Salary rewards the manager’s work. A dividend rewards the capital invested by the shareholder. For someone wearing both hats, the right choice rarely means eliminating one in favor of the other: the split must be defensible, coherent for tax purposes and compatible with both pension provision and the company’s cash flow.
At a glance
- Salary is generally deductible from the company’s profit if it corresponds to actual services and remains in line with the market. It is fully taxable for the manager and subject to social insurance contributions.
- A dividend is paid from distributable profit or reserves after tax. It is not deductible by the company and is generally subject to 35% withholding tax.
- With a holding of at least 10%, the dividend is partially taxed: 70% for direct federal tax and, in the canton of Vaud, 70% where the holding is a private asset.
- An unusually low salary combined with a manifestly disproportionate dividend may lead the AVS compensation office to reclassify part of the dividend as salary.
- Conversely, an excessive salary paid to a shareholder-manager may be adjusted for tax purposes as a hidden profit distribution.
This article was prepared for publication on February 20, 2026. A legal review was conducted on September 1, 2026; no material change affecting the principles below was identified.
Two kinds of income that reward different things
In an SA or Sàrl, the company is legally separate from its shareholder or member. An active manager may therefore be both an employee of the company and the holder of ownership rights. This dual status does not allow income to be freely renamed using whichever label is most advantageous.
Salary arises from the employment relationship or corporate office. It rewards duties performed, responsibility, workload, experience and results. A dividend arises from ownership of capital: it belongs to the shareholder because they invested and bear the economic risk.
| Criterion | Salary | Dividend |
|---|---|---|
| What it rewards | Work and the role performed | Capital and shareholder risk |
| For the company | Deductible expense if commercially justified, plus employer contributions | Allocation of after-tax profit, not deductible |
| For the manager | Employment income taxed at 100%, subject to applicable deductions | Investment income, with partial taxation if the holding reaches 10% |
| Social insurance | AVS/AI/APG, unemployment insurance within statutory limits, occupational pensions, accident insurance and other charges as applicable | No contributions on a genuine return on capital |
| Availability | Can be paid periodically, including as a bonus | Requires distributable equity and a valid corporate resolution |
| Main formalities | Payroll, social insurance reporting, salary certificate, any payroll withholding tax | Accounts, proposed allocation of profit, minutes and dividend withholding tax |
Salary: deductible, insured and fully taxable
A market-rate salary generally constitutes a commercially justified expense. It therefore reduces the company’s taxable profit. Employer contributions relating to this remuneration are also borne by the employer under the applicable rules.
For the manager, gross salary is income from dependent employment. AVS/AI/APG contributions total 10.6%, shared equally by employer and employee. Unemployment insurance adds 2.2%, also shared equally, up to insured annual pay of CHF 148’200. Family allowances borne by the employer, accident insurance, occupational pensions and, depending on the contracts, daily sickness benefit insurance are added. The exact cost therefore exceeds gross salary alone.
These social contributions are not merely a cost. Salary feeds the individual AVS account and, depending on the pension plan, occupational pensions and death and disability cover. In 2026, compulsory occupational pension coverage generally begins above annual pay of CHF 22’680, subject to statutory exceptions and the fund’s rules.
What salary also provides
- regular monthly income, useful for private expenses and often for a mortgage application;
- an insured income base for retirement, disability, death, accident or unemployment, within the limits of each scheme;
- the ability to arrange suitable occupational pension provision and, where appropriate, tax-deductible buy-ins;
- a clearer separation between the manager’s private needs and the company’s distribution capacity.
Dividends: profit distributed after tax
A dividend cannot be paid simply because the company’s bank account is well funded. It must be based on profit shown in the balance sheet or reserves established for that purpose. Carried-forward losses and mandatory reserve allocations must be taken into account. The general meeting of shareholders or members then decides how profit is used on the basis of the accounts and the competent body’s proposal.
Unlike salary, a dividend is not a company expense. Profit has already been taxed at SA or Sàrl level, and the dividend is then taxed as the shareholder’s income: this is economic double taxation. Partial taxation mitigates its effect for qualifying holdings without eliminating it.
A holding of at least 10%: how much of the dividend is taxable?
For direct federal tax, 70% of the gross dividend enters taxable income when the ownership rights represent at least 10% of the share or membership capital. In the canton of Vaud, the proportion is also 70% for a holding owned as a private asset and 60% where it forms part of business assets. Below the 10% threshold, the dividend is generally fully taxable.
