Taxation of dividends in SAS: the complete guide

Dividend distribution is a commonly used means of remuneration, and particularly popular among SAS directors. The terms and conditions for paying and taxing dividends have been turned upside down by the 2018 Finance Law, which introduced numerous changes, in particular the famous " flat tax ".

This new tax scale simplifies the calculations and estimates previously required to assess tax liability. The arrival of the flat tax simplifies and clarifies taxation rules for SAS directors.

Let's find out all you need to know about it.

What is the advantage of paying dividends in SAS?

Distributing dividends in SAS is a common form of remuneration. However, the principles governing dividend payments vary depending on the nature of the beneficiary. Dividend payments are decided at the Annual General Meeting, which takes place at the end of the fiscal year.

If the beneficiary is a legal entity liable forcorporate income tax, its share in the profits of another company is included in its income liable for corporate income tax.

It benefits from a 95% exemption under the mother-daughter regime, to avoid double taxation of amounts received. It is therefore taxed on 5% of dividends received for the fiscal year.

It is important to emphasize that it is more advantageous to distribute dividends within the framework of a SAS subject to corporate income tax.

In an SAS taxable under the corporate income tax regime, they are taxed twice: once by the company when they are distributed, and again by the recipients.

What taxation applied before January^1, 2018?

Before the 2018 Finance Act came into force, distributed dividends were taxed according to the progressive income tax scale, taking into account a flat-rate allowance of 40%. They were also subject to the payment of social security levies, at the overall rate of 15.5%.

In this context, a person taxed at the marginal rate of IR set at 45% was taxable at...60.5%! This tax system, deemed too heavy and complex, has been reviewed as of January^1, 2018.

What taxation has been in force since January^1, 2018?

January^1, 2018 saw the PFU (Prélèvement Forfaitaire Unique) come into force for SAS shareholders. Commonly referred to as the "flat tax", it comprises a levy at an overall rate of 30%, made up of 12.8% income tax and 17.2% social security contributions.

These new tax rules are much more advantageous for taxpayers in the higher income tax brackets.

On the other hand, for those in the lower brackets of the income tax scale, it can mean a heavier tax burden. In this context, it is possible to continue to benefit from the old tax system, simply by making a request to the tax authorities.

The Prélèvement Forfaitaire Unique (PFU) is a measure designed to simplify the tax rules applicable to SAS shareholders.

It can result in lower or higher taxes for those concerned, so it's a good idea to carry out a simulation to find out the most advantageous taxation method for your personal situation.