Executive compensation
August 14, 2011 | 35,00 EUR | answered by Oliver Burchardt
I have a small AG (my share is 99.9%). With my AG, I have a board appointment contract that runs until the end of 2013.
In the board appointment contract, salary and bonuses are explicitly regulated. EUR 6,000 per month plus a fixed bonus of 10,000 plus up to 10,000 bonus depending on EBT (~EUR 90k p.a.).
The AG has a turnover of approx. EUR 300,000, profit of approx. 75,000. 2 board members, 2 employees. Except for one employee who earns approx. EUR 4,500, all salary recipients are family members and the amounts are very small.
To optimize my overall taxes, it would be advantageous if my personal income were significantly lower. (Sounds strange but it's true)
I would like to reduce my board salary to EUR 70k p.a. Can I simply eliminate the fixed bonus, reduce the monthly salary, or eliminate the variable bonus or change its calculation method?
Dear inquirer,
Thank you for your inquiry, which I am happy to answer as part of an initial consultation.
Please note that the tax assessment is based on the information provided. Adding, changing, or omitting information can significantly affect the outcome. In particular, I would like to point out that, due to lack of further information, I assume that your statement that it is advantageous for your personal tax situation to keep your income as a director of the AG as low as possible is correct.
Reducing your salary is usually not a problem, as the tax authorities assume a hidden profit distribution only in cases of unreasonably high salaries.
Since you control the AG, a reduction in salary with tax implications can only be made for the future. You must clearly document when you agreed with the AG or the supervisory board to lower your compensation as a director. Only from that point on is the salary reduced. This point can also be chosen retroactively under civil law, but this is not recognized for tax purposes in your case. The actual date of the agreement is crucial.
I hope that my explanations have been helpful to you.
Best regards,
Oliver Burchardt
Tax Advisor
