What is a PMV?

What is a Personally Owned Small Business (POS)?

And PMV is a personally owned small business with one owner, no employees, and no VAT liability.

A PMV is particularly popular among freelancers, entrepreneurs and the solo self-employed as it allows you to run a business as a hobby, part-time occupation or to supplement your main income.

A PMV is characterized by the following:

• You own the business alone
• You have no employees
• You are personally liable with your own assets
• Your turnover is below 50,000 DKK within the calendar year
• You are not liable for VAT or payroll tax

It is therefore possible to run a PMV as long as the turnover does not exceed DKK 50,000 within 12 months and you are not liable for VAT.

Freelance business as a PMV

A PMV is mainly aimed at freelancers and solo entrepreneurs who want to run a leisure or part-time business for profit.

Unlike some of the other forms of business, there is no initial capital required for incorporation, making it an efficient and fast way to get started.

Even if your annual turnover in this case is less than DKK 50,000 and you are therefore exempt from VAT, it is still important to comply with Danish tax rules.

This means that you must report your company's profits and pay tax on the amount. If you have a possible deficitthis can be deducted from your personal income.

Registering a PMV as a freelancer can be a great start for some without the need for start-up capital or VAT registration. However, there will still be accounting requirements, not to mention that a PMV with a turnover limit of DKK 50,000 within 12 months naturally limits your business.

How you can use Factofly as an alternative to PMV

Factofly is a freelance agency specifically for freelancers and solo entrepreneurs looking for a shortcut to invoicing without the hassle of accounting and administration.

Factofly offers a simple and clear way to handle invoicing, VAT accounting, insurance and tax reporting.

With Factofly, you can easily create and send professional invoices to your customers. The platform keeps track of all your invoices so you never lose track of your payments.

When you use Factofly, you get the following benefits:

• No limit on turnover: With Factofly, you are not subject to the 50,000 DKK turnover limit, as you are already registered for VAT through Factofly's CVR number.
• Simple invoicing: Factofly allows you to invoice your customers without the need to register a VAT number. This saves you both time and unnecessary administration.
• Correct tax and VAT accounting: Factofly automatically reports VAT and tax, so you're always on the safe side and avoid errors.
• Optimal utilization of deductions: When you use Factofly, you can continue to record tax deductions where expenses are deducted from your taxable income.
• Insurance and peace of mind: With Factofly, you're covered by two statutory insurances; professional liability insurance and professional indemnity insurance, so you can work with peace of mind knowing you're insured.

In short, with Factofly you can get rid of the administrative hassle and instead focus on what you're passionate about.

Dive into PMV accounting: Basic principles and practices

All businesses in Denmark have a bookkeeping obligation, and this also applies to PMV. It's important to keep track of the accounts, and this can basically be done in several ways:

• You can book and report everything yourself
• You can pay an accountant or bookkeeper to do the accounting

Bookkeeping and accounting in a PMV involves recording sales and purchases, recording deductions, completing annual statements and filing taxes, among other things. Below are some basic principles and practices to help you get started.

How do you get started with PMV accounting as a freelancer?

PMV accounting requires you to carefully record all your income and expenses throughout the year. Most people use an accounting program for bookkeeping, such as Dinero. Dinero or Billy.

What you enter here is your tax and annual accounts at the same time. The results from the accounts must later be filled out in an information form for the Tax Agency, so it's important that the documents and information are correct.

If you have had more income than expenses, you will have a profit, which is taxed. If the situation is reversed and you have had more expenses than income, you will have a deficit, which can affect your personal income, as as a PMV you are liable with your own personal assets.

PMV and accounting - What you need to know

In a personally owned small business (PEB), profits are taxed as personal income due to your personal liability as a business owner. When you own a PMV, you are not registered for VAT, but it is important that you continue to report taxes.

Tips for keeping track of the accounts in a PMV

It can be a good idea to post all receipts on an ongoing basis so that your accounts are always up to date. This way, you ensure that vouchers are not forgotten or that you are suddenly behind with your accounts. 

Here you need to post both sales invoices, which are your sales to customers, and purchase invoices, which are purchases or expenses within the company.

If you're new to bookkeeping, it can be a good investment to get an accountant or bookkeeper to help you get off to a good start and make sure you get it right.

