Board profit share

What it means

A tantième is a share of profit that a company pays to members of its bodies, meaning directors, members of the board of directors or the supervisory board, as a reward for their work. It is paid out of net profit after tax, like a dividend to shareholders.

The general meeting decides on tantièmes when approving the financial statements and the distribution of profit. The articles or statutes must allow them, and they may not be paid if the company would thereby breach the legal restrictions on distributing profit.

Unlike a dividend, a tantième is not a return on ownership but a reward for holding office. The recipient is therefore taxed on it as employment income, not at the special dividend tax rate.

How it works in practice

When proposing a profit distribution, we compare with clients whether a tantième, remuneration under a service agreement or a dividend is better for the directors. Each has different taxation, different contribution consequences and a different effect on the company’s tax.

A tantième is not a tax-deductible expense for the company, because it is paid from profit after tax. Remuneration under a service agreement generally is. When designing remuneration we therefore calculate the total burden on both the company and the recipient.

Once the general meeting approves tantièmes, we record a liability to the office holders and, on payment, withhold tax and contributions under the rules applying to this income. Tantièmes are also included in the employer’s annual report.

What to watch out for

A tantième paid without a general meeting decision or without a basis in the articles is an unlawful payment. The company can demand it back, and the tax office may assess it differently from what the company intended.

The contribution treatment of tantièmes has its own rules, which may differ between health and social insurance and have changed over time. Before payment we therefore always check them against the current version of the regulations.