Historically, there were some tax rules defining the maximum salary that employee could take from his own salary (called "échelle valaisanne"). More recently, since the individuals owning an important investment in a company may obtain a tax rebate on the distribution of dividends (between 30 and 40% depending on the canton of residence), the situation is slightly reversed (the tax authorities may sometimes require that a minimum salary be paid out).

At the same time, you may have to consider also that the representatives of corporate department of the the tax authority might not have exactly the same interest as the ones representing the taxation for individuals. For the department responsible for corporations, if you take a high salary, this implies a higher tax deduction for the company and maybe a lower tax amount (for their budget). From your point of view, it's however true that you would pay higher social security contributions and higher private taxes.

In summary, the tax officials would probably like to understand the way the salary has been defined and if it corresponds to the type of position. The company has some flexibility to define the way the salaries are set and the tax authority should in principle only criticize this if the salaries are not reasonable.

Hi Per P, thanks so much for your response and clarification.

Is there a guide you could refer me to provide some guidance on what a reasonable salary is?

I ask this question because in my company of 1, I am the Company Administrator, the Accountant, the Sales guy, the Client Relations, the IT trouble shoorter and the Delivery Boy. :)

And who’s the Head Cook and Bottle Washer?

Ritchie when you are man show, you are everyone! 

Sorry that should read one man show!

Thanks for the reassurance that the HC&BW

hasn’t  been made redundant.

Courage!

R.

Hi,

I'm not aware of any comprehensive official guide about this question.

There are some statistics that you could refer to, for exemple this salary calculator, but I don't think it provides a precise tool for all situations: https://calcsalge.ch/

For example, if you are the manager of a one-man company, it seems relatively obvious that the salary could be lower in practice than for the manager of a company employing 50 persons. In such case the range to be taken is probably the lower range based on the education, the experience and the field of work.

Best regards,

Hi Per,

I really appreciate you taking the time to repsond again to my post. The information you shared is super helpful. I want to ensure I understand that you are saying the statistics are guide not a standard that a company is required to follow by law.

I find it more than amusing that a government can set or demand explanations for employee salaries in private companies.

I find it more amusing that you would think that the Canton of Geneva Tax Authorities, who do this professionally, day in and day out, would not see that you are pretending to be both the owner and also a multiple employee of a "company." I am sure they  do not think it is bizarre, but infantile and obvious. They were not born yesterday.

You are conducting some business activity that involves a number of activities all of which you perform. It is registered as a company and you are, as its owner, responsible.

Just pay the taxes and fees you are supposed to. If your business activity is successful, you can afford it. Stop being greedy and make your fair contribution to the funding of the public infrastructure within which you operate. If your business is not successful, all the handwaving before the Tax authorities is not going to save you from paying your fair share.  

"Could you give me some insight into Geneva tax authorities interest based on their questions?"

Yes, their interest is in making sure you pay your fair share of taxes, as the rest of us, based on the real expenses and the real profits of your personal (one-man) business.

Thanks JM for your input and perspective. It is also welcomed and appreciated.

Just one word of caution. While I work for an institution, a few of my personal friends are independent professionals and some have consultancies. All of them are registered as independent professionals (profession liberal) and declare their revenues and pay taxes and contributions to the social funds (like pensions) accordingly.

One of them decided to register as a company, so he could reduce his tax burden. He declared himself and his spouse as an employee (who did help him a bit) to increase his "company's" expenses, declare a lower profit and pay lower taxes. It was accepted, but he had to justify the salary levels, just like you are being asked. Then, to his surprise, he found he had to make a number of payments regarding his "employees," both as an employee and as an employer (social security contributions, pension funds, etc) and he had to "deduct" taxes from his employees "at source" and forward those payments to the authorities. At the end of the year, he and his "employees" both had to pay taxes. His wife had to pay income taxes on a salary she never really received. Don't know the details, and I don't know if in the end, he ended up worse or slightly better regarding his tax burden, only that he regreted his decision, as it was all too complicated, so I thought I would share this with you.

Thanks JM for following up on your initial post and providing more insight. It is kind of you. Have a good evening and weekend.

Kikiriki,

Please be aware that if you have not registered as an employee and obtained legaly required employee insurances, then any payments to you would normally be considered dividends, and corporate taxes are due on profits before your declared dividends. And such taxes are significant, so either you have a choice of higher taxes as a independant, or register a company and declare yourself as an employee, where the taxes are dedictible from the profit and loss of the company, versus all payments to you and any related costs, are at a very high rate of Corporate taxes. Be very careful, and infact they sending you a notice is a nice reminder to get you to understand your business responsibilities. Its not easy to find out about all this but you should have invested time before you setup your legal entity. Several business owners I heard about lost everything, as they were looked at the business operations, and the officials found that it was acting as sole ownership and not a Sarl or SA. And then you lost the view of at the 'at arms length' and viewed as 100% legally liabile. And shoudl any tax be imposed or fines, thez become Personal and not corporate. Good luck

ops sorry about the spelling, between home and work I have to fight with the Z and Y, as home I use Swiss french keyboard and recently had to use compay laptop with UK English keyboard, grrr. making me nutz