Are you managing your own company (SRL or BV) in Belgium? A common question for self-employed directors is how to determine an appropriate salary. While the flexibility to set your own remuneration is an advantage, it requires careful consideration of tax obligations and financial planning. Paying yourself a higher salary increases personal income tax and social security contributions, whereas a lower salary could restrict access to certain tax benefits.
In this article, we’ll provide guidance on recommended remuneration levels, explore relevant tax incentives, and outline strategies for efficiently extracting profits from your own company.
What’s the recommended salary for company directors?
As a company director, setting your own salary is in your hands—but it’s not a decision to be made lightly.
To figure out the right amount, you’ll need to map out a financial plan for the next 3 to 5 years. This is where a chartered accountant comes in handy to help you crunch the numbers.
But remember: the higher your salary as a company director, the more you’ll pay in social security contributions and personal income tax. So, it’s all about finding that sweet spot between a fair income and tax efficiency.
A gross annual salary of €45,000 serves as an important benchmark for SRL/BV directors. It strikes a balance between ensuring a reasonable income and optimising tax efficiency. This remuneration can include:
- Directors’ fees (tantièmes/loon)
- Taxable benefits, such as company cars or phones (ATN/VAA)
Why €45,000?
You might be wondering why €45,000 is considered the sweet spot.
Companies with a director’s salary of at least €45,000 can access a reduced corporate tax rate of 20% on the first €100,000 of profits.
Profits beyond €100,000 are taxed at the standard 25% rate.
Note: only small companies qualify for this reduced rate under Article 1:24, §§1-6 of the Belgian Companies and Associations Code (CSA).
Is my company eligible for the reduced corporate tax rate?
To benefit from the 20% corporate tax rate on the first €100,000 of profits, the following conditions must be met:
1. Director’s remuneration and taxable income
- The company director’s remuneration is equal to the company’s taxable income. For example, the company’s taxable income is €30,000, the director’s remuneration must match this amount.
- If profits exceed €45,000, setting a salary at or above €45,000 is sufficient.
2. Newly created companies
Newly established SRL/BV companies enjoy the reduced rate for their first 4 fiscal years. However, if transitioning from a sole proprietorship to an SRL/BV, the clock starts from the sole proprietorship’s creation date.
3. Requirements for small companies
- The company must meet the criteria defined in Article 1:24, §§1-6 CSA.
- At least 50% of shareholders must be natural persons.
- The company must not function as a financial entity with shareholdings exceeding 50% of its released capital, reserves, and gains.
Extracting funds from your SRL/BV
Beyond a salary, company directors can also distribute profits through dividends, directors’ fees, or liquidation reserves. Each option has distinct tax implications:
1. Dividends and directors’ fees
- Dividends
As income from movable property, dividends are taxed at a 30% withholding tax but are exempt from social security contributions.
Reduced withholding tax rates for small companies:
For dividends from shares issued after 1 July 2013 (fully paid in cash and held continuously):- 30% in the first fiscal year after issuance
- 20% in the second fiscal year
- 15% from the third fiscal year onward
- Directors’ fees
Distributed as a share of profits at the Annual General Meeting, directors’ fees are subject to both personal income tax and social security contributions.
These are the key conditions for dividends and director’s fees:- Net assets test: Distributions must not reduce the company’s net assets below zero.
- Liquidity test: The company must remain capable of meeting its financial obligations post-distribution.
2. Liquidation reserves
A liquidation reserve is one of the most tax-efficient ways to extract profits from your SRL/BV. Companies can allocate part of their profits to this reserve, which is:
- Initially taxed at 10%, in addition to the standard 25% corporate tax.
- If distributed five years or more after the fiscal year’s end, the reserve is subject to just a 5% withholding tax.
Example: A liquidation reserve created for the 2024 fiscal year becomes distributable at the reduced rate starting 1 January 2030. This approach significantly reduces the tax burden compared to the standard 30% withholding tax on dividends.
💡Accountable tip: You can optimise your salary with meal vouchers. Read more about here.
Tips to optimise your salary as a company director
To determine how much salary you should give yourself as a company director, keep the following points in mind:
- Salary is typically the most heavily taxed form of income. Pay yourself what you need for daily living expenses, but avoid excessive salary payments.
- If your company qualifies for the reduced corporate tax rate, aim to pay yourself at least €45,000 annually, to lower your tax rate on the first €100,000 of profits.
- Consider building a liquidation reserve for future profit distributions at minimal tax rates.
By strategically managing your remuneration and profit distributions, you can optimise tax efficiency while ensuring compliance with Belgian corporate regulations.
💡Did you know you can use Accountable for your BV/SRL? Simply scan your invoices and expenses, invite your accountant, and effortlessly stay on top of your finances. Try Accountable now for free.
