Should you pay yourself director's fees or director's salary? Director's fees are NOT subject to CPF (saving you up to 37%). Director's salary IS subject to CPF (employer 17%, employee 20%, subject to wage ceilings). However, director's fees must be approved by shareholders at an AGM under Section 168 of the Companies Act. Both are tax-deductible for the company, but tax timing differs.
No CPF (0%). Must be approved at AGM. Taxed in YA of approval.
CPF applies (up to 37% total, subject to wage ceilings). Taxed when paid.
Fees save up to ~S$37,000 in CPF compared to salary
Key Takeaways
- Director's fees = NO CPF — On S$100,000 of fees, you save up to S$37,000 in combined employer and employee CPF contributions compared to a salary structure.
- Salary = CPF applies — Total CPF cost is up to 37% of gross salary, subject to the S$8,000/month Ordinary Wage (OW) ceiling and S$102,000 Annual Wage Ceiling.
- 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).
- Tax timing differs — Salary is taxable when paid. Director's fees are taxable in the Year of Assessment (YA) corresponding to the AGM approval date.
- Foreign directors face 24% withholding tax — Proper structuring and Double Taxation Agreements (DTA) 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.
| Feature | Director's Fees | Director's Salary |
|---|---|---|
| CPF Mandatory Contributions | 0% (Excluded from wages under CPF Act) | Up to 37% (17% Employer + 20% Employee for age ≤55, subject to wage ceilings) |
| Legal Approval | Shareholder approval at AGM required under Sec 168 Companies Act | Board resolution / Standard employment contract |
| Tax Assessment Timing | Assessable in Year of Assessment (YA) corresponding to AGM approval date | Assessable in YA when paid/received |
| Corporate Tax Deduction | Deductible (provided proper shareholder approval is documented) | Deductible as a standard business expense |
| Withholding Tax (Non-Residents) | 24% flat (unless reduced by Double Taxation Agreement) | Standard progressive non-resident rates / employment rules |
| Employment Rights | Not covered by the Employment Act | Covered under Employment Act (if executive duties apply) |
CPF Treatment: Why Director's Fees Save You Up to 37%
Under the CPF Act, director's fees are specifically excluded from the definition of "wages" for CPF purposes. This means 0% CPF applies to fees. However, if you choose to pay yourself a Director's Salary, CPF contributions are mandatory, but they are strictly limited by statutory wage ceilings:
- Monthly Ordinary Wage (OW) Ceiling: CPF is capped at S$8,000/month.
- Annual Wage Ceiling: Total annual wages subject to CPF (OW + Additional Wages) is capped at S$102,000/year.
- Annual CPF Limit: For employees aged ≤55, the maximum combined annual CPF contribution is fixed by the CPF Board at S$37,740 (which is exactly 37% of the S$102,000 Annual Wage Ceiling).
Scenario A (S$100,000 as Director's Fees): 0% CPF. You receive the full S$100,000 (less personal income tax).
Scenario B (S$100,000 as Monthly Salary): Paid at ~S$8,333/month. CPF is capped at the S$8,000 OW ceiling. Monthly CPF = S$8,000 × 37% = S$2,960. Annual CPF = S$2,960 × 12 = S$35,520.
Scenario C (S$100,000 as a single lump-sum Additional Wage with $0 prior OW): The AW Ceiling formula is S$102,000 - Total OW (S$102,000 - 0 = S$102,000). Thus, the full S$100,000 AW would still attract 37% CPF, resulting in S$37,000 in contributions.
Conclusion: The ~S$37,000 "savings" is achieved by structuring the payout as Director's Fees (which carry 0% CPF), not by disguising it as an Additional Wage salary bonus.
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).
- 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.
- Without proper shareholder approval, the fees are technically invalid and could be challenged.
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) |
Best-Practice Hybrid Payroll Strategy
For small-to-medium enterprise (SME) owner-directors who are Singapore tax residents, relying 100% on fees or 100% on salary is rarely optimal. A hybrid approach is often best:
- Draw a Base Salary up to the CPF OW Ceiling (S$8,000/month): This maintains continuous CPF contributions for home mortgage servicing (Ordinary Account) and long-term interest accrual (Special/Medisave/Retirement Accounts). It also generates documented employment income, which is crucial for personal bank credit lines, mortgages, and visa approvals.
- Distribute Surplus Earnings as Director's Fees or Dividends: Excess earnings paid out as AGM-approved director's fees avoid additional CPF contribution overhead beyond the statutory caps. Alternatively, tax-resident dividends under Singapore's One-Tier Corporate Tax System are tax-exempt at the personal level.
Operational Compliance Checklist
If your company intends to pay Director's Fees this financial year, confirm the following sequence:
- ✓ Draft Shareholder Resolutions: Prepare clear AGM resolutions specifying the exact gross fee amount or fee structure for the financial year.
- ✓ Confirm AGM Approval Before Payout: Do not disburse funds as "fees" prior to shareholder approval, unless an explicit provision for advance payment is granted by the company's Constitution and subsequently ratified.
- ✓ File IR8A / myTax Portal: Report director's fees accurately under the specific field for fees (distinct from employment income/salary).
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%).
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 |
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.
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Important Notice: While Terra Advisory Services Pte. Ltd. endeavours to keep the content accurate and current, Singapore government policies, regulations, fees, and procedures may change at any time without prior notice. For the most up-to-date and authoritative information, please refer directly to official government sources, including the Inland Revenue Authority of Singapore (IRAS), Ministry of Manpower (MOM), and other relevant agencies. For the latest compliance and advice tailored to your specific circumstances, please contact Terra Advisory Services.
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Frequently Asked Questions
Can I pay myself only director's fees and no salary?
Yes, many director-shareholders do this. However, you must ensure proper AGM approval is in place. Also consider that without salary, you will not have CPF contributions or Employment Act protection.
Do I need to pay CPF on director's fees?
No. Under the CPF Act, director's fees are specifically excluded from the definition of wages for CPF purposes. However, the fees must be genuine director's fees — not disguised salary.
What happens if I forget to approve director's fees at AGM?
You can ratify the fees at the next AGM. However, IRAS may treat the fees as assessable in the year they were paid rather than the year of approval.
I am a foreign director living overseas. How does this affect me?
Director's fees paid to non-resident directors are subject to 24% withholding tax. You may be eligible for reduced rates under a Double Tax Agreement (DTA).
Can my company deduct director's fees for corporate tax?
Yes, director's fees are tax-deductible for the company, provided they are properly approved by shareholders and are not excessive.
What is the difference between director's fees and dividends?
Director's fees are payments for services as a director and are tax-deductible. Dividends are distributions of company profits to shareholders and are not deductible.
Official sources used in this 2026 update: