Business owner, how to pay less taxes? Tips and solutions
You are a business manager, salaried or self-employed, success is there and your income increases, it is the fruit of your work! But the other side of the coin is the income taxes which are heavier and eat away at your earnings.
So, how to pay less taxes when you are a business owner? From the simplest solutions to those of more complex tax exemption, you have the choice. We give you some tips to follow according to your resources, your objectives and your needs!
Optimizing executive compensation
As a business owner, several options are available to you within the company itself to benefit from advantageous tax arrangements in order to optimize your remuneration and indirectly pay less tax.
Arbitrate between salaries and dividends
While the president of SAS receives salaries, the manager of SARL receives bonuses. Whatever your profile and that of your company, you can optimize your overall remuneration by carrying out an arbitration between the sums paid having a character of salary and the dividends.
Despite the appearance of the “flat tax”, the payment of dividends is only taxed at 30%. This operation is facilitated with an SAS and it may be useful, on a case-by-case basis, to transform an EI, an EURL or a SARL into an SAS to optimize the tax gain provided by the dividends.
This change entails costs, do not hesitate to contact your accountant or a tax advisor before making this decision. Note that dividends are movable income and you therefore do not contribute to retirement when you receive them.
Set up a profit-sharing contract
The profit-sharing bonus can be paid to the business manager as well as to the employee. It is limited to the amount of profit-sharing received by the employee benefiting from the highest bonus. In addition, the profit-sharing is exempt from social charges and income tax (subject to conditions).
For this purpose, the profit-sharing bonus must be implemented in the company at the latest 6 months before the closing date of the accounting year. It is possible from an employee and its amount is capped to benefit from the income tax exemption.
Set up a PEE Company Savings Plan
Like the profit-sharing bonus, the PEE is not reserved solely for employees of your company. You can also benefit from it as a business owner.
In the benefits program, you benefit from savings whose interest is not taxed, and a matching contribution paid by the company itself which can be particularly advantageous.
It should be noted that the savings will be blocked for a minimum of 5 years, even if there are many cases of early release.
Choosing between company vehicle and mileage costs
Depending on your travel needs, it is a good idea to optimize the choice of vehicle. In general, if you drive a lot of kilometers, using your personal vehicle and receiving a payment from the company for mileage allowances is advantageous.
Conversely, if you do few kilometers as part of your profession, buying a new vehicle at the expense of the company is relevant.
Restaurant vouchers and lunch vouchers
If your company sets up a system of lunch vouchers or restaurant vouchers, the manager can benefit from it under certain conditions, which has the advantage of benefiting from meals paid for half, or even more, by the company.
The presidents or general managers of SAS assimilated employees, as well as minority or equal managers, can benefit from restaurant tickets or lunch vouchers, subject to also paying them to their employees.
Majority managers, on the other hand, cannot benefit from the system.
Reduce income taxes as a business owner
Once your sources of income have been optimized as much as possible, it is a good idea to tackle lowering your income tax, or even eliminating it. Many tricks will help you achieve this goal.
Open a PER (Retirement Savings Plan)
The PER has recently replaced many existing devices, in particular Madelin law contracts. It works like life insurance but the funds will only be available on retirement or early release under conditions.
In return, you benefit from significant tax advantages concerning the payments made: they are deductible from your taxable income within the limit of 10% of net earned income and 10% of PASS (Annual Social Security Ceiling).
The more you are taxable, the more advantageous the PER. In addition, it is an effective device for diversifying your assets.
The tax credit for home services
Do you need some time for yourself? Why not use home services to increase your quality of life while reducing your income tax?
By surrounding yourself with people to do housework, gardening, small DIY jobs or home school support, you benefit from a 50% tax credit.
Expenses incurred are deducted up to 12,000 euros per year, plus 1,500 euros per dependent, up to a maximum of 15,000 euros. You can thus realize a tax credit which can amount to a maximum of 7,500 euros!
Rental property investment
Pinel law, Denormandie law, you can invest in new or old rental property while benefiting from tax reductions. Of course, these devices meet strict conditions but allow you to reduce tax while expanding your personal real estate assets!
The tax reduction granted depends on your commitment to the minimum rental period:
- Rental for 6 years: 12% tax reduction
- 9-year lease: 18% tax reduction
- Rental for 12 years: 21% tax reduction
Rents are capped and eligible tenants must not exceed the imposed scale of resources. Nevertheless, the Pinel and Denormandie devices, well made, can prove to be very profitable.
Investment in SMEs and SMIs
As a business owner, you know more than anyone how difficult beginnings can be. You also realize that a well-launched business can have very encouraging results in the years to come.
Investing in SMEs and SMIs, which your company may have benefited from, is an opportunity to support the development of promising companies with fewer than 250 employees while making significant tax savings.
In practice, the investment can be direct, via a capital contribution to a company that you know and in which you believe, or indirect via the subscription to FIP and FCPI.
The investment made entitles you to an income tax reduction of 18%. It is nevertheless a risky investment, since young companies are unfortunately the most threatened by bankruptcy.
There are still many other legal tax arrangements to pay less tax as a business owner. A heritage balance sheet helps you to take stock of your needs and your objectives to calmly reduce tax.