Danish Business Taxation Scheme in order to tighten up requirements so as to prevent abuse of the scheme to finance private debts. The measures were enacted on 9 September 2014. In my Thesis, I have considered in detail the special problems resulting from this enactment, including advisers' challenges with respect to advising self-employed individuals on, for example, clarification of “increased security by way of charges on the assets of an enterprise”. For this purpose, the Thesis looks at a binding ruling requested after the enactment as well as conclusions from an interview with Søren Bech, Tax Partner at PwC Hellerup.

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
Publication date2016
Number of pages82