If you run a small private limited company, you may have heard that you can pay yourself a “director’s fee” at year end. Director’s fees in Singapore are a distinct type of payment, separate from salary and from dividends, with their own approval process, tax timing and CPF treatment. Getting them right keeps your company records clean and avoids awkward questions from IRAS or your auditor. This guide explains what director’s fees are, how shareholders approve them, how they are taxed, and why CPF contributions generally do not apply the way they do to a salary.
This is general information, not tax, legal or financial advice. Rules and rates change, so check current details with the Inland Revenue Authority of Singapore (IRAS), the Accounting and Corporate Regulatory Authority (ACRA) and the CPF Board, or speak to a qualified accountant or corporate secretary.
What a Director’s Fee Actually Is
A director’s fee is a payment to a person for serving as a director of the company, for the responsibilities of sitting on the board, attending board meetings and overseeing the company’s affairs. It is different from:
- Salary, which is paid to someone as an employee under an employment contract for the work they do in the business, such as managing operations or selling.
- Dividends, which are paid to shareholders out of the company’s profits because they own shares, not because of any role they perform.
In a one-person company, the same individual may be shareholder, director and employee all at once. That is why it is important to label each payment correctly in the company’s records. The label decides who must approve it, how it is taxed and whether CPF is involved.
How Director’s Fees Are Approved
Director’s fees are generally not something directors can simply decide to pay themselves. Under Singapore’s Companies Act, payment of fees to directors usually needs to be approved by the shareholders, typically by an ordinary resolution at a general meeting, often the Annual General Meeting (AGM). Your company’s constitution may also contain specific rules.
A typical process looks like this:
- The board proposes the fee. Directors discuss and agree on the amount to recommend, sometimes recorded in a directors’ resolution.
- Shareholders approve it. The proposed fee is tabled at a general meeting, or approved by written resolution where the company is allowed to do so, and the shareholders vote.
- Record the approval. The resolution and minutes are kept in the company’s minute book. Your corporate secretary usually prepares these.
- Pay and account for it. The company pays the fee and records it in its accounts.
Many small companies approve director’s fees for a financial year at the AGM that adopts that year’s financial statements. Some approve fees in advance for the coming year. Either approach can work, but the date of approval matters for tax, as explained below.
How Director’s Fees Are Taxed
For the director. Director’s fees are taxable income of the director. A key point is timing: IRAS generally treats director’s fees as income in the year they are approved, rather than the year the work was done or the year the cash was paid. So a fee for a financial year that is approved at an AGM in the following calendar year is usually taxed in that later year. Check the IRAS guidance on director’s fees for how this applies to your dates.
Reporting. The company reports director’s fees paid to resident directors on the director’s annual employment income form (IR8A) or through the Auto-Inclusion Scheme (AIS) for employment income, where the company is in AIS. The director then sees the amount in their own income tax filing.
For the company. Director’s fees are generally a deductible business expense for the company, as long as they are properly approved and incurred in the course of business. Your accountant will treat them accordingly in the corporate tax computation.
Non-resident directors. If a director is not tax resident in Singapore, the company is generally required to withhold tax on director’s fees paid to them and pay it to IRAS within the required deadline. The withholding rate and filing steps are set by IRAS, so check the current rules before paying a non-resident director.
Why CPF Does Not Apply Like It Does on Salary
CPF contributions are tied to employment. Employers must make CPF contributions on wages paid to employees who are Singapore citizens or permanent residents.
Director’s fees are paid for holding the office of director, not as wages under an employment contract. For this reason, the CPF Board generally does not require CPF contributions on director’s fees. If the same person is also an employee and receives a salary or bonus, CPF continues to apply to that salary in the usual way. Only the director’s fee portion is treated differently.
This distinction has consequences for the director personally:
- No employer CPF on the fee. The director does not build up CPF savings through employer contributions on that money.
- Retirement and housing planning. Someone who takes most of their income as director’s fees, rather than salary, may have lower CPF balances over time. Consider whether voluntary contributions suit you; our guide on topping up your CPF for tax relief explains how top-ups work.
- Check your own position. If you have other income, such as self-employed earnings, separate CPF and MediSave rules may apply to that income. Confirm with the CPF Board.
Director’s Fees vs Salary vs Dividends at a Glance
| Payment type | Who approves it | Income tax position | CPF |
|---|---|---|---|
| Director’s fee | Shareholders, usually at a general meeting | Taxable to the director, generally in the year of approval | Generally no CPF required |
| Salary or bonus | Board or management under an employment contract | Taxable to the employee in the year received | CPF applies for citizens and PRs |
| Dividend | Declared by the company out of profits, per the constitution | One-tier dividends are generally tax-exempt for shareholders | No CPF |
The right mix depends on your company’s profits, your personal tax position, your CPF goals and cash flow. An accountant can model the numbers for you.
Common Mistakes Small Company Owners Make
- Paying before approval. Transferring “director’s fees” without a shareholder resolution can create problems. If it happens, speak to your corporate secretary about regularising it.
- Mislabelling payments. Recording a monthly salary as a director’s fee, or the reverse, causes the wrong CPF and tax treatment.
- Forgetting the tax year shift. Approving a large fee in a year when you also have high salary can raise your personal tax for that year.
- Ignoring non-resident withholding. Paying an overseas director without withholding tax can leave the company liable.
- Poor records. Missing minutes and resolutions make audits and due diligence harder.
Directors should also remember that being paid as a director comes with legal duties. Our guide on wrongful trading for company directors explains one area where directors can be personally exposed.
Practical Checklist Before Paying Director’s Fees
- Check your company’s constitution for rules on directors’ remuneration.
- Have the board propose the amount and record it.
- Obtain shareholder approval by resolution and file the minutes.
- Note the approval date for tax purposes.
- Withhold tax if a director is non-resident, following IRAS rules.
- Report the fees on the IR8A or through AIS as required.
- Keep salary, bonus and director’s fees as separate lines in payroll and the accounts.
- Review your mix of salary, fees and dividends with an accountant each year.
Frequently Asked Questions
Can I pay myself director’s fees without shareholder approval? Generally no. Under the Companies Act, director’s fees usually need shareholder approval, typically by ordinary resolution at a general meeting. Paying before approval can create problems, so speak to your corporate secretary about regularising it.
Which year are director’s fees taxed in Singapore? IRAS generally treats director’s fees as income in the year they are approved, rather than when the work was done or the cash paid. A fee approved at an AGM in the following calendar year is usually taxed in that later year. Check the IRAS guidance for your dates.
Do I need to withhold tax on fees paid to an overseas director? If a director is not tax resident in Singapore, the company is generally required to withhold tax on director’s fees and pay it to IRAS within the deadline. The rate and filing steps are set by IRAS, so check them before paying.
Why is no CPF payable on director’s fees? CPF contributions are tied to employment, and director’s fees are paid for holding the office of director, not as wages under an employment contract. If the same person also draws a salary or bonus, CPF still applies to that. Confirm your position with the CPF Board.
Can director’s fees be deducted as a company expense? Generally yes, as long as the fees are properly approved and incurred in the course of business. Your accountant will treat them accordingly in the corporate tax computation. This differs from dividends, which are not a deductible expense.