Entrepreneurship is about looking ahead. This also applies to how you compensate yourself as a business owner. Starting with the 2027 tax year, the conditions for small corporations to qualify for the reduced corporate income tax rate will change.
One of the most important changes? The The minimum executive compensation will be increased. But what exactly does this change entail? And do you need to raise your compensation now? We've listed the most important points to consider.
In a nutshell
- • The minimum executive compensation will increase from 45,000 euros to 50,000 euros, with annual indexation beginning in the 2027 tax year.
- • The measure does not apply to every business owner, but only to companies that reduced rate of 20% wish to retain in corporate income tax. In addition, start-up companies are eligible for an exemption during their first four taxable periods.
- • A higher salary isn't automatically more advantageous. The optimal executive compensation depends on your company, your personal situation, and your compensation package. A individual analysis remains essential, therefore.
What's changing??
Three points business owners should keep in mind starting with the 2027 tax year.
01 Increase in the compensation cap
Today, at least one executive of a small company must receive annual compensation of 45,000 euros received in order to qualify for the reduced corporate income tax rate of 20% on the first bracket of 100,000 euros of taxable profit.
As part of the De Wever administration's tax reforms, this threshold will be raised to 50,000 euros. In addition, this amount will be indexed annually from now on, which means the threshold will continue to rise gradually in the coming years.
For the 2027 tax year, the required minimum compensation, based on the announced indexation, is already 51,000 euros in practice.
02 No general obligation for every business manager
The announced increase may cause some concern, but it does not mean that every business owner must now pay themselves at least 50,000 euros.
The minimum executive compensation is no general legal obligation. It applies only to companies that wish to retain the reduced corporate income tax rate.
In addition, there is an important exception for start-up companies. This condition does not apply during the first four taxable periods.
03 Benefits of all kinds are also being restricted
The reform is not limited to the level of compensation. From now on, lump-sum-valued benefits of any kind may not exceed 20% of the total annual gross compensation. Examples include:
- • a company car;
- • a smartphone;
- • a laptop;
- • a residence provided by the company to the manager.
If this threshold is exceeded, the right to the reduced corporate income tax rate also expires.
Should you raise your salary now?
Not necessarily.
At first glance, it seems logical to immediately raise a lower salary to the new minimum. However, that is not always the best option.
Higher compensation may allow your company to retain the reduced tax rate, but at the same time results in additional Income Tax and Social Security Contributions for Individuals. As a result, the tax benefit for the company may be partially or even completely offset.
The optimal compensation depends on various factors, such as:
- • the company's profitability;
- • your current compensation package;
- • the ratio of wages to dividends;
- • your personal and family situation;
- • the composition of your benefits package.
That's why there is no one-size-fits-all solution that works for every entrepreneur.
Why is this relevant today?
Although the new rules will not take effect until the 2027 tax year, it is important to start assessing today which impact they may have on your situation. This will give you timely insight into the potential consequences and allow you to make any necessary adjustments to your compensation package now.
What can Titeca do for you?
The new rules regarding executive compensation make it clear that a well-thought-out compensation strategy is becoming more important than ever.
The optimal mix of salary, benefits of all kinds, dividend payments, and other compensation depends on your company, your personal situation, and your plans for the future. What may be an attractive option for one entrepreneur may not be for another.
Our professional accountants and experts assist entrepreneurs in developing a tax- and social security-optimized compensation package, taking into account applicable laws and their specific situation.