You are a cash flow

The first big idea you learn in finance is that a krone today is worth more than a krone next year. You can invest today’s krone, and next year’s krone might buy less. From there, almost everything follows. A company, a building or a bond is worth the money it will pay out over time, adjusted for when that money arrives.

In Financial Modelling at BI, our group built a savings plan for an imaginary 23-year-old. Every deposit, withdrawal, wedding, boat, recession and boom until he turned 97 went into one spreadsheet, and we worked out how much he had to save at the start. What moved the answer most wasn’t the wedding or the kids’ college fees. It was the return, and how long it had to work.

That made me think. What happens if you look at yourself the same way?

You, as a cash flow

Take someone who starts working at 25 on 600,000 kroner a year, gets a raise of 1.5% a year on top of inflation, and retires at 67. In today’s money, they will earn about 34.8 million kroner over their career.

Seen from finance, that person is a cash flow, a stream of money arriving once a year for 42 years. And like any cash flow, it can be valued by discounting every year’s pay back to today. With a discount rate of 2% a year:

$$PV = \sum_{t=0}^{41} \frac{600\thinspace 000 \times 1.015^{t}}{1.02^{t}} \approx 22.8 \text{ million kroner}$$

In a way, that’s what you are worth when you start your first job.

But you don’t own all of it. There’s a silent partner.

A career as a cash flow

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Over the whole career, about 9.8 million kroner, or 28%, goes to income tax. And the partner’s share grows as you do. At 600,000 kroner you pay about 24% in total, but 33.6% on the next krone you earn. At a million, you pay about 31% in total and 46.4% on the next krone.

For an employee, the partner is also paid first. Tax comes off every payslip before the money reaches you, so everything you save and invest comes from what’s left. Compounding only ever gets to work on your share.

When the money lands in a company first

For someone running their own business through a limited company (an AS), the order changes. The money lands in the company, and the company pays 22% tax on its profit. After that, you decide how to get paid: as salary or as dividends.

You might think one of those is a clever way around the tax. It isn’t:

Where 100 kroner of company profit ends up

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As salary, the company first pays the employer’s contribution of 14.1%, and then you pay up to 47.4% tax. As a dividend, the company pays 22% and you pay 37.84% on what’s left. That rate comes from multiplying the ordinary 22% by 1.72, a factor Norway uses to tax dividends harder:

$$\begin{aligned} \text{Salary:} &\quad \frac{100}{1.141} \times (1 - 0.474) \approx 46.10 \text{ kr} \cr \text{Dividend:} &\quad 100 \times (1 - 0.22) \times (1 - 0.22 \times 1.72) \approx 48.48 \text{ kr} \end{aligned}$$

That’s almost exactly the same, and it’s on purpose. Norway’s tax system is designed so that owners can’t dodge tax by choosing one route over the other. At normal income levels salary is actually cheaper, and it gives you pension and sick pay rights as well.

So the company doesn’t make the total tax smaller. What it changes is when you pay it.

Tax later is worth more than tax now

Here’s the key rule. When a company owns shares and earns money on them, that money is almost tax-free inside the company. This is called the exemption method (fritaksmetoden). The personal tax of 37.84% is only paid when the money leaves the company and reaches you.

So money you leave in the company keeps working, with the tax still inside it. It’s like an interest-free loan from the state with no fixed repayment date. And as our savings model showed, what matters most for a long-term saver is how much money is working and for how long.

To see what that’s worth, say your company has one million kroner left over after it has paid its 22% tax, and it grows by 7% a year. You have two choices:

• Pay it out now. You pay 37.84% dividend tax and keep 621,600 kroner. You invest that in a share savings account (ASK), where the tax on your gains is also postponed until you take the money out.
• Keep it in the company and invest it there. You pay 15,000 kroner a year for accounting and running costs, and take it all out as a dividend at the end.

The lines show how much you would have after all tax if you cashed out in a given year:

One million kroner, two ways to save it

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After 30 years, keeping the money in the company leaves you with 3.85 million kroner, against 3.18 million for paying it out first. That’s about 21% more, from the same money and the same tax rates. The whole difference comes from the 378,400 kroner of dividend tax that stayed invested for 30 years instead of being paid on day one. Without the running costs, the company route would have ended at 4.7 million.

For the curious, here’s the whole comparison in two lines. $X$ is the million kroner, $r$ the yearly return, $n$ the number of years and $t$ the dividend tax of 37.84%:

$$\begin{aligned} \text{Kept in the company:} &\quad X\thinspace (1+r)^n\thinspace (1-t) \cr \text{Paid out and saved:} &\quad X\thinspace (1-t)\thinspace \big[(1+r)^n - t\thinspace \big((1+r)^n - 1\big)\big] \end{aligned}$$

The second line is smaller by exactly the tax on the gains. When you pay out first, you pay dividend tax up front and then tax on the gains as well. In the company, the dividend tax at the end is the only tax you pay.

The catches

It isn’t free money, and it isn’t for everyone.

• The money has to arrive in a company. An employee can’t send their salary into a company. The closest things for employees are the share savings account (ASK), where the tax on your gains waits until you withdraw, and the individual pension account (IPS), where you get a tax deduction now and pay tax when you draw the pension.
• A company costs money and work. Accounts, an annual report and fees add up to something like 10,000 to 30,000 kroner a year. For small amounts, that eats the whole advantage.
• Wealth tax applies either way. Shares count at 80% of their value for wealth tax whether you own them directly or through a company. Above 1.9 million kroner, you pay 1% a year.
• The money isn’t yours to spend. As soon as you take it out, you pay the tax. Borrowing from your own company doesn’t get around it either, because such loans are taxed as dividends.
• The rules change. The tax on dividends has been raised several times in recent years, and it’s a political topic that could change again.

What I take from it

• Everything is a cash flow, including you. Looking at a career as a stream of money over time makes it obvious why the early years matter so much. That’s when saved money has the longest time to grow.
• Tax is a cash flow too. Its timing matters almost as much as its size. A tax paid in 30 years costs far less than the same tax paid today.
• A company is a timing tool. In Norway it barely changes how much tax you pay in the end. What it changes is when you pay, and for someone building wealth over decades, that turns out to be worth a lot.

About this article

This is inspired by Financial Modelling in Practice (FIN3616) and Basic Financial Management (EXC2110) at BI Norwegian Business School, where we built savings plans and valued cash flows over time.

The numbers use the Norwegian tax rules for 2026, simplified. The salary tax includes the national insurance contribution, bracket tax and the standard deductions. The examples ignore the tax-free allowance on shares (skjermingsfradrag), and returns won’t be a steady 7% in real life. This is an illustration, not financial advice. Talk to an accountant before you set up a company for this.