Trading with the Right Taxes: How Is it Possible?

Trading with the Right Taxes

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A private trader, i.e. a business name, pays his tax as an advance tax according to the company’s result. The result is calculated by deducting from the taxable result the costs incurred in acquiring it.

The Entrepreneurs

The entrepreneur makes an assessment of the result of business activities on the website of the Tax Administration. In the beginning, it can be difficult to estimate the result if the income is uncertain and the costs vary. At the beginning of the entrepreneur’s journey, the entrepreneur can, for example, monitor the development of the business for a few months and only then make an assessment.

However, the expert recommends that it is worth starting to pay advance taxes immediately, according to their best estimate. However, the estimate can be modified during the year via the Tax Administration’s website.

  • If the pre-taxes have been very small since the beginning of the tax year, the payment pressure towards the end of the year can be hard or the bumps big. Should be awake during the year so there will be no surprises later.

The Processes for You

Since 2017, the taxation of a business name has been reduced by five percent of the business result. This is called entrepreneur deduction. After the deduction, the result is taxed as the entrepreneur’s earned income and, if the company has accumulated net assets, possibly also as capital income.

  • The tax rate on capital income is 30 up to 30,000 euros and 34% of the amount exceeding that. It is therefore worthwhile to take the entire corporate income as earned income if the tax rate on earned income is lower than capital duty.
  • So remember that a business name is taxed as a person, not a company. A business entrepreneur is taxed on the basis of all his earnings and capital income. In addition to business activities, other potential income also affects taxation.

It’s important to understand that all business name money is entrepreneurial money. A private acquisition, i.e. a withdrawal of funds from a company, does not reduce the result of the business, but is income that is taxed as income from the business name. There the use of the small business tax is there also.

Taxation of a limited company

The limited company is an independent taxpayer and pays corporate income tax at the rate of 20% as a withholding tax. A limited company can pay salaries and benefits in kind to its shareholders. Dividends may be paid on the capital accruing to shareholders from the limited liability company. Dividends can be taxed as either earned income or capital income. Part of the dividend is tax-free.

Conclusion

Taxation of dividends is determined on the basis of the mathematical value calculated for the shares. The mathematical value of a share is calculated by dividing the company’s net assets by the number of shares outstanding.

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