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08-12-2019, 11:26   #1
Calahonda52
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Close company: directors drawings vs salary

What am I missing is the following:
.
Employer PRSI is going to be 11.05% from Jan 1.
.
CT is 12.5%
ER is 11.05%
.
so not much difference between taking drawings or salary, assuming drawings are enough to leave no residual profits in the close company.
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08-12-2019, 11:37   #2
davindub
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Quote:
Originally Posted by Calahonda52 View Post
What am I missing is the following:
.
Employer PRSI is going to be 11.05% from Jan 1.
.
CT is 12.5%
ER is 11.05%
.
so not much difference between taking drawings or salary, assuming drawings are enough to leave no residual profits in the close company.
There are no drawings in a company, only directors loan/dividends/salary. Look up the rules on this regarding BIK and corporate tax charge (gross up 80%)

Also there is no ER on payments to prop. directors.

Also close companies only pay a surcharge on non trading income (rental, etc).
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08-12-2019, 16:41   #3
Calahonda52
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Thanks for this, are the rules in the Close company rules or elsewhere.
Anyway take an example.
Company pays
5000 to Prop. director who then pays PAYE/PRSI/USC etc on it.
Whats wrong with that from a tax paid point of view?
.
Does the same tax not get paid if it were treated as salary in the company, or by way of dividends.
Thanks as always
Top rate applying in all cases
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08-12-2019, 17:29   #4
davindub
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Quote:
Originally Posted by Calahonda52 View Post
Thanks for this, are the rules in the Close company rules or elsewhere.
Anyway take an example.
Company pays
5000 to Prop. director who then pays PAYE/PRSI/USC etc on it.
Whats wrong with that from a tax paid point of view?
.
Does the same tax not get paid if it were treated as salary in the company, or by way of dividends.
Thanks as always
Top rate applying in all cases
There is nothing wrong with drawing a salary and it is preferred to dividends as dividends are taken from post corp tax earnings from the co, while salary is corp tax deductible.
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08-12-2019, 17:53   #5
Calahonda52
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Thanks, What I did was just transferred out the funds, post surcharge etc, and paid all the taxes on my F11, rather than set up an employee in 2019 for just one shot.
I am now working as a contractor so from jan 2020 I will do it properly
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17-01-2020, 16:05   #6
Calahonda52
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Just checking my math here, as an employee's in my own company will be paying my salary next week, is this right?
[No headroom left in my tax credits/20% so tax is 40%]

40.00% Tax
04.00% EE PRSI
11.05% ER PRSI
04.50% USC (assuming < than 70,044)
.
Gives an all in rate of 59.55%
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17-01-2020, 17:43   #7
namenotavailabl
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If you're a proprietary director (class S PRSI), no employer PRSI is payable. See page 7 of this booklet (for 2019 but no changes in 2020 for S0/S1).

http://www.welfare.ie/en/downloads/SW14_19.pdf
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17-01-2020, 18:33   #8
Sono Topolino
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There is no employer PRSI for proprietary directors (Class S). In order to be deemed a proprietary director, you need to control 15% or more of the company's share capital.

Before taking money out of your company, you should speak to your tax adviser to decide how to structure the transaction in the most tax efficient way.
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17-01-2020, 20:06   #9
Stratvs
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I may be wrong but did you say in some previous thread that you were >66 in which case PRSI is not an issue.
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17-01-2020, 20:55   #10
Calahonda52
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Thanks, you are both correct about me, I should have said the query was for my partner who is going to join the company as as employee.
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17-01-2020, 22:26   #11
Sono Topolino
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If your partner is an employee, then you may legally be obliged to operate payroll and remit any taxes owing to the Revenue. The threshold for setting up PAYE is very low: €8 per week for a full time employee and €2 per week for a part time employee.

If your partner is not a proprietary director, you have to pay employer PRSI.

There are a lot of factors to consider here, so I would advise getting professional advice.
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18-01-2020, 14:10   #12
Calahonda52
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Originally Posted by Sono Topolino View Post
If your partner is an employee, then you may legally be obliged to operate payroll and remit any taxes owing to the Revenue. The threshold for setting up PAYE is very low: €8 per week for a full time employee and €2 per week for a part time employee.

If your partner is not a proprietary director, you have to pay employer PRSI.

There are a lot of factors to consider here, so I would advise getting professional advice.
Thank you.

Will be doing payroll for both of us as I am a contractor. The exercise in part was to see what her net pay would be, so the ER is a big piece.
I have yet to decide if I need to buy a payroll package, for 2 ?
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18-01-2020, 15:33   #13
namenotavailabl
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Quote:
Originally Posted by Calahonda52 View Post
I have yet to decide if I need to buy a payroll package, for 2 ?
For peace of mind it would be worth buying.

I've a spreadsheet linked in my signature which generally seems accurate but I wouldn't rely on it myself to be 100% accurate in all cases. The real world consequences of making errors can be expensive and well exceed the cost of payroll software.
Additionally, the software packages tend to be well integrated with PAYE modernisation which saves time.
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18-01-2020, 16:47   #14
Stratvs
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Originally Posted by Calahonda52 View Post
I have yet to decide if I need to buy a payroll package, for 2 ?
https://www.boards.ie/vbulletin/show...hp?p=111837122

Following up on that other thread the question is what value do you place on your time per hour to be manually calculating and inputting payroll for 2 into ROS -v- approx €160pa cost of a payroll package, say <€4pw. Time to input 2 EE on payroll package & submit to ROS weekly <10 mins, in fact probably closer to 5 and no having to see if you’ve calculated everything correctly.
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18-01-2020, 17:38   #15
Calahonda52
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Yep, good point!
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