Tax Related Perspectives for Self-employed Workers When Establishing a Business

Martin Bauer Rasmussen

Student thesis: Master thesis


It is the purpose of this master thesis to present and analyze tax related perspectives for self-employed workers when establishing a business in Denmark.
The master thesis has a two-fold approach, a theoretical one, concerning relevant tax law and the principles used for calculating income taxes and practical one based on a case study, which thus allows theory being applied to practical use.
A self-employed worker can choose between three taxation schemes, the personal taxation scheme, the return of capital scheme and the business taxation scheme.
Under the personal taxation scheme income is divided into to two main groups: personal income and capital income. Personal income is more heavily taxed when it reaches the upper tax level.
The return of capital- and the business taxation scheme follow the same principles, but they still differ from the personal taxation scheme.
When chosen, the return of capital scheme allows the self-employed worker, to partial deduct commercial interest as a return on capital is calculated and deducted from personal income and added to the capital income thereby lowering the overall taxation. A short-term tax relief is also available in the way of savings.
The business taxation scheme secures full deduction of commercial interests and compared to the return of capital scheme it is more flexible when it comes to savings and short-term tax relief. A return on capital is also calculated and deducted from personal income and added to the capital income.
Deciding on a taxation scheme will be a case-by-case decision, but it’s important to identifying whether personal income reaches the upper tax level and look at the overall level for commercial interest and of net capital income in order to optimize the tax payment.
In the presented case-sturdy a self-employed worker establishes a business.
It is analyzed which one of the available taxation schemes that should be used. Based on the projected earnings and interests going forward and restrictions applied by the owner, it is concluded that the business taxation scheme should be used as it lowers the overall tax payment and secures a higher permanent tax relief plus savings.

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
Publication date2016
Number of pages122