Managing director’s levies vs. minimum wage

This topic is very topical today and will be topical in the future unless the tax and levy burden in Slovakia changes dramatically or the tax authorities and the Social Insurance Institution start to control business entities more effectively. The topic concerns primarily small and medium-sized entrepreneurs, who naturally have the opportunity and flexibility, if they are employees or statutory bodies in their company, to determine the amount of their salary or remuneration with regard to the overall tax and social security tax burden.

What is the content of the training?

• the different options for remuneration of statutory officers in companies (for simplicity, the statutory officer is hereafter referred to as the managing director);
• Different tax differences between different types of executive remuneration in companies;
• is it possible to be employed as a managing director in my own company?
• Are the various sub-minimum remuneration schemes (e.g. 1/5th time, €1 executive remuneration) legally OK?
• whether such wages/remuneration are in line with transfer pricing and do they constitute tax and insurance evasion, which is a criminal offence?
• taxation of profit shares for directors and employees;
• tax burden on irregular executive remuneration;
• Impacts on individuals’ pensions, Pensions, sick leave or disability (also in the light of the current COVID situation);
• the effect of director’s remuneration or status as a statutory officer and status as an employee on travel allowances;
• the alternative options offered by our legal system for getting out of the company.

Specifics of the levy obligation for executive remuneration

In principle, there are three different levy obligations for executive remuneration. If you have a small company where you are both the owner and the director and you decide whether or not to give yourself remuneration or an employee’s salary, you should be aware that if you are not employed but only receive director’s remuneration, you do not pay guarantee insurance. Guarantee insurance is generally a type of insurance designed to protect an employee if the employer gets into financial difficulties. However, an employee does not pay guarantee insurance if he or she is also a director of the company and owns more than 50% of the company. Furthermore, you do not pay accident insurance when you are paid as a managing director and even sickness and unemployment insurance if you set up an irregular remuneration as a managing director.

Deductions of a managing director – can a managing director be employed in his/her own company?

As the decision of the Supreme Court of the Slovak Republic indicates, a managing director may be an employee in a company where he acts as a managing director: ‘It is not excluded that one natural person acts as a managing director of a limited liability company and is also an employee of that company’. (Supreme Administrative Court of the Slovak Republic 1 Sža 27/2015). This decision to some extent negates a decision that was issued several years before. Indeed, the original decision did not envisage that a managing director could perform certain functions for the company from a position other than that of managing director. Such a view of the Supreme Court is certainly contrary to the standard set-up of small companies in Slovakia, where the managing director provides his services as a sole trader to his own company.

You can see the whole topic with the presentation here: