The taxation of a corporation’s dividends varies depending on whether the corporation distributes more than or less than eight percent of the mathematical value of the shares as dividends. If less than eight per cent is distributed as dividends, the payer of the dividend will make a withholding tax of 7.5 per cent if the dividend is less than EUR 150,000. For the excess, the withholding tax is 28 percent.
From a limited company to a business name
From the beginning of July 2019, a limited liability company can be established without the previously required initial capital of EUR 2,500. The expert believes that this change will make the limited company an even more popular form of company.
Is switching to a limited company profitable?
It’s worth thinking about on a case-by-case basis. If the business is small, a business name is a more typical and lighter option. In a limited company, the bureaucracy is heavier, but there the shareholder can take a salary, fringe benefits, dividends and receive tax-free employee benefits that fail on the business name side.
According to him, a limited company can be considered a more economically sensible option than a business name if the entrepreneur pays more than 30 percent tax on the result.
- Many struggle with what all is allowed to be put into deductions as an entrepreneur.
- The most typical deductions are insurance and entrepreneur’s accident insurance, unemployment fund payments, accountant’s fees, telephone bill, workspace rent, tools and supplies, possible software, training, business trips, car expenses and half of entertainment expenses.
How does VAT work?
VAT is a general consumption tax that is levied on the consumption of almost all goods and services. The entrepreneur includes VAT in his sales prices.VAT paid on acquisitions related to the entrepreneur’s VAT activities is deducted from sales VAT, and the difference is paid to the state. For the small business tax this is important.
If the turnover is less than 10,000 euros, the entire turnover is exempt from VAT. If the turnover exceeds this amount, the VAT payable will increase on a sliding basis to the full amount up to a turnover of EUR 30,000.
You must remember to apply for this lower limit for turnover below EUR 30,000, and the relief will be repaid at the end of the financial year.
You will receive a personal customer pre-filled tax return in March-April 2020. If there is nothing to correct in your tax return, you do not need to do anything. So all you have to do is check that the information on your tax return is correct and complete any foreign holdings as well as certain fund holdings at the end of the year.