Congratulations. If you are dealing with the issue of “salary or dividend”, you have been working successfully for at least the last 11 months. Hats off to you. Now the question arises as to how you can draw the profit in order to benefit to the maximum from the existing framework conditions. We think in scenarios and create clarity for you.
Introduction: Successful work - What now?
Congratulations. If you are dealing with the issue of “salary or dividend”, you have been working successfully for at least the last 11 months. Hats off to you. Now the question arises as to how you can draw the profit in order to benefit to the maximum from the existing framework conditions. We think in scenarios and create clarity for you.
Scenario 1: The golden exit
“I'll leave the money and sell the business and pay zero tax”
The “golden exit” scenario is by far the most tax-efficient solution. You are a tax fox. The idea is good - but difficult to implement. You need a buyer who wants to buy cash for cash. There is also the problem of deferred taxes. You also need to earn an income until you can sell in order to cover your private expenses.
Scenario 2: Dividend rider
“Only losers receive wages - winners receive high dividends”
The “dividend rider” scenario is more than tax-optimized. You know where Bartli gets the most. You take full advantage of the dividend privilege and save on social security contributions. However, you will realize the pitfalls of this approach at the latest when you have the AHV revision in the house. From the point of view of the AHV, income is subject to social insurance contributions if the salary paid is too low compared to the industry average. You certainly want to receive a pension in old age and not go hungry. Your pension is based on the insured salary. Zero salary; equals zero pension; equals zero sense.
Scenario 3: Per salary
“I take everything as a salary - dividends are not my thing”
The “per salary” scenario guarantees you a high pension. Your annual salary is the basis for insurance and pension benefits, while the potential for voluntary purchases into the pension fund increases, which reduces your private taxable income. Salary equals expense, equals less profit. You are not stupid. But please note that if you receive a salary, this must be taxed privately and social insurance contributions must be paid. Voluntary purchases into the pension fund are only possible if this is provided for in the regulations and there is a gap in cover. With this solution, you do not benefit from the dividend privilege. You are not taking advantage of the options available to you due to the general conditions.
Further scenarios...
In this blog post, we have omitted detailed descriptions of the other possible scenarios “Loan”, “Pro Pension” and “Substance”. We would be happy to explain these to you in a personal meeting.
Conclusion: It's all in the mix
However, we can anticipate one thing here: None of the scenarios is ideal. The mix - tailored to your situation - makes all the difference. But how can you pragmatically ensure that there is no obvious imbalance between salary, capital employed and dividends received and that you can benefit optimally from the framework conditions?
You need to ask yourself these questions:
Is the distribution made from the current profit or from the profit from previous years?
In principle, you can assume that if you are distributing dividends from previous years' profits, this should not generally pose any problems. We recommend that you clarify this with your compensation office in advance if you are planning above-average distributions.
How high is my dividend compared to the share valuation for tax purposes?
Dividends that correspond to a return on equity, i.e. a return of more than 10%, are presumably excessive.
How high is my salary in relation to the industry comparison?
Calculate your salary here: lohnrechner.bfs.admin.ch
Conclusion:
Your company is unique, as are your specific circumstances. Whether a dividend is the optimal solution depends on many factors, not least the domicile of your company and your place of residence. If the yield is higher than 10% and your salary is lower than the industry average, there is a risk that your dividend will be regarded as a salary subject to AHV contributions. When defining the relationship between salary and dividend, the focus should not only be on tax optimization, but also on pension planning and any succession planning.
Clever planning together with an expert is worthwhile in order to make ideal use of the framework conditions in the long term.