Alternatively, you can also use Factofly to keep track of your accounts so you don't have to worry about accounting and taxes. Factofly's system automatically keeps track of everything, where you always have access to your information and will have your money paid as salary directly into your account.

PMV Tax: What every freelancer should know

When you run a personally owned business and are CVR-registered, it's crucial to understand how the tax calculation in your PMV works. Tax is calculated in your tax assessment based on your expected income, where your expected income is easily sent to the Tax Agency via your tax assessment. 

This way, you pay tax on your income on an ongoing basis, and at the end of the financial year you have to report actual income and expenses to find out if you need to pay more tax or get a refund.

Common PMV and tax mistakes

It's important that all tax information is correct to avoid a potential tax gap. Common mistakes for tax returns can be, for example, that the expected income in the withholding statement is set too low and is not continuously adjusted. This will result in you having to pay back taxes, which can be avoided by setting the amount in the withholding statement slightly higher than expected or simply by continuously adjusting the withholding statement.

In addition, it's also important to pay attention to tax deductions to ensure which business expenses or purchases are deductible. That way, you're sure to register all deductions to avoid paying more tax than necessary.

That's why it's important to report correctly

When you are responsible for your company's tax reporting, it is extremely important that you enter and report the correct information to the tax authorities. The reporting must be both timely and correct, otherwise you risk fines and fees, and interest will automatically be added to the amount owed. 

As the owner of a PMV, it is your responsibility to report correctly and on time, and you are responsible for keeping track of reporting deadlines. 

If this seems a bit confusing, you can easily and quickly invoice your customers through Factofly instead. When you use Factofly, your tax reporting is handled automatically and your money is paid to your account after tax. You don't need to keep your own accounts, as you are affiliated with Factofly as a project employee and are therefore technically an employee.

PMV Deduction: Optimize your income as a freelancer

Like other businesses, PMVs are also entitled to tax deduction for certain business expenses.

As a rule of thumb, expenses that are necessary in connection with the work or considered justifiable business purchases can be deducted for tax purposes. However, it's important to check up on these as some deductions may differ.  

The most common deductions in a PMV include:

• Purchase of equipment or programs for work, such as a computer or accounting software
• Mileage deduction when driving to customers
• Telephone and internet costs
• Rental costs for office space
• Electricity and heating costs for office space
• Work insurance
• Expenses for bookkeeper or accountant

These are just some of the most common deductions. There are more deductions that you can register as purchases in your business. 

Of course, Factofly can also help you register your tax deductions.

Take advantage of the available deductions

The list of deductions is long, and to make sure you take advantage of the deductions that are available, it's a good idea to regularly check if a possible amount is deductible. 

As a rule of thumb, you can deduct all work-related expenses, but there are exceptions, which is why it's always recommended to check the rules for deductions regularly.

Examples of overlooked PMV deductions that can benefit your bottom line

Some deductions are less well-known than others, but can have a big impact on your tax bill and your bottom line as a freelancer. Here are some examples of overlooked PMV deductions:

• Rent for office space
• Software and applications
• Research material
• Tools and equipment
• Home office (if part of your home is used exclusively for business)
• Travel and transportation expenses
• Marketing e.g. costs for ads, logo or website
• Administration costs such as accounting software or accountant

Best practices for handling PMV as a freelancer

When you own a PMV, it's important to regularly check up on new rules and guidelines in this area. It's your responsibility to comply with these and to stay updated on the rules for operating a PMV to avoid fees, fines or sanctions.

You can find these on The website of the Danish Business Authority.

If you are unsure about the rules for operating or tax reporting for PMVs, you can always contact the Danish Business Authority or the Danish Tax Agency for questions.

In addition, it can be beneficial to be a member of various networking groups where you can spar and help each other with general questions.

It may also be important to consider the future of your PMV operation. Your freelance business may evolve and grow over time, and if you have a goal of a turnover exceeding 50,000 DKK within the calendar year, it may be necessary to change your business form.

We've written another article that can help you answer questions about PMV vs sole trader.

You can also consider using Factofly with a focus on flexibility and continuous adaptation to your changing needs - there will be no upper limit to your revenue.

👋 You can read more about Factofly as a freelance agency here.