The Tax and Customs Administration considers a director/major shareholder (shareholder with a substantial interest) as having a special employment relationship. Below you can find the major points to keep in mind as a director/major shareholder.
For the purpose of wage taxes, national insurance contributions and health care insurance contributions a director/major shareholder is employed by his own company. A director/major shareholder is usually not covered by employee insurance schemes. The Tax and Customs Administration assumes salary for the director/major shareholder that is customary for the level and duration of his activities. They have defined a salary standard for the purpose, which is indexed annually. For 2014 it is at least € 44,000 per annum.
Income tax, national insurance contributions and health care insurance contributions must be withheld from the director/major shareholder’s wages. The payroll accounting calculates the appropriate contributions. Deductions from the wages are reported by means of the monthly PAYE form and must be paid monthly.
Lower revenue? Perhaps you do not want to pay yourself any wage in this period. You must still remember to file a monthly PAYE form. This is called the nil tax return.
In 2015 the Expense Allowance Scheme will take effect. No more than 1.2% of the taxable wage may be spent on tax-free payments and benefits. The Tax and Customs Administration defines what is reasonable to pay and what is not. They will decide whether or not the expenses are customary.
A director/major shareholder is usually not covered by employee insurance schemes. However, a reduced health care insurance contribution has to be withheld from the wages. Pursuant to the law the health care insurance contribution is not employee insurance but non-life insurance. Therefore, this contribution is also charged to a director/major shareholder, but is then a reduced contribution. For 2014 it is 5.4% over a maximum of € 51,414 on an annual basis.
With regard to a company car the same rules apply to a director/major shareholder as to a regular employee. It is possible to make more than one car available to a director/major shareholder, but remember the Tax and Customs Administration may check for excessive private use.
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