The €50,000 salary rule: paying 20% corporate tax instead of 25%

The reduced rate and its condition

Small companies benefit from a reduced corporate income tax rate of 20% on the first tranche of taxable profit, instead of the standard 25%. But the reduced rate is conditional: the company must pay at least one director a minimum annual remuneration, raised for income year 2026 (assessment year 2027) to a base €50,000 — and because the article indexes that base annually, the amount actually applicable for income year 2026 is €51,000 (or, if profit is lower, a salary at least equal to the taxable result). On top of that, benefits-in-kind may not make up more than 20% of that minimum remuneration — pure fringe benefits can no longer fill the gap to the threshold.

Why paying yourself more can help

If you pay yourself too little, the whole profit is taxed at 25%. Lifting the salary to the €50,000 threshold brings the first tranche down to 20% — and the salary itself is deductible for the company. Remember that at most 20% of that remuneration can be benefits-in-kind (a company car, vouchers and the like), so cash salary still has to make up the bulk of it. The extra personal tax and social contributions on the higher salary have to be weighed against the corporate saving.

• Below the €50,000 threshold: profit taxed at the standard rate
• At the threshold: reduced 20% rate on the first tranche of profit
• Benefits-in-kind may not exceed 20% of the minimum remuneration — the rest must be cash salary
• The salary is deductible, so it is not “lost” — it moves the money to your personal side
• The optimum depends on your profit, family situation and other levers

It is a balance, not a slogan

The right salary is rarely “exactly €50,000”. It depends on your marginal personal rate, social contributions, and whether you also plan dividends. This is precisely the trade-off a salary-versus-dividend optimiser is built to solve — searching the split that leaves the most in your pocket overall.