Tax topic
Income and profit tax
Corporate profit tax and business income for individuals: taxable income and expenses, deductible and non-deductible expenses, depreciation, losses, instalments, the annual return, dividends and withholding tax.
Key issues
- Taxable income and expenses
- Deductible and non-deductible expenses
- Depreciation and losses
- Tax instalments
- Annual return
- Business income of individuals
Frequently asked questions
Short answers to the questions businesses ask us most often on this topic. Treatment can differ for each business. For your case, write to us.
The starting point is accounting profit. Expenses the law does not recognise are added back, non-taxable income is deducted and, where allowed, losses carried forward from earlier years are offset. Tax is applied to the result under the income tax law.
Accounting profit follows accounting standards; taxable profit follows tax law. The difference mainly comes from non-deductible expenses, the specific rules for tax depreciation and exempt income.
Expenses incurred to earn, secure and maintain business income are recognised when they are documented with proper invoices and paid according to the rules, for example through a bank where the law requires it. The law also lists expenses that are not recognised or are capped.
Instalments are advance payments of tax during the year, calculated under the law's rules, mainly on the basis of earlier years' results. In the annual return they are credited against the final tax and the difference is paid or carried as a credit.
Employment income is taxed through withholding by the employer. An individual's business income, rent, capital income and other income are taxed under specific rules in the law and, where required, declared in the annual personal income return.
Dividends can only be paid from profit approved in the financial statements, by decision of the shareholders or general meeting. The company withholds the tax at the time of payment and declares it, so the shareholder receives the net amount.
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