If you're the director of your own company, you have two main ways to take money out of the business: drawing a salary as compensation for your role, or distributing dividends as a shareholder. Each has a different tax treatment worth understanding before you decide.
How salary as a director is taxed
Compensation as a director is taxed just like any other salary: as employment income under IRPF, on the general progressive scale, while also generating Social Security contributions under the corresponding regime (generally RETA for directors with effective control of the company).
How dividends are taxed
Dividends are distributed after the company has already paid Corporate Tax on its profit, and are taxed at the shareholder level within the savings income base of IRPF, on its own progressive scale (generally lower than the general scale in the first brackets). However, they don't generate any additional Social Security contributions.
Double taxation: why the dividend already "paid" once
It's important to understand that the profit distributed as a dividend was already taxed once at the company level (Corporate Tax) before reaching the shareholder, who then pays tax again on that same profit through personal IRPF. This double layer of taxation must be factored in when comparing the total tax cost against a salary.
Why combining both is usually the most common strategy
In practice, most advisors recommend a combination: a reasonable salary (which also generates contribution rights for future benefits) topped up with dividend distributions depending on the year's results, rather than relying exclusively on one route or the other.
There's no universal answer, it depends on your numbers
The optimal combination depends on your company's profit level, your need to build up contribution rights (pension, benefits), and your overall personal tax situation. A personalized analysis with a tax advisor is essential before settling on your compensation strategy.
Compare the net effect of each route
Our net salary calculator serves as a reference to estimate how much net income you'd get through salary, giving you a point of comparison against the dividend route.