As was the case last year, the salary of the director and majority shareholder (DGA) has been increased by €1,000 with effect from 1 January 2021. That is, provided that salary is equal to the standard amount under the customary remuneration scheme.
Standard amount
The director and major shareholder has the final say in his or her private limited company and can therefore decide for themselves what salary they receive for the work carried out for the company. Recently, in our article, we explained Salary or dividend?, which shows that it is often worthwhile to receive dividends rather than a salary from an early stage.
However, tax legislation stipulates that the director-major shareholder’s gross annual salary in 2021 must be at least €47,000 (in 2020, this was €46,000). This rule also applies to the director-major shareholder’s tax partner, if they work for the private limited company.
Higher or lower
If the director and major shareholder considers that a salary customary for his or her work is lower than the standard amount, he or she must substantiate this with sound arguments.
Where the salary exceeds the customary level, the burden of proof lies with the Tax and Customs Administration; however, if the director and major shareholder (DGA) has not set the salary in a reasonable manner, this may result in fines. If the gross annual salary paid to the director-shareholder exceeds the standard amount, it must amount to at least:
- 75% of the salary in the most comparable post;
- the salary of the highest-paid employee within the group who is not a director and major shareholder.
Coronacrisis
In light of the coronavirus crisis, approval has been granted for the director-major-shareholder’s salary for 2020 to be set at a lower level. It is not currently clear whether this approval will also apply in 2021.
However, it is possible to defer (part of) the payment of the director-shareholder’s salary until later in the year. The amount of salary to be paid must then be determined by December at the latest. That salary must then be entered into the payroll records (at a later date).
It is important to take a proactive approach to this. This is because, in principle, it is not possible to reverse a salary payment once it has been processed in the payroll system