Taxation at 70% does not mean a 70% tax rate. It means that 70% of the dividend is added to other income subject to the taxpayer’s tax schedule. The final amount therefore depends in particular on tax residence, marital status, other income, assets and deductions.
The 35% withholding tax does not reduce the dividend to declare
The company generally has to withhold 35% of the gross dividend and pay it to the Federal Tax Administration under the applicable procedure. For a beneficiary resident in Switzerland, this safeguard tax is normally refunded or credited if the dividend and holding are correctly declared and the other conditions are met.
An example of the mechanism — not a calculation of the best choice
A general meeting approves a gross dividend of CHF 40’000 for a manager resident in the canton of Vaud who holds the shares as private assets:
- immediate payment to the manager: CHF 26’000;
- withholding tax paid by the company: CHF 14’000;
- gross dividend to be declared by the manager: CHF 40’000;
- if the holding reaches 10%, amount included in the Vaud and federal tax bases: CHF 28’000.
The CHF 14’000 is not automatically lost: it is generally recoverable if the income and corresponding assets are duly declared. This example excludes the profit tax already paid by the company, the personal tax schedule and pension effects.
The main risk: artificially replacing salary with dividends
Dividends generally constitute a return on capital not subject to AVS contributions. However, the compensation office may depart from the chosen classification when two conditions are met: the manager receives no salary or an unusually low salary for the work performed, and the dividend is manifestly disproportionate to the capital invested.
The salary analysis considers in particular the job description, level of responsibility, expertise, experience, working percentage, size and situation of the business, changes in remuneration and salaries in the industry. The Salarium calculator can provide an indication, but cannot replace a comparison tailored to the manager’s actual role.
To assess the return on capital, AVS guidelines generally refer to the tax value of the shares. A dividend of 10% or more of that value is presumed disproportionate. This threshold is neither an absolute statutory ceiling nor a guarantee: it is an indicator used alongside the salary assessment.
An example of a risk area
A manager works full time. A reasonably documented market salary would be around CHF 120’000. The company pays CHF 45’000 in salary and CHF 80’000 in dividends. The holding’s tax value is CHF 300’000: the return reaches 26.7%.
Both warning signs are present: potentially inadequate salary and a dividend above 10% of the tax value. The compensation office may examine an adjustment up to the usual salary level, with retrospective contributions and interest. The outcome nevertheless depends on the facts and evidence; this example is not an automatic assessment rule.
The opposing view: a high dividend is not always enough
The company and manager can argue that salary is already at market level by producing the contract, job description, working percentage, comparables and remuneration history. The Federal Supreme Court has accepted that, where salary is appropriate, a high dividend cannot be reclassified solely because the return on capital appears substantial. Both disproportionate elements must be examined cumulatively.
This defense is much stronger when documented before an inspection. Reconstructing a heroic job description and an approximate working percentage after the event may leave the compensation office with a less poetic impression.
The reverse risk: excessive salary
Setting a very high salary does not provide unlimited freedom either. If remuneration exceeds what a company would have granted an independent third party in the same circumstances, the tax authority may treat the excess as a hidden profit distribution. The excessive portion is then added back to the company’s taxable profit and may have consequences for the shareholder and for withholding tax.
The authority must examine all circumstances and cannot simply substitute its salary preferences for the company’s. It may, however, rely on the role, comparable remuneration, results, company size and available documentation. Variable pay or a bonus should therefore rest on a written, understandable rationale, not simply on the profit someone wishes to make disappear on December 31.
A practical method for setting the right combination
- Describe the actual role. Document duties, responsibilities, working percentage, experience, decision-making authority and any replacement arrangements.
- Estimate a market salary range. Use comparable data, the company’s history and available statistical tools as an additional indicator.
- Check social protection. Assess the impact on AVS, occupational pensions, death and disability cover, accident insurance, daily benefits and pension buy-in capacity.
- Check distributable profit. Ensure the accounts are reliable, losses and reserves have been addressed, and equity legally permits the distribution.
- Preserve liquidity. Accounting profit is not necessarily available in the bank. Retain the resources needed to pay taxes, salaries, suppliers, investments and financing maturities.
- Simulate the total burden. Consider the company and manager together: profit tax, social contributions, income tax, recoverable withholding tax, occupational pensions and the effects of the canton of residence.
