How you pay a director in Singapore is not just an accounting choice. Directors’ fees and a director’s salary are treated differently under company law, tax law and the CPF rules, and getting the distinction wrong can lead to unapproved payments, unexpected CPF liabilities, or a deduction being disallowed. For owner-managed companies, where the same person is often shareholder, director and employee, the line matters more than most people realise.
This guide explains the difference between directors’ fees and a director’s salary, how each is approved, and how each is taxed, so you can structure remuneration correctly and keep it clean for both ACRA and IRAS.
Directors’ fees versus salary: the basic distinction
Directors’ fees are paid to a person for holding the office of director. They are typical for non-executive directors who sit on the board but are not employees. A director’s salary, by contrast, is employment income paid to an executive director who works in the business under a service arrangement, in the same way any employee is paid. One person can receive both: a fee for board duties and a salary for an executive role.
How directors’ fees must be approved
Directors cannot simply pay themselves fees. Under the Companies Act 1967, directors’ fees must be approved by the members of the company, usually by an ordinary resolution passed in general meeting. In practice this is done at the annual general meeting, and the approval can be given prospectively (for the year ahead) or to ratify fees already earned. The approval should be recorded in the members’ resolution and reflected in the minutes. This is one reason keeping proper minute books matters, and why understanding ordinary versus special resolutions is useful when documenting the decision.
A director’s salary is different. It flows from an employment or service arrangement and is generally authorised by the board under the company’s constitution, not by a members’ resolution. Directors must still disclose any interest in the arrangement to avoid a conflict.
The tax treatment
Both directors’ fees and a director’s salary are taxable income in the hands of the director, and both are generally deductible for the company if incurred wholly and exclusively in producing income. The timing differs. Directors’ fees are treated as derived when they are approved and the director becomes entitled to them, so fees approved at an AGM in 2026 are typically assessed for the corresponding Year of Assessment. Salary is taxed as it is earned. Company deductions and the director’s personal filing are both administered by IRAS, and the company reports the director’s remuneration on the annual employee income return where applicable.
CPF: the key practical difference
This is where the choice has real cash consequences. CPF contributions are payable on wages from employment, so a director’s salary as an executive (employee) attracts CPF for a Singapore Citizen or Permanent Resident, along with the Skills Development Levy. Directors’ fees paid to a director acting purely as an office holder are not wages and are generally not subject to CPF. So a non-executive director paid only fees does not attract CPF on those fees, while an executive director on a monthly salary does. Structuring remuneration without understanding this can create either an unexpected CPF shortfall or a missed obligation. The current rates and rules are published by the CPF Board.
Which should an owner-manager use?
For a typical owner-managed private company, the working director is usually an employee drawing a salary (attracting CPF, which builds retirement savings and supports housing) and may also receive directors’ fees approved at the AGM. Non-working shareholders appointed to the board are more commonly paid fees only. The right mix depends on cash flow, CPF considerations and the company’s tax position. New companies weighing this up should also review the start-up tax exemptions that affect the company’s own tax bill. The governing company-law provisions are in the Companies Act 1967.
Documentation checklist
Whichever route you take, keep the paperwork tidy: a members’ resolution approving directors’ fees; board approval and a service agreement for an executive director’s salary; disclosure of interest where a director is party to the arrangement; and consistent treatment in the accounts and tax filings. Clean documentation is what makes remuneration defensible in an audit or due diligence.
Frequently asked questions
Can directors’ fees be paid without shareholder approval?
No. Directors’ fees require approval by the members, usually by ordinary resolution at a general meeting. Paying fees without approval is improper and can be challenged.
Do directors’ fees attract CPF?
Generally no. Fees paid to a director as an office holder are not wages and are not subject to CPF. A director who is also an employee pays CPF on the employment salary component.
When are directors’ fees taxed?
Directors’ fees are generally treated as income for the year in which they are approved and the director becomes entitled to them, which is often the date of the AGM approval.
– The Editorial Team, Raffles Corporate Services