What a close company means for you as an owner
As an owner of a close company, you are affected mainly through special rules on the taxation of dividends and capital gains. These rules determine how much can be taxed as capital income and how much is taxed as income from employment.
This makes ownership planning especially important. How you take out salary, dividends and any profits has a major effect on your total tax.
Key rules that apply to a close company
A close company is subject to special provisions that govern taxation and withdrawals by owners.
- Four or fewer co-owners control the majority of the votes
- Holdings of closely related persons are counted together
- Special rules for dividends and capital gains
- A link between salary withdrawals and the scope for dividends
- The aim of counteracting income conversion
When these rules are understood and applied correctly, ownership can be structured more advantageously.
When a company counts as a close company
Worth bearing in mind
A company is classified as a close company when four or fewer co-owners together hold more than half of the votes in the company. Closely related persons are also included, which means family-owned companies are often covered by the rules.
The definition matters because it determines whether the special tax rules apply. A company can therefore be a close company even if it has more formal owners, as long as the votes are in practice concentrated.
Frequently asked questions
What is the difference between a close company and other limited companies?
A close company is subject to special tax rules that do not apply to companies with dispersed ownership.
Do family members count as separate owners?
No, closely related persons are counted together when assessing ownership control.
Do the rules also apply to passive owners?
Yes, the rules can apply even if the owner is not active in the company.
How does being a close company affect the taxation of dividends?
Dividends are taxed partly as capital income and partly as income from employment, depending on the available scope and the rules.
Are all smaller limited companies close companies?
No, but many smaller and owner-managed companies fall within the definition.