If the tax authorities identify a pecuniary benefit, they notify the AHV. But social security contributions are only levied on income from employment, not investment income (dividends). In some circumstances, though, payments received out of a corporation’s net profit may be deemed relevant salary for contribution purposes. This is the case where the remuneration is based on employment.

When they begin, many start-ups face the issue of what legal form to choose. The limited-liability company (Gesellschaft mit beschränkter Haftung, GmbH) and the stock corporation (Aktiengesellschaft, AG) are popular because they limit liability. As an AG requires more capital to start with, a GmbH is at least at first often the preferred option.

If a company is financed by more debt than usual the tax authorities may conclude that the entity has “hidden equity”. Where hidden equity is present and interest is paid on it, not only is this added back to the company’s profit – the interest also counts as a pecuniary benefit from the company to the shareholder. Depending on whether the shareholder or related party is an individual or a legal entity and where they are subject to taxation, withholding tax in particular can result in unwanted tax complications for residents abroad.