The right ratio of dividend and salary can bring significant tax benefits to the entrepreneur. Some of the dividends can be withdrawn tax-free, while some are taxable income for the entrepreneur. The salary, on the other hand, is income subjected to income tax.
The difference between a dividend and a salary in a limited company is that dividends are dividends that the limited company pays to the shareholders as a distribution of the company's profits. The salary, on the other hand, is the payment that the company pays its employees for their work contribution. Dividends are taxable income, while salary is taxable earned income. Thus, taxes are paid on dividends, while taxes and pension insurance premiums are paid on salaries. In a limited company, you can influence the amount of tax payments by optimizing salary and dividend payments.