Director’s Fees vs Director’s Salary in Singapore: Tax, CPF and Legal Guide (2026)

If you are a director of a Singapore company — whether as founder, executive, or non-executive board member — how you receive remuneration has real consequences for your personal tax position, CPF obligations, and the company’s deductible expenses. 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.

This guide explains the key differences, how IRAS and the 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 paid to a director in their capacity as a director — for attending board meetings, providing governance oversight, and fulfilling 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 (executive salary) is paid to a director who also holds an executive role — such as CEO, Managing Director, or COO. This payment arises from an employment contract, not from the directorship itself.

A director can receive both: fees for their board role and 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

Director’s Salary: CPF Applies

Where a director is also an employee under a contract of service, their salary is employment income and CPF contributions are compulsory for Singapore Citizen and Permanent Resident directors. Both employer contribution (currently 17% for employees aged 55 and below) and employee contribution (currently 20%) must be paid to CPF Board by the 14th of the following month. For a full breakdown of CPF rates and deadlines, see the Singapore Payroll & CPF 2026 Guide.

Director’s Fees: No CPF Required

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 at a general meeting are not “wages” under the Central Provident Fund Act.

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

Skills Development Levy (SDL)

SDL applies to salary paid under a contract of service, but not to director’s fees. The SDL rate is 0.25% of total wages, capped at S$11.25 per month per employee.

Income Tax Treatment

Both director’s fees and salary are subject to Singapore personal income tax as employment income. The key difference is in timing:

• Director’s fees: Taxable in the year they are voted and approved, not when paid. If shareholders approve fees at an AGM held in 2026 for FY2025 services, those fees are taxable in Year of Assessment 2027.
• 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 every director and employee, covering remuneration paid in the preceding calendar year. The IR8A must capture salary, bonuses, director’s fees, and benefits-in-kind. IRAS cross-references IR8A data against personal income tax returns — omissions are detectable. For corporate tax deductibility of remuneration, see the Corporate Tax 2026 Guide.

Tax Deductibility: Can the Company Deduct Both?

From the company’s perspective, both director’s fees and 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.

Structuring Director Remuneration: Three Options

Option 1: Pure Director’s Fees

No CPF required. Simpler administration. Taxable when approved at AGM. Downside: no CPF retirement savings on this income; no “salary” without an employment contract.

Option 2: Pure Salary

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

Option 3: Combination (Most Common for SME Owner-Directors)

Many Singapore owner-directors take a modest regular salary (to maintain CPF contributions) supplemented by director’s fees approved at the AGM. The salary covers day-to-day personal expenses; the fees allow flexibility in distributing year-end profit. Any arrangement should be documented via board resolutions, an employment contract (where applicable), and a shareholder resolution approving fees at the AGM.

Non-Resident Directors

Where the director is not a Singapore tax resident, director’s fees are subject to withholding tax at 24%, which the company must deduct and remit to IRAS. See the Singapore Withholding Tax 2026 Guide for full details. Non-resident directors performing executive duties in Singapore (beyond attending board meetings) may have additional personal income tax obligations.

Common Mistakes to Avoid

• Paying director’s fees as monthly salary without AGM approval: If shareholders have not approved director’s fees, the payment may be legally invalid and attract IRAS scrutiny.
• Failing to pay CPF on a director’s salary: Directors receiving a regular monthly salary under a contract of service must have CPF deducted and remitted, even in a micro-company with one shareholder.
• Confusing fees and salary in IR8A: IRAS requires separate disclosure; do not combine them.
• Not documenting the remuneration structure: A board resolution and, where applicable, an employment contract are essential records.

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

Beyond remuneration structuring, personal financial planning and investment decisions are important for directors building 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.

Summary Comparison

Conclusion

The distinction between director’s fees and salary matters — for CPF, personal tax, and corporate compliance. 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.

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