The Business Scheme Can Prevent You from Entering the Top Tax Bracket

There are several advantages to using The Business Scheme (Virksomhedsordning/VSO). For example, within certain limits, you can decide for yourself how much and when profits should be paid out. This also allows you to decide for yourself what tax to make of this surplus. Please note, utilising these benefits does require thorough, proper planning / disposition in The Business Scheme.


With the current tax rates, you can postpone a tax of up to (56.5% -22%) = 34.5% of the profits you save with the business scheme. This means that the saved profits in The Business Scheme are provisionally taxed at a rate of 22%, until the profits are withdrawn to personal income tax. You can avoid the top tax by withdrawing up to about 530.000 DKK per year. See Figure 2 for details.


We know that this concept can be quite confusing, so below there is a graph (Figure 1) and a table (Figure 2), showing 3 examples. The main point is that you want to use profit to optimize your tax by smoothing out the curves created by profit fluctuations, as illustrated in Figure 1.





As mentioned, obtaining these benefits requires thorough, proper planning. This planning can be combined with planning your retirement savings.



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