If you own and manage a GmbH, there are different ways to receive money from your company. One of the most common questions is: Should I pay myself a higher salary or distribute part of the company’s profits as a dividend?
At first glance, dividends may appear attractive. They are generally not subject to AHV/AVS salary contributions, and qualifying shareholdings benefit from partial taxation. However, a lower salary can also affect social security and occupational pension planning.
The key question is therefore not simply salary or dividend, but rather:
Which combination best fits your income, your company, your retirement planning and your personal situation?
In Brief
A salary is remuneration for the work you perform for your GmbH. It is taxable as personal income and is generally subject to social security contributions. At the same time, it forms an important basis for your social security and occupational pension benefits.
A dividend, on the other hand, is a distribution of company profits to its shareholders. It requires sufficient distributable profits or freely available equity and a proper resolution approving the distribution.
From a tax perspective, dividends can be attractive. Shareholders holding at least 10% of the share capital benefit from partial taxation. For direct federal tax purposes, 70% of qualifying dividends from shares held as private assets are included in the tax base. The cantons also provide for partial taxation, although the specific rules and percentages vary.
However, this does not mean that paying as much as possible as dividends and as little as possible as salary is automatically the best solution.
Why the Combination Matters
In an owner-managed GmbH, you have two different roles.
On the one hand, you are an employee of your own company and receive a salary for the work you perform. On the other hand, you are a shareholder and may participate in the company’s profits.
These two roles have different tax and social security consequences.
At least five areas should therefore be considered together.
1. Salary and Income Tax
Your salary is taxed as ordinary personal income.
For the GmbH, a commercially justified salary generally constitutes a personnel expense and therefore reduces the company’s taxable profit.
In simplified terms, a higher salary means:
more taxable income for you personally – but less taxable profit for the GmbH.
The actual tax burden depends, among other things, on your place of residence, your other income and your personal and family circumstances.
2. Dividends and Taxes
A dividend works differently.
First, the GmbH generates a profit and pays corporate tax on that profit. Only the remaining distributable profit can subsequently be distributed to shareholders.
The dividend is then also taken into account as income at shareholder level. For a qualifying shareholding of at least 10%, partial taxation reduces this economic double taxation. At federal level, 70% of qualifying dividend income from private assets is taxable. The corresponding cantonal rules and percentages vary.
This is one of the reasons why a dividend can be more attractive than additional salary from a tax perspective.
But a dividend is not tax-free.
3. The Important Difference for AHV/AVS
Ordinary salary is subject to social security contributions.
A genuine dividend, on the other hand, is generally not considered remuneration for work performed. This creates an important difference between the two forms of remuneration.
However, owners cannot simply reduce their salary to an arbitrarily low amount and receive everything else as dividends.
Swiss social security rules are particularly relevant where a shareholder working for their own company receives no salary or an unreasonably low salary while simultaneously receiving an obviously excessive dividend. In such circumstances, part of the distribution may be treated as salary subject to social security contributions.
For owners of a GmbH, this means:
The salary should be appropriate for the work actually performed.
Factors such as the individual’s position, responsibilities, workload, industry and market-level remuneration may be relevant.
4. A Lower Salary Can Affect Your Pension Provision
This aspect can easily be overlooked when focusing purely on taxes.
Salary is not only a tax figure. It also affects social protection and, in particular, occupational pension planning.
As an employee of your GmbH, you are generally affiliated with occupational pension provision if the statutory requirements are met. The insured salary and the specific pension plan determine, among other things, how occupational pension assets are accumulated.
Reducing your salary significantly in order to distribute more dividends can therefore also affect your occupational pension situation.
A short-term tax saving should not be considered separately from long-term retirement planning.
5. Pillar 3a Should Also Be Considered
Income subject to AHV/AVS contributions also plays a role in Pillar 3a.
Employees who are affiliated with an occupational pension fund can claim the so-called small Pillar 3a contribution. For the 2026 tax year, the maximum amount is CHF 7,258. Pillar 3a contributions generally require income subject to AHV/AVS contributions.
This is another reason why the remuneration strategy should not be assessed solely on the basis of immediate income tax.
So Which Is Better?
There is no universal answer.
For many owners of a GmbH, a balanced combination of an appropriate salary and dividends can make sense.
The salary provides transparent remuneration for the work performed and forms a basis for social security and occupational pension provision.
An additional dividend may become attractive when the company generates sustainable profits, has sufficient distributable funds and meets the requirements for a distribution.
The appropriate balance, however, changes depending on the owner’s personal circumstances and the company’s financial situation.
A Simplified Example
Assume an entrepreneur owns 100% of her GmbH and works full-time for the company.
The company generates a healthy profit. The question is whether the entire available amount should be paid as a higher salary or whether an appropriate salary should be combined with an additional dividend.
With a higher salary, additional social security contributions arise and the owner’s taxable employment income increases. At the same time, the salary reduces the GmbH’s taxable profit.
With a dividend, the underlying profit has already been taxed at company level. However, partial taxation may apply at shareholder level where the participation qualifies.
The second option may result in a lower overall burden – but this is not necessarily the case.
A meaningful comparison should take into account at least:
- personal marginal tax rate and canton of residence
- corporate tax at the registered office of the GmbH
- appropriate level of salary
- social security contributions
- occupational pension arrangement
- existing pension assets and potential pension fund purchases
- level and sustainability of company profits
- liquidity requirements of the GmbH
Only by considering these factors together can a meaningful overall comparison be made.
Common Mistakes
Setting the salary as low as possible
Using an excessively low salary purely for tax optimisation can create social security issues.
Comparing only personal income tax
A dividend should not be viewed in isolation. The underlying profit has already been taxed at company level.
Ignoring retirement provision
A lower salary can affect occupational pension provision and long-term financial security.
Using the same split every year
What makes sense today may not be appropriate several years from now. Company profits, private income, retirement planning and personal circumstances can all change.
How to Approach the Decision
Salary and dividends should not be viewed as two competing options, but as parts of an overall remuneration strategy.
The first step is to determine an appropriate salary for the work actually performed.
The next step is to assess whether an additional profit distribution is both possible and appropriate.
The effects on taxes, AHV/AVS and occupational pension provision should then be considered together.
Finally, the chosen structure should be reviewed regularly – particularly when company profits change significantly, working hours are adjusted or personal retirement planning changes.
Conclusion
The question “salary or dividend?” cannot be answered by comparing tax rates alone.
A higher salary results in social security contributions and increases personal employment income, but it also forms part of the basis for social security and occupational pension provision.
A dividend can be attractive from a tax perspective, particularly in the case of a qualifying shareholding. However, it does not replace an appropriate salary and is paid from profits that have already been taxed at company level.
The key is therefore the interaction between salary, company profits, dividends, AHV/AVS, retirement provision and personal taxation.
The most appropriate solution is not necessarily the one that produces the lowest tax bill this year. It is the one that balances the company’s finances, personal income and long-term retirement planning in a sustainable way.
Carlino Trust supports owners of GmbHs in assessing salary and dividend strategies from a tax and retirement planning perspective. Together, we analyse the relevant figures and determine a structure suited to both the company and the owner’s personal situation.
We would be pleased to discuss your situation with you in a personal initial consultation.