Accrued Bonus Tax Deduction in Singapore: Unpaid Directors’ Fees, CPF and AGM Approval

Short answer: A Singapore company can usually deduct a bonus or director’s fee accrued at year end and paid later, if properly ascertained. Non-contractual bonuses must be paid within a year of the year end. Directors’ fees approved in arrears must be voted on at the AGM approving those accounts. Otherwise IRAS treats the accrual as a non-deductible provision.

The accrued bonus tax deduction rule catches many owner-managed companies in a good year. The board books a bonus pool and directors’ fees in December, the cash goes out in the new year, and nobody checks the paperwork against what IRAS needs. This guide covers the deduction, CPF timing, the recipient’s tax, Form IR8A and shareholder approval, with a worked example for a 31 December 2026 year end.

Raffles Corporate Services works with a panel of experienced Singapore law firms who offer cost-effective and efficient legal service and advice. This article is general information only and is not legal advice.

When is an accrued but unpaid bonus tax deductible in Singapore?

A bonus is deductible when the company’s liability to pay it arises. In practice IRAS allows the deduction in the year the bonus is properly ascertained and accrued in the accounts, as long as payment follows soon after.

The starting point is section 14(1) of the Income Tax Act 1947: an expense is deductible when it is incurred. In practice, the IRAS e-Tax Guide says IRAS will typically allow directors’ fees approved in arrears and non-contractual bonuses in the year they are properly ascertained and accrued under generally accepted accounting principles. Payment must also be expected shortly after the year end, so the amount and timing are both certain.

For non-contractual bonuses, IRAS spells out the test: the accrued amount should typically be paid within a year of the accounting year in which it was accrued. If a company with a 31 December 2026 year end accrues a bonus pool and has not paid it by 31 December 2027, that accrual falls into the not-deductible category for the 2026 year.

How to measure the accrual itself is covered in our guide to FRS 19 employee benefits and bonus accruals.

Contractual or non-contractual: why the label changes the timing

A contractual bonus is one the employer cannot rescind without legal consequences. A non-contractual (discretionary) bonus can be withdrawn at any time before payment. The label decides when the employee is taxed and how the company’s deduction is tested.

Calling a bonus “discretionary” makes it non-contractual only if the employer can in fact withdraw it before payment without legal consequences.

When are accrued but unpaid directors’ fees deductible?

Directors’ fees approved in arrears are deductible for the year in which they are accrued only if they are tabled and put to the vote at the AGM where that year’s accounts are approved. IRAS calls this the “relevant AGM”.

The e-Tax Guide lists situations where the accrual is a mere provision and is not deductible for that year:

1. The accrued fees were not put to the vote at the relevant AGM.
2. The fees were put to the vote but not approved, and the unapproved amount was not written back in the accounts within the accounting year in which the relevant AGM was held.
3. The fees were approved at the relevant AGM, but the directors were not entitled to them on the approval date or within the accounting year in which they were approved.
4. For bonuses, the non-contractual amount accrued was not paid within a year of the accounting year.

The Annex to the e-Tax Guide covers partial approval. If the shortfall is written back within the accounting year in which the relevant AGM was held, the full accrual is deductible and the write-back is taxed the following year of assessment. If it is written back later, only the approved amount is deductible and the write-back is not taxed.

If you are still deciding how to pay the people who run the company, our comparison of director fees, salary and dividends covers the tax and CPF differences.

Who must approve directors’ fees, and how?

The members (shareholders) approve directors’ fees, by a resolution dealing only with the fees. Section 169 of the Companies Act 1967 says a company must not provide or improve a director’s emoluments unless the provision is approved by a resolution that is not related to other matters, and a resolution passed in breach is void.

“Emoluments” here includes fees, taxable expense allowances, pension contributions and non-cash benefits. IRAS cites this section as the reason a director is not entitled to fees approved in arrears until members approve them. For the company secretary:

• Put the directors’ fees in their own resolution. Do not bundle them with the adoption of accounts or the re-election of directors.
• Record the amount per director, the financial year the fees relate to, and the approval date. IRAS asks companies to keep the approval date, amount approved and any write-back year for at least five years from the relevant year of assessment.

