Income Tax
How do I calculate my income tax as the owner of a sole proprietorship?
Income tax is calculated based on your business profit. Your profit, minus deductions such as the self-employed deduction and the SME profit exemption, forms your taxable income. Income tax is then levied progressively based on this taxable income.
What is the self-employed deduction, and am I eligible for it?
The self-employed deduction is a fixed deduction for entrepreneurs who meet the hours criterion of 1,225 hours per year. This amount is deducted from your profit, resulting in lower taxable income.
What is the SME profit exemption?
The SME profit exemption is a deduction where 14% of your profit after applying the entrepreneur’s deductions is exempt from tax. This reduces your taxable income.
How does the startup deduction work?
The startup deduction is an additional deduction on top of the self-employed deduction for entrepreneurs who have recently started and have been an entrepreneur for at least three years. This offers additional tax benefits.
Can I deduct business expenses from my profit?
Yes, you can deduct business expenses such as office supplies, travel expenses, and business phone costs from your profit, provided they are fully business-related and you can prove them with invoices and receipts.
How and when should I file my income tax return?
You must usually file your income tax return before May 1 for the previous calendar year. In the tax return, you report your business profit along with any other income and applicable deductions.
What happens to my income tax if I incur a loss?
If you incur a loss, you can offset this against profits from previous years (carry-back) or future years (carry-forward), resulting in lower income tax in profitable years.
How does the small-scale investment deduction (KIA) work?
The KIA is a deduction you can apply if you invest in business assets. The amount of the deduction depends on the total investment amount in a year.
What should I do if I discover an error in my income tax return?
If you discover an error, you can file a revised tax return through the Tax Office’s online system or request a correction by an official.
How are private withdrawals treated in my tax return?
Private withdrawals, such as money you take from the business for personal use, are not considered business expenses. They reduce your equity in the business but directly affect your profit.
What role does my partner play in my income tax?
If your partner is your tax partner, you can allocate certain income and deductions between you and your partner, potentially leading to a tax benefit.
How can I reduce my taxable profit?
You can reduce your taxable profit by using deductions such as the self-employed deduction, SME profit exemption, investment deductions, and by deducting business expenses.
How does depreciation of business assets work?
Depreciation means spreading the costs of business assets (such as machinery, vehicles) over several years, allowing you to deduct part of the costs each year from your profit.
What should I do when ending my sole proprietorship?
When ending your sole proprietorship, you may need to settle silent reserves and any investment deductions. This can result in one-time tax assessments.
What are the consequences of abolishing the FOR (Fiscal Retirement Reserve) for my pension planning?
With the abolition of the FOR, you can no longer make new additions to this fiscal pension provision. However, you can still use existing reserves or consider other forms of pension savings, such as annuity insurance or individual pension products.
