The director of a French SAS paid himself 400,000 euros in dividends and 30,000 euros in salary for four years. His accountant had demonstrated to him, figures in hand, that a dividend cost half as much as a salary. That was true. Last December, he discovered an instalment of the differential contribution for which he had made no provision, a pension he had never built up, and a share capital of 1,000 euros which would have changed everything had he chosen a SARL. None of these three points appeared on the comparison table.
The choice between salary and dividends is presented as a calculation. It is not. It is a structural decision, taken once a year, whose effects unfold over ten years and which can never be undone retrospectively. The calculation comes last, and it yields different answers depending on the corporate form, on the director's social security status, on the household's overall income, and, since 2026, on a new factor which most comparison tables still ignore. Everything that follows assumes a company subject to corporate income tax, the only situation in which the question arises at all.
Because it sets against one another two flows which do not pay for the same thing. Salary rewards work, it is deductible from the taxable profit of a company subject to corporate income tax, and it builds up pension and welfare entitlements. A dividend rewards capital, it is drawn from profits which have already borne that tax, and its treatment for social security purposes depends entirely on the director's status.
Comparing one euro of salary with one euro of dividend therefore means comparing two things which do not carry the same consideration. The immediate difference in cost, invariably placed in the foreground, says nothing of what the director is buying, nor of what he is giving up. The useful question is not which of the two routes is cheaper this year. It is which combination serves the director's plan over five years, given the corporate form he has chosen and the one he could have chosen.
The director's social security status, and nothing else.
The president of a SAS, and a minority or equal-holding manager of a SARL, are treated as employees for social security purposes and fall within the general scheme. Their remuneration bears high employer and employee contributions. Their dividends, by contrast, bear no social security contributions at all, whatever the amount and whatever the shareholding.
A majority-holding manager of a SARL, and the sole shareholder of an EURL, fall within the self-employed scheme. Their remuneration bears appreciably lower contributions. But the fraction of their dividends exceeding 10% of the share capital, increased by share premiums and by sums standing to the credit of the shareholder current account, is treated as earned income and subjected to self-employed social security contributions (French Social Security Code, art. L. 131-6).
This 10% threshold alone accounts for most of the differences observed in practice. It makes the dividend expensive precisely where the salary is cheap, and the reverse. Its base can be made to move, which makes it a genuine lever. But one must understand what that base contains. A shareholder current account is not an account held by the director within the company: it is a claim of the shareholder against the company, a debt owed by the company. It enlarges the base of the threshold for as long as it remains unpaid, and its repayment reduces that base, without the repayment itself being taxable. Acting on that base therefore calls for decisions on the share capital or on the company's cash position, whose timing and collateral effects are not matters for improvisation.
The choice of corporate form, thought to be neutral at incorporation, thus determines most of the arbitration for the entire life of the company.
A great deal, and this is the point the comparison tables have yet to absorb.
Introduced by the Finance Act for 2025, the differential contribution on high incomes was made permanent by the Finance Act for 2026, until the year in which the public deficit falls back below 3% of gross domestic product (French Tax Code, art. 224). It guarantees a minimum tax burden of 20% of the adjusted reference taxable income for taxpayers resident in France whose income exceeds 250,000 euros for a single person, or 500,000 euros for a couple taxed jointly.
Yet a dividend subject to the single flat-rate levy (prélèvement forfaitaire unique) bears income tax at 12.8%. A director who takes his remuneration mainly in dividends therefore crosses the reference income threshold while displaying an effective tax rate well below 20%. That is precisely the situation the contribution was designed to catch. The strategy which used to minimise tax is now the one which triggers the top-up.
The contribution also requires a compulsory instalment of 95% of the estimated amount, payable between 1 and 15 December of the tax year, on an estimate which the taxpayer must produce himself. A distribution decided in June therefore creates a cash obligation in December, with surcharges where the estimate proves significantly wrong. The director who distributes without having modelled his position discovers the issue when it is too late to address it.
It carries two, and neither appears on any table.
A director sets his own remuneration freely. That freedom has two limits, and they do not lie where one might expect.
That is exactly what the recent decisions sanction. The Conseil d'État, the supreme administrative court, upheld the recharacterisation as employment income of dividends paid to artificially interposed companies, on the basis of the abuse of law procedure of article L. 64 of the French Code of Tax Procedure (Conseil d'État, 29 November 2024, nos. 487706, 487707 and 487793). A year later, a court of appeal confirmed a social security reassessment aimed at service agreements concluded between a SAS and its parent company, held to lack any real consideration distinct from the director's corporate office, and without even resorting to the abuse of law procedure (Court of Appeal of Aix-en-Provence, 3 July 2025, no. 24/05530).
In both cases, it is not the size of the dividend that is attacked. It is the route it travels. The dividing line does not run between a low salary and a high one. It runs between a distribution made directly, openly and on the record, and a flow arranged so as not to resemble what it is. Determining on which side an existing structure falls requires that structure to be examined.
Choosing the corporate form at incorporation without having modelled remuneration over five years. Reasoning on the cost of the dividend without allowing for the corporate income tax already paid upstream. Distributing from a SARL without having checked the 10% threshold and the exact composition of its base. Distributing heavily without modelling the differential contribution, then discovering the December instalment. Interposing a company with no demonstrable economic purpose. Deciding each year as though the decision stood alone, when it in fact builds a pension trajectory and a valuation for the company.
None of these decisions is irregular. All of them are irreversible once the financial year is closed.
The right balance is not the one that minimises this year's tax. It is the one that holds over time, withstands a tax audit and funds the director's plan. It is built before the year end, not at the shareholders' meeting.
Lobe Law, a Paris law practice specialising in tax law and the structuring of company directors' affairs, reviews your situation and secures the balance you strike between salary and dividends. Book a consultation.