Guide of Director Fee for Tax Purpose in Singapore
Director is the role of take part in making decision by attending meeting of board of director. The remuneration of the director is can be draw as director fee or director salary. Both of the payment will be remunerated in differently and having different tax payment effect due to the making of CPF contribution. In this article will provide a guide about how the company director should be noted on their tax obligation when they are preparing their tax after receiving director fee.
Director Fee
Director’s fees are fees to be paid to a director in their capacity as company director, for the directorial services they perform for the company. The amount of director fee payment normally decided and approved in a general meeting by a director resolution. Director’s fee could be included as allowances for expenses charged to income tax in Singapore or any benefit that director received in a form of other than cash for his directorial services. Also, a director draw director fee will not be required to make contribution to their CPF contribution.
Director’s Tax Obligation
Director Fee are generally taxable after the it been declared in the accounting year. Thus, if director’s fees were decided in advance for the next upcoming year, such fee will not be taxable for the current particular accounting year but only in the next upcoming year.
On the other hand, director fee normally will not be taxable in Singapore in the company is not present in Singapore, even if the director attended the board meeting in Singapore, and the director fee will be taxable in the country where the company present. However, if the company present in Singapore, but the director is a non-tax resident or foreign board of director, might still required to pay tax in Singapore, even though the director fee that they receive will be taxable in their country regardless whether the board meeting are held in Singapore.
Residency Status of Board of Director:
| Physical presence in Singapore in the year preceding the Year of Assessment (YA) | Residency status | Withholding Tax required |
| Less than 183 days | Non-tax resident | Yes, for remuneration paid to non-resident director. |
| 183 days or more | Tax resident | No |
For example, if a Foreign/ Non-resident board director received remuneration in the capacity as a board of director of company which is a tax resident in Singapore. There are few tax obligations that the employer and director required to comply as following:
| Role | Obligations |
| Employer |
1) Withhold tax at 22% of director’s remuneration 2) e-File via myTax Portal and pay the withholding tax by the 15th of the second month from the date of payment of the director’s remuneration. 3) Issue Confirmation of Payment (CP) |
| Foreign board of director | The director does not require to file a tax return as the employer has withheld tax at their director fee. While, if director receive a tax return/bill only in receipt of director fee, the director required to send CP to IRAS to remit the tax. |
While, if a foreign director receive remuneration in capacity as a board of director AND executive director (e.g managing director) of tax resident company in Singapore, the remuneration required to apportion as remuneration between board of director and executive director, and report tax for differently. With example below, explained the methodology for tax reporting purpose:
The remuneration that non-resident director received as followed:
| Director fee received as executive director | $5,000 per month |
| Director fee received as board director | $20,000 approved on 30 June 2019 |
The Employer required to withheld tax of $4,400 ($20,000 x 22% withholding tax) of the remuneration as board director as director does not physically presence in Singapore more than 183 days. However, if the foreign director present in Singapore more than 183 days, the $20,000 board director remuneration will not require to withhold tax, but it will be taxable on Singapore individual tax. On the other hand, the annual remuneration received as executive director of $60,000 ($5,000 x 12 months) is not applicable withhold tax and report to IRAS vis Form IR8A too. While, the director will be required file the tax return for remuneration received as executive director and remuneration as board director if they been physically present in Singapore more 183 days.
Conclusion
The remuneration received by the non-tax resident director in overseas does not mean that the remuneration is only taxable on their own country. The director fee will be still have potential that required to withhold tax and pay to IRAS based on the remuneration from a company present in Singapore, regardless the remuneration is director fee or salary.