Taxation of company director remuneration
The taxation of the manager’s remuneration should not be taken lightly as it can have more or less significant consequences on the taxation of your household.
The concept of manager’s remuneration actually involves two types of income:
- Income derived from the exercise of an activity within the company,
- Income generated by the distribution of the company’s result.
We will successively address these two types of remuneration.
What is the tax applicable to the remuneration for the manager’s activity?
The company may be subject to corporate tax (hereinafter CT) or income tax (hereinafter IT) depending on its activity or its decision to opt for one of these regimes.
- Manager of a company subject to corporate tax
When the company is subject to CT, the salaries paid to the manager will be subject to income tax in the category of salaries and wages.
The taxable income will be equal to the remuneration received minus professional expenses. These can be determined based on a flat rate of 10%, but they can also be deducted for their actual amount upon presentation of supporting documents.
The remuneration paid to the manager of a company subject to CT will be deductible from the company’s result. However, be careful, for it to be deductible, this remuneration must correspond to effective work and must not be excessive in relation to the service provided.
- Manager of a company subject to income tax
If the manager is an associate
The remuneration of associate managers of a company subject to IT will be fiscally treated as a distribution of the company’s result. This applies to partnerships that have not opted for CT, but also to capital companies that have opted for CT.
These amounts will be subject to income tax on behalf of the manager. The tax category will be determined based on the nature of the company’s activity (Industrial and Commercial Profits, Non-Commercial Profits, Agricultural Profits, rental income).
It is important to note that these remunerations will not be deductible from the result achieved by the company.
If the manager is not an associate
As soon as the manager is not an associate of the company, his remuneration will be subject to income tax in the category of salaries and wages, like managers of companies subject to CT.
The remuneration of non-associate managers is a deductible expense from the result of the company, under the same deductibility conditions as for companies subject to CT.
What is the tax applicable to the distribution of the company’s result?
Here again, the applicable tax will depend on the company’s tax regime. However, unlike the previous type of remuneration, the taxation of distribution will only concern managers who are also associates of the company.
- Companies subject to CT
Since January 1st, 2018, dividends paid to associate managers are subject to a flat-rate withholding tax at a rate of 30%. This rate consists of income tax up to 12.8% and social security contributions up to 17.2%.
It is still possible to opt for the taxation of dividends at the progressive scale. However, be careful, this option is global and will concern all income from movable capital, as well as capital gains on the sale of securities.
- Companies subject to IT
Unlike companies subject to CT, associate managers of companies subject to IT will be taxed on their share of the result, even if there is no effective distribution of the result. This means that in the case of deferred distribution of the result, there will be no new taxation.
As we have seen above, the tax category will depend on the company’s activity (Industrial and Commercial Profits, Non-Commercial Profits, Agricultural Profits, rental income).
Why hire a tax lawyer?
The assistance of a tax lawyer can be opportune to make the right choices regarding these different tax regimes and thus optimize the taxation of your remuneration to the fullest.
As a tax professional, he will notably help you make the best trade-off between salary and dividends.
The tax lawyers at LEXPERTAX firm master all the tax rules applicable to individuals as well as businesses. Therefore, we will be able to assist and advise you in setting up remuneration that is in line with your situation.
LEXPERTAX Tax lawyers
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