What is a corporate income tax?

The term corporate tax covers the tax that all companies that operate in Denmark pay to the state. A new corporate tax rate is set every year, and in 2018 the rate is 22%. It is the state that decides how high the corporate tax should be.

How does the corporate income tax work?

As a citizen of Denmark, you must pay personal income tax on the income you have. This applies to everything from wage income to transfers from the state such as SU, daily allowance or pension. Similarly, the Danish companies must pay tax to the state. The tax that companies are required to pay is called corporation tax.

The rate of corporation tax varies from year to year. For the past many years, the tariff has been falling, and in the year 2018, the rate is 22%.

Who should pay corporation tax?

All capital companies operating in Denmark pay tax on their profits. But there is a difference in how the tax is paid. It depends on the type of business involved.

Company taxation

Company types such as limited liability companies (A / S), limited liability companies (ApS) and entrepreneurial companies (IVS) as well as associations and foundations are subject to the kind of tax that is called corporate taxation. Here it is the company itself or the company that has to pay taxes to the public. The money for tax will thus be deducted from the annual accounts.

company Tax

If you run a company, such as a sole proprietorship or a partnership, it is different. When you personally own a business, it is not the company itself that has to settle with SKAT. It is you as the owner who has a duty to pay tax on your company’s profits.

Here you, as the owner, are subject to an independent tax liability, and you have the duty to calculate and report how much you owe to SKAT.

There are basically three different possibilities for taxation:

  • Personal tax
  • business tax scheme
  • Capital return scheme

Which Corporate tax that makes the most sense for you depends on several factors.

What should corporation tax be paid for?

How much a business translates is in itself subordinate when we talk about the concept of corporation tax. It is the company’s taxable profit that corporation tax is payable on.

If any company comes out of the year 2018 with a taxable profit of 300,000, it must pay what is equivalent to 22% of that in corporate tax. The company will, therefore, pay DKK 66,000.

What is the purpose of corporation tax?

The purpose of corporation tax is the same as for personal tax. Namely, collecting money for the Danish welfare state. In order to have money in the cashier to be able to offer the Danish citizens free medical care, schooling, etc., there is some money needed. The money collects all of us citizens – whether we have a job as an employee or our own company.