If you are a director of a Singapore company — whether as the founder, an executive, or a non-executive board member — how you receive remuneration from the company has real consequences for your personal tax position, your CPF obligations, and the company’s deductibility of that expense. The distinction between director’s fees and a director’s salary is both a legal and a tax matter, and getting it wrong can lead to unexpected liabilities for the company or the director personally.

This guide explains the key differences, how IRAS and CPF Board treat each form of remuneration, and how directors can structure their pay correctly in 2026.

The Core Legal Distinction

The two forms of director remuneration are legally distinct:

  • Director’s fees are a payment made to a director in their capacity as a director — for attending board meetings, providing governance oversight, and fulfilling their statutory duties. Under Section 168 of the Companies Act, director’s fees must be approved by shareholders at a general meeting unless the company’s constitution provides otherwise.
  • Director’s salary (or executive salary) is a payment made to a director who also holds an executive role — such as Chief Executive Officer, Managing Director, or Operations Director. This payment arises from the employment contract between the director and the company, not from the directorship itself.

A director can receive both: director’s fees for their board role and a salary for their executive duties. This is common in Singapore SMEs where the founder is both the sole director and the chief executive.

CPF Treatment: The Most Important Practical Difference

The biggest practical difference between director’s fees and salary is their CPF treatment.

Director’s Salary: CPF Applies

Where a director is also an employee of the company under a contract of service, their salary is treated as employment income. CPF contributions are compulsory on this salary for Singapore Citizen and Permanent Resident directors. Both the employer contribution (currently 17% for employees aged 55 and below) and the employee contribution (currently 20%) must be made and paid to the CPF Board by the 14th of the following month. Failure to pay CPF on time attracts late payment interest and potential enforcement action.

For a detailed breakdown of CPF rates and deadlines, see the Singapore Payroll & CPF 2026 Guide.

Director’s Fees: No CPF

Director’s fees are not subject to CPF contributions — provided they are properly characterised as fees for the directorship role (not disguised salary). The CPF Board takes the position that director’s fees voted and approved by shareholders at a general meeting are not “wages” under the Central Provident Fund Act and therefore do not attract mandatory CPF contributions.

This makes director’s fees administratively simpler and reduces the company’s payroll burden. However, it also means the director does not build CPF savings on this portion of their income, which affects retirement planning.

Skills Development Levy (SDL)

The Skills Development Levy (SDL) applies to all employees earning wages from an employer. Director’s salaries under a contract of service attract SDL, but pure director’s fees do not. The SDL rate is 0.25% of total wages paid, capped at S$11.25 per month per employee.

Income Tax Treatment

Both director’s fees and director’s salary are subject to Singapore personal income tax as employment income. The key differences lie in the timing and basis of assessment:

  • Director’s fees: Under IRAS’s rules, director’s fees are taxable in the year they are voted and approved, not in the year they are paid. If the company approves director’s fees at the AGM held in 2026 for services rendered in FY2025, those fees are taxable in the Year of Assessment 2027 (income year 2026 — when approved). Directors should ensure the AGM approves fees in the correct year to align with their personal tax planning.
  • Director’s salary: Taxable in the year the salary is received or accrued, consistent with ordinary employment income rules.

IR8A Reporting: Both Must Be Declared

Employers must file Form IR8A with IRAS by 1 March each year for each employee and director, covering remuneration paid in the preceding calendar year. The IR8A covers:

  • Salary, bonuses, and allowances;
  • Director’s fees approved during the year; and
  • Benefits-in-kind (e.g., car, accommodation, club memberships).

All director’s fees and salary components must be declared on the IR8A, whether or not CPF was paid. IRAS cross-references IR8A data against director’s personal income tax returns, so omissions are detectable.

Tax Deductibility: Can the Company Deduct Both?

From the company’s perspective, both director’s fees and director’s salary are tax-deductible business expenses under Section 14 of the Income Tax Act — provided they are incurred wholly and exclusively in the production of income and are reasonable in quantum. IRAS may scrutinise unusually high remuneration paid to directors who are also controlling shareholders of the company.

For detailed guidance on the corporate income tax deductibility of business expenses, see the Singapore Corporate Tax 2026 Guide.

Structuring Director Remuneration: Practical Guidance

For owner-directors of Singapore SMEs who are both the sole director and the primary executive, the choice between fees and salary (or a combination) depends on several factors:

Option 1: Pure Director’s Fees

No CPF required. Simpler administration. Timing of taxability is when approved at AGM. The downside: no CPF retirement savings on this income, and the company cannot pay a “salary” if no employment contract exists.

Option 2: Pure Salary

CPF applies (both employer and employee contributions). The director builds CPF savings. Monthly payroll processing is required. The salary must be commercially reasonable and supported by an employment contract.

Option 3: Combination of Salary + Fees

Many Singapore owner-directors take a modest regular salary (to maintain CPF contributions and demonstrate employment) and supplement this with director’s fees approved at the AGM. The salary covers day-to-day personal expenses; the fees allow for flexibility in how the year-end profit is distributed.

Note that any remuneration arrangement should be properly documented via board resolutions, employment contracts (where applicable), and a shareholder resolution approving the director’s fees at the AGM.

Non-Resident Directors

Where the director is not a Singapore tax resident, different rules apply. Non-resident directors’ fees are subject to withholding tax at 24%, which the company must deduct and remit to IRAS. This is a withholding tax on the gross amount of fees, not a net-of-expenses calculation. For more on this, see the Singapore Withholding Tax 2026 Guide. Non-resident directors who perform executive duties in Singapore (as opposed to purely attending board meetings) may have additional obligations.

Common Mistakes to Avoid

  • Paying director’s fees as a monthly salary without AGM approval: If shareholders have not approved director’s fees, the payment may not be legally valid and could attract IRAS scrutiny.
  • Failing to pay CPF on a director’s salary: Directors who receive a regular monthly salary under a contract of service must have CPF deducted and paid, even if the company is small or the director is the sole shareholder.
  • Confusing fees and salary in IR8A: IRAS requires separate disclosure of director’s fees and salary. Do not combine them in a single line item.
  • Not documenting the remuneration structure: A board resolution and, where applicable, an employment contract are essential documentary evidence.

For legal advice on director remuneration structuring and any disputes arising from director fee approvals, consulting a qualified solicitor is recommended.

Beyond remuneration structuring, personal financial planning and investment decisions are important for directors looking to build long-term wealth beyond their company income.

For the latest Singapore financial news and tax updates, there are regularly updated resources for business owners and directors.

Conclusion

The distinction between director’s fees and director’s salary matters — for CPF, for personal tax, and for the company’s compliance obligations. Most Singapore SME directors benefit from a structured combination of both, documented correctly and approved in accordance with the Companies Act. Understanding how IRAS and CPF Board treat each form of remuneration is essential for any director responsible for their own pay structure.

At Raffles Corporate Services, we assist Singapore directors and companies with payroll structuring, IR8A filing, corporate secretarial support (including AGM management for fee approvals), and ongoing ACRA compliance. If you need help getting your director remuneration arrangements right, we are here to assist.

To speak with the team at Raffles Corporate Services, you can email [email protected] or call, SMS, or WhatsApp +65 8501 7133. We are happy to assist with any queries.

— The Editorial Team, Raffles Corporate Services