Close Company Director/100% shareholder: PAYE vs Dividend Income

[Branz]

It seems to me that:
PAYE is deductible as an CT expense and attracts ER at 11.7% or something like that.
Dividends are not deductibles a CT expense so can't avail of the 12.5% CT rate.

Assume minimum wages paid to ensure full PRSI stamps, any pros or cons to PAYE vs Dividend other than the timing of paying the tax:
25% DWT on payment and the balance when the Personal tax return is done.

Thanks.

 

[DB74]

What do you mean ER at 11.7%?

How many shares do own in the company?

 

[Branz]

Thanks for your response
ER is employers PRSI, which I understand applies even as Class S?

Not my entity so need to check re no of shares?
Whats the angle with the no of shares?

 

[DB74]

Employers PRSI doesn't apply to Class S

If a director has 50% shares they are automatically Class S. If its less you may be Class A (and therefore Employer's PRSI) but depends on other factors

Anyway dividends are usually a waste of time in a close company

Scenario A - company makes profit of €10K and wants to issue dividend of €10K

Company pays €1,250 CT (€10k x 12.5%)
Company pays €2,500 DWT (€10k x 25%)
Director pays €2,500 IT (€10k x 50% = €5,000 less €2,500 DWT above)
Total tax paid = €6,250

Scenario B - company pays a bonus of €10K

CT = 0
Close company surcharge = 0
PAYE/PRSI/USC = €5,000 (€10k x 50%)
Total tax paid = €5,000

 

[Branz]

Thanks for a very useful pice of work, will pass it on.