In general, the director's fees are likely to be sourced in the country the company is based.
The reason for this is that the director's actions in controlling and determining business activities to generate the company's revenue have taken place in that specific country.
1. Director's Fee must be approved at AGM
Director fee is usually paid to the director once a year.
The earliest date which the director can receive his fees is the date on which his fee is approved at the company's annual general meeting (AGM).
AGM should be conducted within 6 months from the company's financial year end.
For example, the company has a financial year ended on 31 December 2017.
The company approved the director's fee in its AGM on 30 Jun 2018 to be paid for the director's service rendered for the financial year ended 31 December 2017 (i.e. for the previous financial year).
2. Is Director's Fee Taxable in Singapore?
The director's fee is deemed taxable in the hands of the director in the year that the director is entitled to the fee.
This is usually the AGM date where the company approved the director fee.
3. Can the Director's Fee Be Agreed in Arrears?
In situations where the director's fees are agreed in arrears, the director appears to provide his services for the relevant financial year.
There is still a requirement to disclose the director's fees and seek for board approval at AGM.
As such, the earliest date the director is able to receive the director fees is at the date of the company's AGM when the director fee is voted and approved.
Here is an example:
The director's fees are voted and approved at AGM. The fee is agreed at of $25,000 on 30 June 2018 which relates to services provided within the financial year that ends 31 December 2017.
The director is considered as the director's income for 2018 as his services were approved on 30 June 2018. This means the taxable period on the director's fee will take place in Year of Assessment 2019.
4. Can the Director's Fee Be Approved in Advance?
In the event that the director's fees were approved in advance at the AGM, the director has not provided the relevant service.
As such, the director is required to render his service before he can be entitled to his director's fees.
Here is an example:
The AGM is held on the 1 December 2016 and approved the director's fee at S$100,000 for the financial year ending 31 December 2017 (i.e. the next financial year).
This means the director’s fees were agreed in advance.
The directors are not entitled to the fees on 1 December 2016 as the directors have not provided the services for the financial year ending 31 December 2017.
5. When is Director's Fee Not Taxable?
In general, the director's fee sourced from a corporation with no presence in Singapore is not required to pay tax in Singapore.
This also applies to directors who hold their board meetings in Singapore.
The director's fee is generally derived in the country where the company is a tax resident. The fees related to attending the board meetings in Singapore are not subject to tax in Singapore.
All other fees/payments paid to the directors for discharging the directors' duties in Singapore are taxable.
For more information on tax implication on Director's fees, please complete the Contact Form and our Tax Service team from will contact you.