Activity as self-employed and benefits

While on benefits, there are ways for you to continue activity as self-employed that you had already before you became unemployed. You can also start up your own business while you’re unemployed.

However, the impact on your benefits varies significantly. Therefore, you need to consider whether you want to be self-employed while unemployed.

If you are registered as a sole trader with the Central Business Register and use the tax regime for self-employed, your activity will generally always be considered a secondary occupation as self-employed.

However, the benefit system offers various opportunities for you to have activity as self-employed while receiving benefits. The activity can be considered a secondary occupation as self-employed, a spare-time occupation or asset management, and its impact on your benefits varies significantly depending on what the activity is deemed to be.

Depending on when you start up (or plan to start up) business as self-employed, there are various conditions to be met.

If you already run a business when you apply for benefits

If you wish to continue your business while you’re unemployed and receive benefits, some conditions must be met:

  • In the course of the past 6 months before you became unemployed, you must have reported at least 480 hours of paid work to the Income Register, and
  • You must have reported hours of paid work to the Income Register in 5 out of 6 months

In other words, you must have had paid work at least half the time (80 hours per month) on average in the past 6 months where you have worked at least 5 out of the 6 months.  

Paid hours worked in your own company such as a private or public limited company do not count towards the 480 hours.

If you do not meet this requirement, you will not be eligible for benefits until you have closed down your business and served a waiting period of 3 weeks.

If you’re a new graduate, your studies will be considered comparable to full-time work. As a new graduate, you’ll therefore be able to continue activity as self-employed on benefits. But only if you apply for benefits immediately after the end of your studies. Possibly after you have completed your studies.

If you start up a business while unemployed

While you’re unemployed, you can start up a business without meeting any requirements other than being available to the labour market and the general conditions for unemployed.

If you receive benefits after ceasing a self-employed main occupation, you cannot start up other activities as self-employed while receiving benefits until after a minimum period of 6 months.

How long can I receive benefits while carrying on activity as self-employed?

As a general rule, you can have a secondary occupation as self-employed while receiving supplementary benefits for 30 weeks and never longer than you are otherwise entitled to benefits.

Read more about supplementary benefits

What if I cease to have a secondary occupation?

In any benefits period, you may only once cease a secondary occupation. If you got your right to benefits after stopping being self-employed, such termination is not counted in.

That means that if you start up a new business in your benefits period and close it down again in the same period, then you’ll lose your right to benefits when any new business is closed down. This applies to self-employed activities, but not to spare-time occupation and asset management.

The requirements for documentation showing that you stop being self-employed as your main occupation also apply to documentation showing that you cease a secondary occupation.

If you have a secondary occupation, you are not entitled to 6 weeks’ job-related training.

Request permission to run a business as self-employed as a secondary occupation

You should consider whether the scope of your activity as self-employed requires you to have it as a secondary occupation. Perhaps it can be your spare-time occupation?

The activity can be deemed to be a spare-time occupation if:

  • your activity is not registered in the Central Business Register
  • the financial results of the activity are not taxed as profits or losses generated by activity as self-employed
  • you do not have any A-income from a company where you own at least 50% together with your immediate family
  • any B-income does not originate from your business and is therefore not included in the accounts, and
  • for tax purposes, the income from your spare-time occupation is registered/reported in box 20 or 36 the Danish Customs and Tax Administration (SKAT)

If, for instance, you run:

  • part-time farming from your own residence
  • a rental property with no more than ten tenancies
  • your own wind or solar farm,

we will in most cases accept it as a spare-time occupation.

The advantage of having an activity as a spare-time occupation is that you are not subject to the 30-week limitation applicable to secondary occupation as self-employed.

The disadvantage is that you cannot use income from spare-time occupation to earn a new period with the right to benefits. The income cannot be used to calculate a new benefit rate either.

All the hours you work in your spare-time occupation will be deducted from your benefits.

Advantages:

  • You’ll not be subject to the 30-week limitation if you receive supplementary benefits
  • You’ll not be subject to the rule on only 1 business closure per benefit period

Disadvantages:

  • The income cannot be used to earn benefits for a new benefit period
  • The income cannot be used to calculate a new benefit rate.

Request permission to have spare-time occupation

You can carry on business within asset management with no actual operations. Asset management includes real estate rental, trading in treasury shares or leasing, requiring no or very limited work in the business.

If you work no more than 5 hours a month in the business, it can be considered asset management. The up to 5 hours you can spend each month will not be deducted from your benefits.

If you carry on asset management business, you’re not subject to the rule on a maximum number of business closures as described above on secondary occupation as self-employed. Nor will you be subject to the 30-week limitation if you receive supplementary benefits.

Advantages:

  • You’ll not be subject to the 30-week limitation if you receive supplementary benefits
  • You’ll not be subject to the rule on only one business closure per benefit period
  • There will be no deductions from your benefits for the up to 5 hours you’re allowed to work each month

Disadvantages:

Request permission to carry on asset management business