What is company tax?
Company tax is a tax in your company. As a business owner, you are obligated to pay the tax, just like employees pay tax on their salaries.
Regardless of the size of your company, you must pay a percentage in tax as long as you have a turnover that exceeds 50,000 kroner per year.
However, your company type determines whether you need to pay company tax. A corporation must instead pay corporation tax. Regardless, it is crucial that you have control over your company’s financial documents and records when dealing with and paying taxes.
You can handle electronic invoices automatically with Acubiz
With Acubiz, it is easy to keep track of documents. Acubiz streamlines your expense management digitally and ensures complete digital documentation of everything from invoice handling to expense management.
What is the difference between company tax and corporation tax?
Corporation tax is reserved for state-owned or publicly traded limited companies and partnerships. Company tax is related to companies such as personally owned companies.
You can get more knowledge about personally owned companies below.
Three different types of company tax for personally owned companies
If you run a personally owned company, you have three options for paying your company tax:
- Personal Income Tax
- Company Tax Scheme
- Capital Return Scheme
The percentage of tax you must pay depends on the scheme you choose.
Personal Income Tax
With personal income tax, you pay tax in the same way as individuals. Like a regular salary, your company’s result before interest will be taxed on equal terms with your income.
The percentage of tax is calculated based on various factors. The size of your income and whether you own properties, stocks, or similar things influence the tax rate.
With the personal income tax scheme, you do not have the option to save the excess in your company. In return, you get a simple and clear form of taxation.
Personally owned companies are taxed under personal income tax rules as a starting point. But you can choose to combine personal income tax with the company tax scheme or capital return scheme.
Company Tax Scheme
The company tax scheme is abbreviated VSO in many cases and is a form many companies choose to use. If you want to use this as a form of taxation in your company, your personal tax conditions are not included.
Here, you pay 22% in A-tax on the year’s income. At the same time, you can save a portion of your excess without paying total tax, which is the accumulated excess.
However, remember that the accumulated excess may only be used in your company – not for private consumption. If you do so, standard tax rules apply.
As with everything else, the taxation form has advantages and disadvantages. You will learn more about them here.
Advantages of the company tax scheme
- You can save excess without paying total tax – instead, you can cover a deficit with your excess if you experience a financially tight year.
- You can reinvest your money and create additional development and growth in your business.
- You will have better liquidity thanks to the tax benefits and deferred taxation – you pay 22% tax on the accumulated excess.
Disadvantages of the company tax scheme
- If you decide to change your tax scheme at some point, you will end up paying a lot of money from the accumulated surplus, which will be considered your private wealth, and you will have to pay personal tax on the entire amount.
- You must meet strict bookkeeping requirements, so allying with a sharp auditor is a good idea.
Capital Return Scheme:
In the eyes of some companies, the Capital Return Scheme is a simplified version of the company tax scheme and is, therefore, a good alternative. With this scheme, the accounting requirements are not as strict as with the company tax scheme.
With this tax scheme, you can choose to tax part of your company’s income as capital income (income from interest and shares). This means you avoid paying AM contributions and can deduct your company’s interest expenses.
Ultimately, this results in savings for you.