How the two routes work
Salary is an expense: it reduces taxable profit, but bears social contributions. Dividends are paid after corporation tax, from profit that has already been taxed, and then bear the flat-rate withholding tax.
Deductible from profit
- Salary
- Yes
- Dividends
- No
Social contributions
- Salary
- Yes
- Dividends
- No in a SASU, partly in an EURL
Personal taxation
- Salary
- Progressive scale after allowance
- Dividends
- 31.4% flat tax
Builds social security rights
- Salary
- Yes
- Dividends
- No
| Salary | Dividends | |
|---|---|---|
| Deductible from profit | Yes | No |
| Social contributions | Yes | No in a SASU, partly in an EURL |
| Personal taxation | Progressive scale after allowance | 31.4% flat tax |
| Builds social security rights | Yes | No |
In a SASU
Dividends escape contributions. The temptation to take everything as dividends is strong, and that is exactly where the risk lies: without a salary, no pension quarters are earned and there is no sick pay if you stop working.
In an EURL
The share of dividends above 10% of the share capital and current-account balances is subject to social contributions. The trade-off is therefore much less clear-cut.
What works in practice
- A salary high enough to earn four pension quarters and open your rights.
- The top-up in dividends, decided after the year end, once the result is known.
- A trade-off reviewed every year: it depends on the result, not on a fixed rule.
Timing matters
Salary is decided upfront and spread over the year. Dividends are voted at the general meeting after the accounts are approved. So you cannot make up in December for a salary you did not pay.