Right at the end of 2019, it emerged that the salary of a director and major shareholder (DMS) would be increased from €45,000 to €46,000 with effect from 1 January 2020. This is not because the regulations have changed, but due to indexation.
Usual wage
A director and major shareholder works for a private limited company in which he (or she) holds all (or a large proportion of) the shares. The director-shareholder therefore determines for themselves what salary the private limited company pays for their work. The director-shareholder could gain (tax) benefits by setting the salary at a low level (or at zero).
A director and major shareholder’s annual salary must therefore not be less than:
- 75% of the salary received by a non-director-shareholder in the most comparable employment relationship; and
- not less than €46,000 (in 2019: €45,000).
Directors and major shareholders whose annual salary in 2019 was equal to the minimum amount of €45,000 must increase their annual salary by €1,000 with effect from 2020.
This is a brief overview of the salary scheme. Please contact one of our tax advisers for advice on how it applies to your specific situation.