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In a bowl, combine the lukewarm milk and sugar.
Sprinkle the dried yeast over the milk mixture.
Let it sit for about 5-10 minutes until it becomes frothy.
In a large mixing bowl, beat the egg and add the vanilla sugar.
Pour in the yeast mixture and stir until well combined.
Add the flour and salt to the wet mixture.
Mix until a dough forms.
Add the softened butter to the dough and knead until the dough is smooth and elastic. This should take about 5-7 minutes by hand or 3-4 minutes using a stand mixer with a dough hook.
Cover the dough with a clean kitchen towel and let it rest in a warm place for 30 minutes, or until it has doubled in size.
Punch down the dough to release the air.
Divide the dough into equal portions and shape them into balls or your desired shapes.
Place them on a baking tray lined with parchment paper.
Cover the shaped dough with the towel again and let it rest for another 15 minutes.
Heat oil in a deep fryer or large, deep saucepan to 350°F (180°C).
Carefully place a few doughnuts into the hot oil, being careful not to overcrowd the pan.
Fry until golden brown on one side, then flip and fry the other side until golden brown, about 2-3 minutes per side.
Remove the doughnuts with a slotted spoon and drain on paper towels.
Once the doughnuts have cooled slightly, dust them with icing sugar.