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Income tax and your biz
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Being a business owner your taxable income is the company’s net income, i.e. the company’s profit after deduction of total operating costs.
The key stone to the Danish tax system, the sequence, is the same as for pay earners:
Advance Tax Assessment
Tax Return
Notice of Assessment
It is likewise important to emphasize, that tax on a given amount earned as pay earner is eventually identical to tax on a similar amount earned as sole trader.
The Big Difference
The taxation difference between pay earners and sole traders shows in the way tax is collected.
As a sole trader you obviously do not have an employer who automatically calculate and withhold your tax payable.
You must, based on expected earnings of your company, notify the tax authorities about your taxable income.
Advance Tax Assessment
The total tax, i.e. the tax implications you have reportet in the advance assessment, is levied as so-called “tax not collected at source”.
This type of tax is paid by monthly instalments either by giro transfer forms forwarded by the tax authorities along with the advance tax assessment sheet or by PBS (Danish Payment System).
Notice of Assessment
At the end of the year a sole trader receives a tax return sheet just like any other pay earner.
But contrary to that of the pay earner’s it is not pre-completed and you are under all circumstances obliged to complete and return it. The company’s profit must be reported in a box on the tax return sheet.
Your tax account sheet must be kept in your file.
The tax accounts show the company’s profit and loss account, the balance sheet and usually the owner’s private assets and external income is also stated in the accounts.
Special Scheme for Businesses
Sole traders can choose to use the Special Scheme for Businesses when working out the tax accounts.
The Special Scheme for Businesses is a complex set of tax rules, which is optional for the taxpayers to make use of. You can choose this option (on an annual basis) when you file your tax return. The Special Scheme for Businesses is an exception from the main rule that tax on a company’s net income is calculated the same way as tax on earned income. Making use of it usually calls for the assistance of an accountant.
- Samling af skatteregler
- Vejledning fra Skat
- Basic Accountancy
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