When you start up a sole proprietorship, it may be difficult to understand how to pay the company tax and how much to pay in company tax.
In this article, we’ll offer you some free advice and walk you through the specifics and the process.
How Much Tax Do You Have to Pay?
Progressive Tax System
The Danish tax system is progressive, so the more money you make, the more you’ll be taxed. Most Danes pay around 40-50% in taxes, and some pay more than 60%; it all depends on your level of income. When you initially start up a company, your income may not be high, so you should expect your tax to reflect that.
How Do You Pay the Tax?
Make an Estimate
At the beginning of the year or from the date you start your business, you must make an estimate on how much money you expect to earn that year. The figure will never be 100%, but nevertheless, if you hire our services, we’ll be able to estimate it. In order to estimate it, Dania Accounting would ask how many sales you expect and how much the expected costs will be from those sales. Additional costs may include transportation or a home office, and these can be deducted. The idea here is to estimate what your salary will be.
Submit the Expected Revenue to the Tax Office
Once we agree on the revenue, we log into  which is the Danish tax website, and we submit this expected revenue on what we call the , which is the preliminary tax registration. Once this has been done, the Danish tax office calculates how much tax you need to pay.
Make Tax Payments
Your payments will be split into ten installments. Payments are to be made on the 20th of each month from January to May, with no taxes to be paid in June, and from July to November, with none due in December. Normally, this is paid automatically through your internet bank account. Manual bank transfers can also be made by ordering a payment ID from the tax website.
Alter Your Estimate Throughout the Year
Being that the taxes are based off an estimate, reality may not reflect your estimate. Things can change during the year – you might acquire new clients and increase your revenue, or you might lose some and make less revenue than expected. But at any given time, we’re able to alter this estimate. If, for instance, you acquire new business that will double your income, then you can simply contact us at any time through email or phone, and Dania Accounting will change the tax. This only goes for major adjustments that will either greatly increase or decrease your revenue and, thereby, disrupt your estimate.
Declare Actual Revenue; Receive a Refund or Pay In
If you pay too much in tax, you’ll receive a refund once we declare your actual revenue at the end of the year; and vice versa, if you’ve paid too little, you must pay in. The idea is to make the estimate as precise as possible to avoid having to pay interest on a remaining tax and also to avoid receiving a refund. If you’re refunded money, it means you’ve been using cash-flow from your business that you could have otherwise used more constructively as a new business owner.
Do you have any questions relating to company tax for sole proprietors?