11 Things You Need to Know about Tax in Denmark
- 1. When do You Become Taxable in Denmark
- 2. How to Register in the Danish Tax System
- 3. What is Included in Your Taxable Income
- 4. How Much Tax Do You Need to Pay
- 5. Social Security Network for Work within the EU
- 6. Does Your Company Need Foreign Workers
- 7. Company or Self-Employed
- 8. How to Pay Salary to Yourself as a Major Shareholder
- 9. Securities and Other Activities Abroad
- 10. How to Avoid Double Taxation
- 11. Tax in the Time of Corona: A Must-Read if You Live or Work in Denmark
- Starting a Business
- Does Your Company Need Foreign Workers?
- COVID 19 - THE DANISH TAX AUTHORITY OFFERS AID PACKAGES FOR YOU AND YOUR BUSINESS
- Larger deductions for companies that need to invest in fixed assets or small assets
8. How to Pay Salary to Yourself as a Major Shareholder
As a major shareholder, you can choose to pay salary to yourself either in dividends or as a salary. It is important to report dividend tax or salary correctly, in a timely manner. If you do not control your reports, you risk being double- or, at worst, triple-taxed and charged additional added fees.
Salary must be reported no later than the 10th day of the month after it has been paid. The company must include tax withheld on your salary at the rate indicated on your tax card. Wage payment can be deducted from the company's taxable income.
Dividends may be paid out of the company’s profits. If the company’s equity capital (including other capital binding) is insufficient to cover the company capital, no dividends can be paid. You must always ensure that the company's capital is at least present after the dividends have been decided. The dividends must be approved at the company's general meeting.
If you choose to pay cash dividends, the dividends must be reported and the company will be subject to a tax on dividends. The standard rate is 27%. However, as a shareholder, dividends may be taxed up to 42% depending on the amount paid. As a major shareholder, you should consider whether it is better to pay yourself in dividends or salary. You must also determine whether or not you meet the criteria for distributing dividends.
You should be aware that borrowing money from your company is not a solution that is recommended in Denmark. It is considered illegal and must be either taxed as salary or dividends. In addition, you will have to pay the money back to the company. Thus, you risk being double-taxed or even triple-taxed. If you have borrowed funds for yourself, there are still options for repairing the loan, if it is reported on time.
*SkatteInform does not take any responsibility for any actions taken based on the information provided in this article, before receiving individual tax advice.