Minimum salary for company directors: new rules already adapted
In order to benefit from the reduced corporate tax rate, a small company should pay a minimum salary to one of its company directors. In the summer agreement, the minimum amount was increased from 36.000 euro to 45.000 euro. At the same time a sanction was introduced for companies not paying sufficient salary. These new rules have been amended already.
Reminder of the applicable rules
Small companies only pay 20% corporate tax on the first 100.000 euro profit provided if they pay at least a salary of 45.000 to one of their company directors.
As salary is regarded:
The actual base salary
The benefits in kind
The requalified rent. In case a company director rents out an immovable property to his own company, a part of this rental income is treated as salary when a certain threshold is exceeded. Rental income is after all taxed at a lower rate than salary. The tax legislator wants to avoid that company directors treat salary as rental income.
Separate taxation of 5% will not increase up to 10% in 2020
Another element is linked to the minimum salary. In case a company does not pay the minimum salary, a separate taxation of 5% applies. This separate taxation amounts to 5,1% (=5% + 2% additional crisis tax) of non-paid part of the minimum salary.
Bvba GOLD pays a salary to its director of 20.000 euro. This is 25.000 euro under the minimum amount of 45.000 euro. The tax due amounts to 1.275 euro.
Initially it was foreseen that the separate taxation would increase up to 10% in 2020. This increase is no longer foreseen. This means that as from 2020 the rate will slightly decrease to 5%, since the crisis tax will be abolished by then.
What if the company does not have an individual as director?
In this case there is a lot of uncertainty. The text of the law is modified in order to eliminate this uncertainty. According to the modified text the company should pay a salary of 45.000 euro to a director as foreseen in article 32. This can only be an individual. Consequence is that companies having another company as director never fulfill the minimum salary condition. They should pay the separate taxation in any case.
What for company not having 45.000 euro profit?
A company having less than 45.000 euro profit can clearly not pay a salary of 45.000 euro. Such company should pay a salary which equals its taxable income. What is meant by this has also given rise to discussions. In order to solve this situation, the Government has somewhat modified the wordings. It is now clear that the salary should equal the result of the company after deduction of the director's salary.
Bvba SILVER has 84.000 euro profit. It pays its director 42.000 euro salary. So the result after payment of the salary amounts to 42.000 euro. The company does have 45.000 euro profit. The minimum salary should in this case equal the taxable result after payment of the salary. This is the case here. Both amount to 42.000 euro.