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What is the minimum remuneration for a company director?
Under certain conditions, small companies can benefit from a reduced corporation tax rate of 20% on the first €100,000 of taxable profit. The standard corporation tax rate is 25%.
One of the conditions for this reduced rate relates to the remuneration of the company director. Until now, the company was in principle required to pay at least one individual company director at least €45,000 in annual remuneration.
From tax year 2027, this threshold will increase to €50,000. In addition, the amount will henceforth be indexed. As a result of the first indexation, the minimum remuneration for income year 2026, tax year 2027, amounts to €51,000 in practice.
This doesn’t mean that every company director must now receive a salary of at least €51,000. The threshold is relevant if your company wants to meet the conditions for the reduced corporation tax rate.
From €45,000 to €51,000 from tax year 2027
The increase applies from tax year 2027, which for companies whose financial year coincides with the calendar year corresponds to income year 2026.
The basic threshold is increased from €45,000 to €50,000. Because the new amount will now be indexed annually, the threshold for income year 2026 is €51,000.
In other words, the threshold may undergo further adjustments in the future. It is therefore advisable not to automatically continue using the same amount year after year, but to check which minimum remuneration applies as part of your annual tax planning.
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Does every company director have to pay themselves a salary of at least €51,000?
No. The term ‘minimum remuneration’ may give the impression that every company director is legally required to pay themselves at least €51,000 a year but that is not the case.
As a company director, it is perfectly possible to receive a lower remuneration. The possible consequence, however, is that your company doesn’t meet this specific condition for benefiting from the reduced corporation tax rate of 20%.
In that case, the standard rate of 25% may apply. The difference is a maximum of 5 percentage points on the first €100,000 of taxable profit. This means that in theory, the tax difference for the company could amount to a maximum of €5,000 per year.
However, this doesn’t mean you should automatically increase your salary. You need to weigh the benefit in corporation tax against the tax and social security implications of higher remuneration in your private assets.
What if your company’s profit is lower?
There is also an important exception to the minimum threshold. If the taxable income of your company is lower than the required minimum remuneration, the remuneration doesn’t necessarily have to amount to €51,000.
In that case, a lower remuneration may be sufficient, provided it is at least equal to the company’s taxable income.
This can make the calculation less straightforward than it may initially seem. The remuneration itself is, after all, a company expense and therefore affects the final taxable result.
A concrete example will help clarify the principle:
Suppose that, before allocation of the company director’s remuneration, your company has a taxable result of €60,000. In principle, if you pay yourself €30,000 in remuneration, this leaves a taxable result of €30,000. After deduction, the remuneration is then equal to the taxable result.
In such situations, remuneration of less than €51,000 may be sufficient.
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Start-up companies are exempt
Young companies also benefit from an important exception. During the first four taxable periods from incorporation, the minimum remuneration requirement generally doesn’t apply yet.
So if you start a new company, you do not immediately have to €51,000 in remuneration from the first year to retain the reduced rate.
Of course, your company must also meet the other conditions for the reduced rate. Once the start-up period has ended, minimum remuneration does become an important consideration in your annual tax planning.
New 20% rule for benefits in kind
The reform doesn’t only concern the level of your remuneration. The composition of your remuneration package is also becoming more important.
Company directors often receive more than just cash remuneration. For example, a company may make certain goods or services available to the company director for private use as well.
Examples include:
· a company car;
· a smartphone;
· a computer;
· a property made available by the company;
· certain other private benefits.
The private use of these can give rise to a taxable benefit in kind (BIK or ‘VAA’).
From tax year 2027, benefits in kind valued on a flat-rate basis may account for no more than 20% of total annual gross remuneration if the company wants to meet the relevant condition for the reduced rate.
It is therefore no longer sufficient to only look at whether your total remuneration reaches the required threshold. The ratio between your cash remuneration and flat-rate benefits in kind is also relevant.
Do you receive relatively high benefits in kind compared with your salary? Then your current remuneration package deserves extra attention.
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Do you have to increase your salary to €51,000?
Not necessarily. If you currently receive, say, €45,000 in remuneration, you might think that the simplest solution is to immediately increase your salary by €6,000.
From a tax perspective, however, this is not automatically the most beneficial option. Higher remuneration for a company director is in principle a deductible expense for your company, which reduces the company’s taxable profit.
At the same time, the higher remuneration is received by you personally, so among other things, you need to take the following into account:
· personal income tax;
· social security contributions;
· municipal tax;
· the impact on your total private income.
It is therefore perfectly possible that the benefit of the lower corporation tax rate is smaller than the additional personal income tax and social security contributions you owe as a result of increasing your remuneration.
It is therefore better not to consider the new threshold in isolation.
Reduced rate or lower salary: which is more beneficial?
The optimal choice varies from one business owner to another. Suppose that, because of insufficient remuneration, your company is no longer eligible for the reduced rate. On the first €100,000 of taxable profit, the difference between 20% and 25% corporation tax can amount to a maximum of €5,000.
However, to retain that benefit, you may have to pay out thousands of euros in additional remuneration. That additional remuneration is then subject to personal income tax and social security contributions.
As a result, in some cases it may be more advantageous to accept the higher corporation tax. In other situations, it may indeed be beneficial to increase your remuneration as a company director. Conclusion: there is no general rule.
Review your full remuneration package
The discussion around minimum remuneration mainly shows how important it is to consider a company director’s total remuneration package.
In addition to conventional remuneration, other forms of remuneration may also come into play, depending on your personal and professional situation.
These include:
· salary;
· benefits in kind;
· dividends;
· pension accrual;
· expense reimbursements;
· benefits made available by the company.
The optimal combination depends, among other things, on your company’s profits, your private needs, your family situation, any other income and your longer-term plans.
The changed 20% threshold for flat-rate benefits in kind also makes it useful to look not only at the total amount of your salary, but at its overall composition.
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Why you should review your remuneration in 2026
The new conditions apply from tax year 2027 and therefore already affect income earned in 2026.
That is why it is advisable not to wait until the corporation tax return is being prepared. By then, the relevant financial year will usually already be behind you and there will be less scope to make adjustments.
Have the following elements reviewed in good time:
· how much remuneration you have already received in 2026;
· which benefits in kind are part of your remuneration package;
· whether the 20% threshold is being respected;
· how much taxable profit your company expects to make;
· whether the reduced corporation tax rate is actually beneficial for your company;
· whether the current balance between salary, benefits and other forms of remuneration is still tax-efficient.
This will allow you to make adjustments, where necessary, before the end of the financial year.
No automatic pay rise but a new calculation
The increase in minimum remuneration therefore mainly means that company directors need to take another look at their current remuneration.
€51,000 is not a mandatory minimum salary for every company director. It is a tax threshold that helps determine whether your company can benefit from the reduced rate of 20% on the first €100,000 of taxable profit.
Whether it is beneficial to actually increase your remuneration to this threshold depends on your overall tax situation.
An automatic pay rise is therefore rarely the best approach. A calculation that takes both your company and your personal situation into account gives a much more accurate picture.
Wondering which level of remuneration would be most beneficial for you as a company director? Discuss your remuneration package with your PIA adviser in good time. Together, we can look at the combination of salary, benefits and other forms of remuneration that suits both your company and your personal situation.
