Should you pay yourself director's fees or director's salary? Director's fees are NOT subject to CPF (saving you 37% total). Director's salary IS subject to CPF (employer 17%, employee 20%). However, director's fees must be approved by shareholders at AGM under Section 168 of the Companies Act. Both are tax-deductible for the company, but timing differs.
No CPF (0%). Must be approved at AGM. Taxed in YA of approval.
CPF applies (employer 17%, employee 20% for age ≤55). Taxed when paid.
Fees save ~S$37,000 in CPF compared to salary
Key Takeaways
- Director's fees = NO CPF — This is the single biggest advantage. On S$100,000 of fees, you save S$37,000 in combined employer and employee CPF contributions compared to salary.
- Salary = CPF applies — Salary is treated like any employee's pay. Employer contributes 17%, employee contributes 20% (for those aged 55 and below). Total CPF cost is 37% of gross salary.
- Fees require AGM approval — Under Section 168 of the Companies Act, director's fees must be approved by shareholders at an Annual General Meeting (AGM). Without proper approval, the fees are invalid.
- Tax timing differs — Salary is taxable in the year it is paid. Director's fees are taxable in the Year of Assessment when the AGM approves them — which can be years later if not properly managed.
- Foreign directors face 24% withholding tax — If you are a non-resident director, director's fees are subject to 24% withholding tax. Proper structuring can mitigate this.
Fast Facts
Key Differences: Director's Fees vs. Director's Salary
Many director-shareholders do not realise there are two distinct ways to take money out of their company. The choice has significant implications for CPF, tax timing, and legal compliance.
| Factor | Director's Fees | Director's Salary |
|---|---|---|
| CPF treatment | NO CPF (0%) | CPF applies (17% employer + 20% employee) |
| Legal requirement | Must be approved by shareholders at AGM (Section 168) | Standard employment contract, no shareholder approval needed |
| Tax timing | Assessable in YA of AGM approval | Assessable in YA when received |
| Tax deductibility for company | Yes (if properly approved) | Yes |
| Employment Act protection | Not covered | Covered (if employee) |
| Board resolution required | No — shareholder approval only | Yes — board resolution for director's employment contract |
CPF Treatment: Why Director's Fees Save You 37%
Under the CPF Act, director's fees are specifically excluded from the definition of "wages" for CPF purposes. This means:
- No employer CPF contribution — Your company saves 17%
- No employee CPF contribution — You keep the full 20% that would otherwise go to your CPF account
- Total savings: 37% of the amount paid as fees compared to salary
Salary: Employer pays S$17,000 CPF, employee contributes S$20,000 CPF. Total S$37,000 locked in CPF.
Fees: Zero CPF. You receive the full S$100,000 (less personal income tax).
Difference: S$37,000 more cash in hand (or available for business reinvestment).
For a complete understanding of your employer obligations beyond director pay, see our guide on how to hire your first employee in Singapore.
Legal Requirements: Section 168 of the Companies Act
This is where many directors get it wrong. Under Section 168 of the Companies Act, director's fees must be approved by shareholders at an Annual General Meeting (AGM). The key points:
- Approval must be given before the fees are paid (or ratified at the following AGM)
- The resolution must specify the total amount of fees for the financial year
- Approval can be for a specific amount or a formula (e.g., "S$50,000 per director per annum")
- Without proper shareholder approval, the fees are technically invalid and could be challenged
This is where professional corporate secretarial support becomes essential. We prepare the AGM resolutions and minutes to ensure your director's fees are properly approved.
Tax Timing: When Are Director's Fees Assessable?
The tax treatment differs significantly between salary and director's fees:
| Aspect | Director's Salary | Director's Fees |
|---|---|---|
| Tax timing | Year of Assessment (YA) when received | YA when approved at AGM (can be years later) |
| Reporting | Included in Auto-Inclusion Scheme (AIS) | Reported separately as director's fees |
| Withholding tax for non-residents | 15% (subject to tax treaty) | 24% (unless treaty relief applies) |
Which Should You Choose? A Decision Framework
Choose Director's Fees When:
✓ You are a director-shareholder
✓ You want to maximise cash in hand
✓ You already have sufficient CPF savings
✓ You have proper AGM approval in place
✓ You are a tax-resident director
Choose Director's Salary When:
✓ You need CPF contributions for housing or retirement
✓ You want Employment Act protection
✓ You need to demonstrate regular employment income for loans or visas
✓ You are a foreign director requiring an Employment Pass
Non-Resident Directors: Withholding Tax Considerations
If you are a director who is not resident in Singapore, special rules apply:
- Director's fees paid to non-resident directors are subject to 24% withholding tax
- The company must withhold 24% from the fee payment and remit it to IRAS
- If the director's country has a Double Tax Agreement (DTA) with Singapore, the withholding tax rate may be reduced (typically to 8-15%)
- Salary paid to non-resident directors may be subject to 15% withholding tax instead, depending on the circumstances
Common Mistakes Directors Make
| Mistake | Consequence |
|---|---|
| Paying director's fees without AGM approval | Fees may be invalid; possible CPF reclassification + back-contributions |
| Misclassifying salary as fees to avoid CPF | CPF arrears + interest + penalties; director personal liability up to S$10,000 |
| No board resolution for director's employment contract | Contract may be unenforceable; disputes over terms |
| Ignoring withholding tax for non-resident directors | Company liable for unpaid tax + penalties |
| Not filing AIS for director's salary | Late filing penalties up to S$5,000 per year |
For a complete understanding of director obligations beyond pay structure, see our Singapore corporate compliance 2026 guide.
Get your director pay structure right — and keep more of what you earn.
Terra Advisory Services helps director-shareholders structure director's fees and salary to minimise CPF, optimise tax timing, and ensure full legal compliance. We also handle AGM approvals, tax filings, and corporate secretarial requirements — one team, one point of contact.
Frequently Asked Questions
Incorporating or restructuring a business in Singapore is a major legal and financial decision. We provide dedicated, personal service from our first conversation to your ongoing annual filings.
If you do not fully understand any aspect of the process, we will pause and will not move forward until you are ready.
We quote and design only the specific services your business actually requires.
Strategic Malaysia Affiliate — MIA Registered Firm
Official sources used in this 2026 update:
This page is a general guide and should not be treated as legal or tax advice. Director remuneration structures depend on your specific circumstances, shareholding, and residency status. For advice tailored to your situation, contact Terra Advisory Services.