Remuneration of the manager of a SARL or EURL: how it is treated by the company and by the manager

In a limited liability company (SARL) subject to corporate income tax, the manager's remuneration is deductible from the company's profits. In an SARL subject to personal income tax, it is not. The deduction is not automatic: the remuneration must correspond to actual work performed and must not be excessive. For the manager, the social security regime depends on their share of the capital, and dividends are subject to specific rules.

This page covers the general tax and social security framework. It does not address: contribution rates, the details of Article 62 of the French General Tax Code (capital requirements, fees, beneficiary allowance), the amount of a "reasonable" remuneration, social protection (pension, supplementary insurance), or the situation of non-residents. For these points, the rules depend on your individual circumstances.

Who decides on the remuneration

The manager of a limited liability company (SARL) must be a natural person, whether or not they are a shareholder. The ordinary general meeting of shareholders decides on their appointment, removal, and remuneration. A single-member limited liability company (EURL) is managed by a manager who must also be a natural person: either the sole shareholder or a third party.

From a company perspective: deductible or not?

It all depends on the company's tax regime.

A limited liability company (SARL) is generally subject to corporate income tax (IS). It can opt for personal income tax (IR), under specific conditions. For an SARL created less than 5 years ago, the official guidelines require all of the following conditions:

• the main activity of a commercial, craft, agricultural or professional activity; ;
• a company not listed on the stock exchange; ;
• fewer than 50 employees; ;
• an annual turnover or total balance sheet of less than 10 million euros; ;
• a creation less than 5 years old at the time of the option request; ;
• voting rights held at least 50 % by one or more natural persons; ;
• voting rights held at least 34 % by certain managers (president, chief executive, manager, for example) and by members of their tax household.

In this case, the option is valid for 5 accounting periods and cannot be renewed. Another case exists: the family-owned limited liability company (SARL), formed between members of the same family, for which the option, decided by all the partners, is not limited in time.

The three conditions for deduction

The deduction of a manager's remuneration is based on the same principle, whether the company is a SARL or an EURL subject to corporate income tax:

1. Effective work. The BOFiP states: "To be included among deductible expenses, remuneration must correspond to actual work performed."«
2. A salary that is not excessive. It is assessed in light of the importance of the service rendered. The criteria cited by legal doctrine include qualifications, scope of activity, compensation for similar positions, and the company's salary policy. For executives who hold a significant share of the capital, legal doctrine requires strict application. Company losses alone do not prove that compensation is excessive.
3. An effective and sufficiently justified charge. If the amount or the identity of the beneficiary is not justified, the sums are added back to the taxable profit.

Benefits in kind and cash are part of remuneration. They are subject to the same conditions.

From the manager's perspective: taxation of remuneration

For a limited liability company (SARL), the service-public.fr information sheet on the manager's income indicates that the remuneration for the corporate office constitutes an operating expense for the company and is subject to income tax in the category of salaries and wages. This sheet presents this treatment without distinguishing between SARLs subject to corporate income tax (IS) and those subject to personal income tax (IR): for an SARL subject to personal income tax, whose remuneration is not deductible, the manager's remuneration should be verified with the official source. The sheet does not cover single-member limited liability companies (EURL).

The case of the EURL

In principle, a single-member limited liability company (EURL) is subject to income tax when the sole member is an individual: its profits are then taxed at the member's level. This member can opt for corporate income tax (IS). The option is exercised when the articles of association are filed, or otherwise before the end of the third month of the fiscal year for which the company wishes to be subject to IS for the first time. If the sole member is a legal entity, the EURL is automatically subject to IS, without the option for personal income tax (IR).

For a single-member limited liability company (EURL) taxed under the personal income tax (IR) regime, the French tax authority's official bulletin (BOFiP BOI-BIC-CHG-40-50-10) stipulates that the salaries withdrawn by partners in partnerships "must remain included in the company's profits." It specifically mentions the EURL when the partner is an individual and the company has not opted for corporate income tax (IS). The tax treatment of the manager of an EURL taxed under the personal income tax regime should be verified with the official source.

From the manager's perspective: the social security system

A minority shareholder-manager can combine their directorship with an employment contract if it stipulates distinct technical functions, remuneration, and a subordinate relationship. In this case, they are eligible for unemployment benefits. For an equal shareholder-manager, the rules regarding combining directorships should be verified with the official source.

For the majority shareholder, contributions are calculated on their professional income. Those paid on their behalf are deducted from the company's taxable profit.

For the sole shareholder of a single-member limited liability company (EURL), the tax base changes depending on the tax regime. Under personal income tax (IR), contributions are calculated on the EURL's total profit. Under corporate income tax (IS), they are calculated on net remuneration.

Dividends: a special rule

Dividends are automatically subject to a flat tax of 31.4%. The manager can opt for the progressive income tax scale, after a deduction of 40%.

For the majority shareholder of a limited liability company (SARL), an additional social security rule applies: dividends exceeding 10% of the share capital are subject to social security contributions. The service-public.fr information sheet on company directors' income specifies that these dividends are not subject to contributions as long as they do not exceed this threshold. The rule is the same for the sole shareholder of a single-member limited liability company (EURL) subject to corporate income tax (IS): dividends exceeding 10% of the EURL's share capital are included in the contribution base.

Several points need to be verified with the official source: the basis on which the threshold is measured, the portion of the dividend subject to contributions (full dividend or excess portion), and the interaction with the flat-rate levy. The same applies to the rule applicable to minority or equal shareholders.

Numerical example (fictitious profile)

Situation. Marc is the majority shareholder and manager of a limited liability company (SARL) with a share capital of €20,000. Before his compensation, the company's profit is €150,000. He plans to receive €60,000 in compensation and a dividend of €5,000. Assumptions: the SARL is subject to corporate income tax for the dividend test, the 10% threshold is calculated solely on the €20,000 share capital (excluding share premium and shareholder current account balances), and any other tax adjustments are ignored.

Issue. What is the effect of the company's tax regime on the taxable base, and does the dividend exceed the 10 % threshold of capital?

Strategy. Compare the bases depending on whether the SARL is subject to IS or IR, then calculate the 10 % threshold of capital.

Result.

This calculation compares tax bases, not taxes: it applies neither corporate tax rates nor income tax brackets. It does not calculate any social security contributions, and the €3,000 does not represent a contribution base: the portion of the dividend subject to contributions should be verified with the official source. Marc is a fictional profile. The figures illustrate the arithmetic, not a real-life situation.

What changes depending on your situation

• The company's tax regime : IS or IR, and, in EURL, the possible option for IS.
• Your share of the capital : it decides on the social status and treatment of dividends.
• The work actually done : this is the condition for the deduction, along with the level of remuneration.
• The existence of an employment contract for a minority manager.
• The amount of share capital : it sets the threshold of 10 % for dividends.
• Your personal situation : residence, other income, desired social protection.

No results are promised.