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Old 21.03.2019, 13:46
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Corporate tax vs. social costs

I have my own company and trying to decide whether I should pay all revenues out as salary to myself, or if I should take out more dividends. Few points to consider.

Corporate tax rate is roughly 15% where the company is. Social costs for the employer (my company) are very close to 15%. Only difference is the social costs (AHV, IV etc) paid by the employee. On the other hand, these contribute to my own future pension. Am I missing something here?

Dividends and salary are taxed at the same rate, i.e. added to my annual income and taxed at the progressive income tax rate. No benefit from this perspective. Right?

What would be the benefit of keeping the profit in the company, and not paying it out as dividend (and paying the tax)? I dont need funds to expand the business right now. Does it make sense to invest the money via the company?
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Old 21.03.2019, 14:30
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Re: Corporate tax vs. social costs

Dividends from a company in which you own a significant stake, 10% and higher, should be taxed at a reduced rate
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Old 21.03.2019, 20:00
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Re: Corporate tax vs. social costs

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Dividends from a company in which you own a significant stake, 10% and higher, should be taxed at a reduced rate
after all your other incomes expenses are calculated you end up with an income tax rate SB page. your own corporate dividends are taxed at HALF of the rate I just mentioned because corporate tax has already been paid on it and you don't get double taxed, or at least it is reduced. but .... when you declare a dividend you MUST defer 35% of it to the federal tax office. This is partly to ensure you do all the paperwork! when you fill in all your personal tax forms you will get the 35% back, but depending on canton that could be 18--24 months!

Last edited by bill_door; 21.03.2019 at 20:16.
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Old 21.03.2019, 20:13
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Re: Corporate tax vs. social costs

there are some pdfs in the forum on this, I can't find them now. in general the consensus (here and professional providers) usually is that you take a salary of CHF120K and the rest as dividend. If you take salary though, you have to pay state pension on it, both you and the corporate, and perhaps corporate pension, depending on how you are operating. The corporate side of these are corporate expenses, therefore reducing your profits.

you should also look to maximise your receipt-able expenses as well even the grey ones (mobile phone, travel for 'business', etc) that cross over to your personal life. minimises your profit, and also your corporate income tax. but you get a smaller dividend but had the benefit!

play with the zuri tax software. Income, traditional tax return expenses etc., You should declare your dividend as "code Q" on the WV form, then you can see the result on the SB (the green provisional results) page
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Old 26.03.2019, 11:43
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Re: Corporate tax vs. social costs

Thanks for the comments.

I hadn't realized there is some compensation for the double taxation, good point. In simple terms, if my personal tax rate is 18%, then dividends would be taxed at half of that, 9%? Or is it more complicated than that?

Expenses: What expenses can I deduct? Apart from the obvious strictly business related.

SBB, mobile phone, internet?

Car?

Food expenses while traveling?

How about part of the rent? Office is at home.
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Old 26.03.2019, 11:52
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Re: Corporate tax vs. social costs

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Thanks for the comments.

I hadn't realized there is some compensation for the double taxation, good point. In simple terms, if my personal tax rate is 18%, then dividends would be taxed at half of that, 9%? Or is it more complicated than that?

Expenses: What expenses can I deduct? Apart from the obvious strictly business related.

SBB, mobile phone, internet?

Car?

Food expenses while traveling?

How about part of the rent? Office is at home.

Why don't you go and ask an accountant as it seems you have little idea as to what is deductible or not
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Old 26.03.2019, 15:32
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Re: Corporate tax vs. social costs

Thanks for the tip, I have asked 2 separate accountants already and now looking for the absolute truth in the forum... My idea was to hear from people who actually have deductibles.
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Old 26.03.2019, 15:43
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Re: Corporate tax vs. social costs

SBB, mobile phone, internet?
My company pays for my mobile phone and my yearly travel card (uAbo, not GA, don't need one). Also first class travel outside the uAbo area.

Car?
My accountant advised not really worth the hassle.

Food expenses while traveling?
Definitely.

How about part of the rent? Office is at home.
Yes.

For dividends, my accountant worked out the optimal. It was only really worth it when my yearly income significantly exceeded my salary in a specific year. By doing it we could level out the marginal rare across several years.

There is no absolute truth. Too many grey areas.
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Old 26.03.2019, 16:18
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Re: Corporate tax vs. social costs

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I hadn't realized there is some compensation for the double taxation, good point. In simple terms, if my personal tax rate is 18%, then dividends would be taxed at half of that, 9%?
It's not half the tax rate but a 50% rebate on income from dividends taxed, which lowers your average tax rate to less than 50% of what it would be otherwise.

That said, this only applies to "Kapitalgesellschaften" (stock companies) such as GmbH and Aktiengesellschaft (LLP's I believe). AFAIK sole proprietorships, among others, are excluded.
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Old 26.03.2019, 16:37
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Re: Corporate tax vs. social costs

Thanks for clarifying this
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