Under section 175A of the Companies Act, a private company may dispense with the AGM. Where it does, a reference in the Act to doing something at an AGM is read as doing it by written resolution under section 184A. Pass the directors’ fee resolution together with the members’ approval of the accounts, and date it clearly. Our guide on when a private company can skip the AGM explains the conditions.

When is CPF due on an accrued bonus or directors’ fee?

CPF follows the payment calendar, not the accrual. A bonus is an Additional Wage, and CPF Board says the contribution is made for the month in which the bonus is due and payable. Directors’ fees voted at general meetings attract no CPF at all.

So a December 2026 accrual for a bonus paid in January 2027 is an Additional Wage in the January 2027 contribution month. That matters because the Additional Wage ceiling is worked out per calendar year, so a bonus paid in January draws on the new year’s ceiling. The ceiling arithmetic, and the rates for older workers, are in our separate guide to CPF on bonus and the Additional Wage ceiling.

A director employed under a contract of service attracts CPF on salary and employment bonus, but not on fees voted by members. For a bonus approved after payroll closes, see a bonus added after payroll is finalised.

How do you report accrued bonuses and directors’ fees on Form IR8A?

Report each amount in the IR8A for the year the employee or director becomes entitled to it, not the year it was accrued. Forms IR8A, or the Auto-Inclusion Scheme submission, are due by 1 March of the following year.

IRAS’s explanatory notes to Form IR8A confirm that directors’ fees approved in arrears are generally income on the date they are voted and approved at the AGM or EGM. If the company held more than one meeting in the calendar year to approve fees for the same accounting year, the employer enters the date of the last meeting. For more on who must file electronically, see our post on IR8A and the Auto-Inclusion Scheme.

The company therefore deducts the fees in one year of assessment while the director is taxed on them in the next. IRAS’s own examples work that way.

How does the accrued bonus tax deduction work for a 31 December 2026 year end?

Example Pte Ltd (illustrative figures) has a 31 December 2026 year end. It accrues a non-contractual staff bonus pool of S$40,000 and directors’ fees of S$60,000 to be approved in arrears.

If the members’ resolution is silent on fees, the S$60,000 is a provision and none of it is deductible for YA 2027. If the bonus is still unpaid on 31 December 2027, the S$40,000 drops out of the YA 2027 claim.

Common mistakes with accrued bonuses and directors’ fees

Most problems come from the approval paperwork lagging behind the accounts.

• Accruing directors’ fees but leaving them out of that year’s members’ resolutions.
• Bundling directors’ fees into the resolution adopting the accounts.
• Reporting directors’ fees on the IR8A for the year of service instead of the year of approval.
• Paying CPF on directors’ fees voted by members.
• Claiming a bonus pool still unpaid a year after the year end.
• Forgetting to write back an unapproved amount in the year the AGM is held.

The compliance deadline calculator on our free tools page gives your AGM, ECI and Form C-S dates from your financial year end, which tells you when the relevant AGM falls. For more on minutes and members’ resolutions, our sister site Singapore Secretary Services covers the company secretary side.

Official sources: the IRAS e-Tax Guide on director’s fees and bonuses, section 169 of the Companies Act 1967 and CPF Board’s guidance on directors.

Frequently asked questions

Can a company deduct a bonus it declares in December but pays in March?

Yes, if it is properly ascertained and accrued for that year. A non-contractual bonus must be paid within a year of the year end, which March meets.

Are directors’ fees taxed in the year of service or the year of approval?

Fees approved in arrears are taxed in the year the members vote and approve them. Fees for FY2026 approved in May 2027 are 2027 income for the director, assessed in YA 2028.

Does the company pay CPF on directors’ fees?

No. CPF Board states that CPF is not payable on directors’ fees voted at general meetings. CPF is payable on wages if the director is also employed under a contract of service.

What if the shareholders approve less than the amount accrued?

Write back the unapproved part in the accounting year in which the relevant AGM is held. The full accrual stays deductible, and the write-back is taxed in the next year of assessment.

Can directors’ fees be approved by written resolution instead of an AGM?

Yes, for a private company that has dispensed with the AGM, under sections 175A and 184A of the Companies Act. Keep the fee resolution separate and clearly dated.

Last reviewed: 18 October 2026. The Editorial Team, Raffles Corporate Services.