How is the Business ID, or private trader, taxed?

When you are starting a private business, you generally pay two types of taxes:

1. Earned income tax, i.e. advance tax, if you make any profit, i.e. you get a "salary".
2. Value added tax, or VAT, if you are liable for VAT.

Business name taxes are paid as advance tax. Advance tax is paid according to the company's estimated income. If the business name has no previous activity, the entrepreneur must evaluate the result of the coming year himself. A previously created business plan and profitability calculations help here.

Withholding tax is paid in advance based on the estimated result of your company. The final advance tax decision is requested from the tax assessor, who will send you an invoice to your home or to the OmaVero service.

If you paid too much advance tax, you will get the money back later as a tax refund. If, on the other hand, you paid too little, you can pay the missing taxes later as a supplementary payment. If you skip paying the top-up fees, you will still have residual taxes to pay.

Value added tax is a consumption tax that the seller includes in the sales price of the goods or services. Value added tax is intended to be paid by the consumer. In transactions between entrepreneurs, the purchasing entrepreneur can deduct the VAT charged by another entrepreneur liable for VAT. The condition is that the goods or services are used in a business that qualifies for a VAT deduction.

Private trader's salary and its effect on the profit?

When operating under a business name, the entrepreneur cannot pay himself a salary, but withdrawing money from the company's account is interpreted as a personal withdrawal. In practice, private withdrawal works so that when you withdraw money from the account of your business name for your personal use, it does not count the profit of your business name. The money withdrawn is therefore not an expense or expenditure.

Example

You have sold consulting for 10,000 euros + 24% value added tax (2400 euros). You have received 12,400 euros in your account, including 24% value added tax. The €2,400 portion of the value added tax must be paid to the tax authority.

The amount of €10,000 without value added tax remains in the account. You withdraw the entire amount to your own account and use it completely. In private trader taxation, the €10,000 share has been the business name's income, on which tax must be paid. So you must always keep enough money in the cash register to pay the necessary expenses.