[tomschwiha]

Here in Germany its similar, maybe its could be worth for the author to consult a tax consultant as he may be missing out quite some money. Also a wage you pay yourself is usually better off for tax readons - that's why the maximum wage you can pay yourself as business owner is limited.

[dazhbog]

Agree about the accountant, they are expensive in some countries, but usually worth it.

Can you elaborate on your last point? For salary you still need to pay >20% income tax + social insurance, and for dividends you still need to pay >20% after you just paid your corporation tax >15%.

I'm curious, why its better to pay yourself more, when your laptop, phone and even food can be covered by the company? (Assuming a single founder company, doing everything legally)

[tomschwiha]

It really depends on the percentages, so I can mainly speak about Germany: For example you have a revenue of 100.000. If you have a limited liability company (UG or GmbH in Germany) you pay 30% taxes on the profit, so you have 70.000 left at the end of the year. If you want to transfer it to your personal account you will need to pay additionaly taxes of 25%. So you are left with 52.500.

If you directly pay yourself 100.000 as wage it is fully deductable as company expense. So you don't pay any company taxes and would only need to pay income taxes of ~25.000.

So a payout as wage you have 75.000 instead of 52.500.

For both values at least in Germany you would also need to pay health insurance and possible for pension. (Health insurance at least additional 8.000 - 10.000).

[tomschwiha]

The best would be probably to let the company cover the PC / tablet / phone costs as they are business expenses and payout yourself the remainer as long as long as you can still increase your business operations.

A good tip I once got was that you should always try to get money out of your company while you can - having it on your personal bank account is better then in your companies one.

[gruez]

>The best would be probably to let the company cover the PC / tablet / phone costs as they are business expenses

Depending on how your local tax codes are structured and how strictly your local tax authority interprets them, letting the company buy the electronics and then subsequently using it for non-business use might count as a fringe benefit and therefore be taxable. In other words, if get your company to buy you a iPhone 15 Pro Max and a 16 MBP Pro with M3 Max, but all you're doing is some light macOS app development, they might (rightly) think that those aren't really being used for business purposes and are actually a sneaky way to remunerate yourself.

[sitharus]

I’m always amazed at other country’s tax systems. Here in NZ if you’re a sole trader you only pay personal income tax, if you incorporate you either take the whole profit as income and pay income tax, or take a dividend which comes with tax credits so you only pay the difference between the company tax already paid and personal income tax. So just taking it all as salary is easier.

[pard68]

What is "social insurance"?

[croemer]

Literal translation from a language such as German, French or the like. The right translation would be payroll tax, all sorts of mandatory insurances like health, unemployment, retirement (continental Europe has a few more mandatory items than US)

[pard68]

Ah I see, thanks. I thought it might be the equivalent to our social security tax.

[alex_suzuki]

Here in Switzerland, dividends are better tax-wise than wage, at least if you own a significant chunk of the company („Qualifizierte Betriligung“).