Should I pay myself salary or dividends from my Danish ApS?

## The Salary vs Dividend Question for Danish ApS Owners\n\nFor the owner-manager of a Danish ApS, how you extract profit from the company determines your total tax bill. The optimal approach almost always involves a combination of salary and dividends — not one exclusively.\n\n## How Salary (Løn) Is Taxed\n\nSalary paid from the ApS to the director-shareholder is taxed as personal income:\n\n1. AM-bidrag (8%)

Applied first on gross salary. DKK 600,000 salary → DKK 48,000 AM-bidrag. The net (DKK 552,000) is the basis for income tax.\n2. **Income tax**: Applied on the net (post-AM-bidrag) amount:\n - Personal allowance: DKK 49,400 exempt\n - Bottom bracket (bundskat): 12.06%\n - Municipal tax: ~25% (varies by municipality)\n - Church tax: ~0.7%\n - Top bracket (topskat): 15% on income above DKK 568,900\n\nAt the top marginal rate, total effective rate on gross salary: approximately **55.9%**.\n\n**From the company's perspective**: salary is fully deductible, reducing the company's selskabsskat liability by 22% of the salary amount.\n\n## How Dividends (Udbytte) Are Taxed\n\nDividends from an ApS are taxed as **aktieindkomst** (share income) — a separate Danish income category taxed at:\n\n- **27%** on the first DKK 61,000 per year (DKK 122,000 for married couples, 2025)\n- **42%** on amounts above DKK 61,000\n\nCritically: **no AM-bidrag on dividends**. Dividends are not employment income and are not subject to the 8% AM-bidrag.\n\nHowever, from the company's perspective: dividends are paid from **post-tax profit** (after 22% selskabsskat). The effective total tax rate on dividends includes both the corporate tax and the personal dividend tax.\n\n## The Combined Tax Rate Calculation\n\nFor DKK 100,000 earned by the ApS:\n\n**Extraction via salary**:\n- Company pays DKK 100,000 salary → saves DKK 22,000 selskabsskat\n- Employee pays DKK 8,000 AM-bidrag + approximately DKK 50,000 income tax (at top rate)\n- Total tax: approximately DKK 58,000 on DKK 100,000 of company profit\n\n**Extraction via dividend (above DKK 61,000 threshold)**:\n- Company pays 22% selskabsskat: DKK 22,000. Net DKK 78,000 available for dividend.\n- 42% dividend tax on DKK 78,000: DKK 32,760\n- Total tax: DKK 22,000 + DKK 32,760 = DKK 54,760 on DKK 100,000 — slightly better than salary at the top rate\n\n**Extraction via dividend (below DKK 61,000 threshold)**:\n- Company pays 22% selskabsskat: DKK 22,000. Net DKK 78,000.\n- 27% dividend tax on DKK 78,000: DKK 21,060\n- Total tax: DKK 22,000 + DKK 21,060 = DKK 43,060 on DKK 100,000 — significantly better\n\n## The Optimal Salary Level\n\nThe commonly used strategy is:\n\n1. **Pay salary up to the topskat threshold**: DKK 568,900 (net of AM-bidrag) in 2025. In gross terms, this equates to approximately DKK 618,000-638,000 gross salary (depending on municipality). This maximises use of the lower income tax brackets while keeping the ApS deduction.\n\n2. **Retain additional profit in the ApS at 22%**, then distribute as dividends when needed.\n\n3. **Utilise the 27% dividend threshold**: Each year, DKK 61,000 (or DKK 122,000 for married couples) is taxed at only 27% — take this amount every year to make use of the low-rate threshold even if personal income needs are otherwise met.\n\n## Pension as an Alternative\n\nBefore distributing dividends, consider employer pension contributions. The company contributes to a pension scheme on the director's behalf: fully deductible for the company (saving 22%), no AM-bidrag, no immediate income tax for the director. Tax is deferred to pension payout, typically at retirement when income is lower. For many owner-managers, pension contributions are more efficient than both salary and dividends for amounts above the topskat threshold.