Choice of Taxation Scheme for Self-employed: What is the Optimal Taxation Scheme for Self-employed after the Change of the Business Taxation Scheme in 2014

Frederik Høgdahl Bjerg

Student thesis: Master thesis

Abstract

On September 9th 2014 the Danish Government adopted a legislative amendment regarding the business taxation scheme. Purpose of the legislative amendment was to prevent the use of low-taxed funds in the business taxation scheme to finance private spending. This thesis will investigate the impact of the legislative amendment regarding the choice of taxation scheme for a self-employed. First the thesis will describe the different taxation schemes for a self-employed including personal taxation, the business taxation scheme, return on capital taxation scheme and private limited (liability) company. Following the legislative amendment and its consequences will be analyzed. Finally tax assessments will be made to substantiate the effect of the legislative amendment regarding the choice of taxation scheme and what scheme a self-employed should choose. The tax assessments will also address the benefits of the business taxation scheme such as saving company profits to optimize personal tax and full deduction for interest costs. It is shown that the legislative amendment has the desired effect and that it is no longer advantageous to use low-taxed funds to finance private spending in the business taxation scheme. A consequence of this could be that more self-employed chooses the return on capital taxation scheme. The tax assessments show that in many cases it is advantageous to choose the business taxation scheme for the benefits already mentioned – saving of company profit and full deduction for interest costs.

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
LanguageDanish
Publication date2016
Number of pages84