Tax and employer obligations

Tax is where many founders lose the thread, especially when moving from being an employee to running your own business. We stick to the mechanisms — who pays what, and when — and leave the shifting rates with the Tax Administration.

Corporate tax vs. personal taxation of the owner

This is where the big difference between ENK and AS lies.

In an ENK there is no separate corporate tax. The profit is taxed as your personal business income: you pay tax, national-insurance contributions and any bracket tax on what the business earns, whether you take the money out or not.

In an AS, the company pays corporate tax on the profit. If you take money out of the company, it happens in two ways that are taxed differently: as salary (taxed as personal income in your hands, and triggering employer's contributions for the company) or as a dividend (paid out of already-taxed profit, and taxed in your hands as share income, with a shielding deduction). This is often described as two-level taxation: first in the company, then in the owner's hands.

Advance tax and liquidity

Tax is not paid just once a year — it is paid in advance. As the owner of an ENK you pay advance tax (forskuddsskatt) in instalments through the year, based on an estimate of expected profit. If you earn more or less than assumed, you can adjust the estimate. The single most important piece of advice is to set money aside for tax continuously, ideally on a separate account, so you do not spend money that is really the state's. An AS also pays advance tax on the company's profit. Poor liquidity planning around tax is a classic reason why otherwise healthy businesses run into trouble.

What you can deduct

A recurring principle in business taxation is that costs you incur in order to generate income are deductible. If you buy equipment, software, goods or services used in the business, that reduces the taxable profit — provided you have the voucher and the cost is genuinely business-related. Purely private expenses cannot be deducted, and some items have their own rules (for example cars, a home office and entertainment).

For an ENK, the owner's personal income is calculated under a separate model that starts from the profit. For an AS, it is the company's profit after deductions that is taxed. In both cases the point is the same: keep order over what is business and what is private, document everything, and let your accountant assess the borderline cases rather than guessing.

Salary, employer's contributions and the a-melding

When an AS pays out salary, employer obligations come with it. You must withhold advance tax (forskuddstrekk) from the salary and place it on a separate tax-withholding account, pay employer's national-insurance contributions (arbeidsgiveravgift) (the rate varies according to the geographic zone the business belongs to), and report everything in the a-melding every month. The a-melding is the coordinated report of salary, withholding and contributions, filed digitally via Altinn or the payroll system. This also applies when you, as the owner, take a salary from your own AS.

Dividend vs. salary at an overview level

If you want to take money out of your own AS, the choice is often between salary and dividend. Salary is deductible for the company, gives you pension accrual and social rights, but triggers employer's contributions and is taxed as personal income. A dividend is paid out of profit already taxed in the company, triggers no employer's contributions and no pension accrual, and is taxed as share income. Which is better depends on the levels, on the need for pension and on the company's situation — and often a combination is best. This is a typical question to take to your accountant.

Do this now

Set up a simple plan for tax: open a separate account to set aside tax money, and — if you have or will have employees (including yourself in an AS) — a tax-withholding account. Estimate expected profit for the year and check the advance tax against it. If you are going to take money out of an AS, note the salary-vs-dividend question for your next conversation with an accountant.