Self-employment and benefits

The implications of running your own business depend on whether it is considered the regular running of an own business as a secondary occupation, or rather as asset management or spare-time activity.

You should therefore carefully consider the extent of your activity in the start-up phase, and whether you could postpone registration with the central business register (CVR). 

If you notify the central business register and take advantage of the tax regulations for self-employed persons, we will generally consider your activity as the running of an own business. 

In contrast, if you start your independent activity as a spare-time activity, you do not use your right to 30 weeks on supplementary benefits. However, you must report your working hours on the benefit form, which leads to deductions in your benefits. Learn more about this below.

 

Self-employment as a secondary occupation

What conditions must be fulfilled?

This depends on the time you start your business in relation to your unemployment.

1) You are already running your own business when you apply for benefits and gain benefit rights for 2 years
You can claim supplementary benefits while you continue your secondary occupation if you have been a wage earner and your employer(s) reported to the income register:

 

  • a monthly average of at least 80 wage hours
    AND
  • at least 1 wage hour* in 5 of the last 6 months

* For new graduates, study periods are comparable with full-time paid work. Periods spent running your own business are NOT comparable with paid work.

The 6-month period cannot be extended.

If you do not fulfil these requirements, you must close your business to claim benefits.

2) You start your business while you are unemployed
You can start your business without fulfilling further conditions if you can honour  the ordinary requirements for receiving benefits. However, if you previously closed down your own business as a main occupation, you cannot claim benefits for the first 6 months after the closure.

Learn more about the length of the period with supplementary benefits and rules on benefit deductions

Beware: no more than one termination per benefit period

For each benefit period, only one closure of an own business is accepted. However, any closure that may have occurred in connection with gaining the right to a 2-year benefit period is not included. The same applies to a termination of business that occurred before October 1, 2018. 

This means that if you start a new business (Business 1) in your benefit period and then close it, the closing-down of a potential new business (Business 2) will result in the loss of benefit rights. 

This new rule applies to self-employment as a secondary occupation, but not to spare-time activities and asset management. 

Applying for benefit rights while running your own business

You can apply for benefits while running your own business as a secondary occupation by submitting this form: Oplysningsblanket om aktiviteter som selvstændig/freelancer (In Danish, NemID required)

Closing your own business as a secondary occupation 

Whether you close an own business as a secondary occupation or as a main occupation, the same requirements for documentation apply. Learn more here. 

 

Spare-time activity

We suggest that you consider starting your own business as a spare-time activity rather than as a secondary occupation. This is an option if: 

  • The activity is not registered with a central business register number (CVR) or an SE number
  • The results of the activity are not taxed as the profits or losses of an own business 
  • You have no A-income (income taxable at source) from a company of which you or your spouse, individually or together with close family, own at least 50%
  • Any B-income (income not taxable at source) does not stem from your own business and thus does not appear from its accounts

As a rule, the following activities are also considered spare-time activities:

  • Part-time farming if the property is your place of residence 
  • Operation of no more than one rental property with a maximum of 10 tenancies 
  • Managing a forest reserve of no more than 5 hectares in which you reside 
  • Operation of own wind turbine, solar cell system or other similar renewable source of energy involving a minimum of work tasks 
  • Beekeeping with no more than 20 beehives 

Pros: The period in which you can run a spare-time activity is not limited to 30 weeks, and may continue for as long you wish.

The termination of a spare-time activity will not count in relation to the rule accepting only one closure of business during the benefit period.

Cons: Your income cannot be used to earn benefit rights, and it does no enter into the calculation of your benefit rate.

No changes: The hours you spend on your spare-time activity will still result in benefit deductions.

 

Asset management

You can run your own business as an asset management activity when the business concerns the renting of real estate, trading of own securities, passive ownership, or farming out, and a minimum of work is involved. Apart from the above, other economic activity that can be characterized as asset management and which involves no more than 5 hours of work per month will be considered according to the rules for asset management.

Pros: As the 30-week rule does not apply here, you can run your asset management activity for as long you wish.

The hours that you work do not lead to deductions in your benefits.

Please note that you can close down a business only once in a benefit period. The second time will mean the loss of benefits rights! But the termination of asset management activity does not count as the termination of an own business. 

Cons: Your income cannot be used to earn rights in the benefit system.

 

Contact CA's specialists in benefit rights for the self-employed

Tel. 3314 9045 or write to ca@ca.dk