- Decide and formalize. The contract or remuneration decision, payroll, salary certificate, annual accounts, meeting minutes and withholding tax declaration must tell the same story.
When should one or the other be favored?
| Situation | Generally coherent approach |
|---|---|
| Full-time active manager needing regular private income | Stable salary matching the role, followed by a possible dividend from the distributable surplus |
| Young company, volatile profit or tight cash flow | Remuneration compatible with the company’s resources; cautious or deferred dividend |
| Mature company, strong equity, market-rate salary already paid | Combination of salary and dividend, following simulation and a valid resolution |
| Need to strengthen pension provision or risk cover | Examine insured salary and the occupational pension plan before increasing the dividend |
| Purely passive shareholder doing no work for the company | Normal dividend; salary without services would be difficult to justify |
Mistakes to avoid
- setting a token salary without assessing the value of the work performed;
- treating the 10% of tax value threshold as an automatic rule or an acquired right;
- comparing gross salary and gross dividends without including profit tax and employer contributions;
- distributing a dividend solely on the basis of cash balances before checking distributable equity;
- forgetting withholding and payment deadlines for withholding tax;
- neglecting pensions, disability cover and the manager’s need for regular income;
- abruptly changing the salary-dividend split without an economic explanation or documentation;
- paying private “advances” through a current account with the intention of deciding later whether they were salary or dividends.
How Delta Conseil SA can support you
Delta Conseil SA can prepare an overall simulation for the company and manager, document market remuneration, check the impact on payroll and pensions, prepare the allocation of profit and coordinate dividend and withholding tax formalities. The aim is not a universal ratio, but a solution consistent with your role, accounts, canton of residence and private needs.
Caution
The result depends heavily on the canton and municipality of residence, family circumstances, pension plan, age, tax value of the shares, ownership percentage, other income and the company’s distribution capacity. Shareholders resident abroad, asymmetric dividends, corporate groups and shareholder current accounts require specific analysis.
Frequently asked questions
Is there a mandatory minimum salary for a shareholder-manager?
There is no single federal amount or percentage applicable to all managers. Salary must be assessed against the role and the market, subject to any applicable collective agreement or cantonal minimum wage. For AVS, the central question is whether remuneration is unusually low compared with the work actually performed.
Can I pay myself only dividends?
A passive shareholder may naturally receive a dividend without salary. For a manager actually working in their company, the absence of salary, especially combined with a substantial distribution, creates a risk of AVS reclassification and also leaves pension gaps. The situation should be documented before payment.
Is the 35% withholding tax lost?
For a person resident in Switzerland, it is generally refunded or credited if the gross dividend and corresponding assets are duly declared and the statutory conditions are met. For a person resident abroad, the refund depends in particular on the applicable double taxation agreement.
Can dividends be paid every month?
An ordinary dividend generally rests on annual accounts and a general meeting resolution. Swiss law also allows interim dividends based on interim accounts and subject to formal conditions. Improvised monthly transfers do not become dividends simply because of their bank payment description.
Is a bonus treated as a dividend?
No. A bonus rewarding work remains salary: it is taxable as employment income and subject to social contributions. It may be deductible for the company if commercially justified and correctly recorded. Excessive variable remuneration granted to a shareholder may nevertheless be subject to a tax adjustment.
Official sources
- Fedlex — Code of Obligations, in particular rules on reserves and dividend distributions
- Fedlex — Federal Act on Direct Federal Tax, in particular Articles 17, 20 and 58
- FTA — Partial taxation of income from participations
- Canton of Vaud — Reminder of taxable proportions for qualifying holdings
- FTA — Withholding tax: rates, operation and refunds
- FTA — Mandatory withholding tax declarations and deadlines
- FSIO — Overview of social insurance contributions
- FSIO — Guidelines on salary subject to AVS, AI and APG, as at May 1, 2026
- Federal Supreme Court — Judgment 9C_837/2014 of April 8, 2015, appropriate salary and dividends
- Federal Supreme Court — Judgment 2C_660/2014 of July 6, 2015, excessive shareholder-manager salary
Last legal review: February 20, 2026.
Disclaimer
This publication is provided for information only and does not constitute individualized legal, tax, accounting or financial advice. Each situation must be assessed in light of its specific circumstances and the law applicable at the time of the decision.
For further information, please consult our Legal notice and disclaimer.
