There is a lot of misinformation and incorrect information in this post.
101s wrote:There is a common misconception that director fee must be taxable in Singapore. The answer can be YES and NO. Director fee from a company which has no presence in Singapore is not taxable in Singapore. This is because director fee is sourced in the country where the company is resident. Occasional meeting in Singapore will not render the company Singapore-resident status.
What misconception? If the company does not have a legal presence in Singapore, then it can't have directors in Singapore, because it doesn't exist in Singapore. If you are a valid Singapore resident and working in any capacity for a company with no presence in Singapore, then your income is not taxable in Singapore, but is taxable in the country in which the company is located. Whether or not you are earning as a director or as a clerk has no bearing whatsoever on the income tax laws.
Second misconception is that director fee is taxable in the year it accrues. Director fee is taxable when it is approved by the Board or in AGM. For example, 2016 director fee approved in 2017 AGM, is treated as 2017 income that should be declared for personal income tax in YA2018.
This is only half true and applies only to fees awarded at an AGM/EGM after the close of the tax year. The work of the director is considered to have been performed in the prior tax year and compensated in the prior tax year, therefore fees awarded are taxed in the current year with the earliest award date being the date of the AGM/EGM but there is nothing in the rules that prevents directors being awarded fees later in the year. Example: AGM meets in January, 2017 Awards directors fees in arrears for prior year 2016 to be paid in July, 2017. The directors liability for the payment is July, 2017, not the date of the AGM.
I would bet that IRAS did this to stop people from trying to take current year income in a high tax situation and push it back into a prior year by awarding prior year directors fees then refiling a return.
The other half that has been left out is fees awarded in advance. IRAS considers these fees payable only when the work has been performed and the fee expense is accrued to the books. Example: Jan, 2017 AGM awards fees to be paid July, 2017. Fees are taxable to director effective July, 2017. Example: Dec, 2017 EGM awards fees payable immediately. Fees are payable and taxable to director in 2017 regardless of when the cash is actually received.
As a practical matter, most small companies can easily pay directors in arrears or in advance, whichever makes the most tax sense for the director. If I am a director who is expecting a large bonus or fee in 2017, then I may well ask that an EGM be held Dec 2016 such that the fees are paid in the same tax year and therefore taxable to me in 2016. If I have a large income in 2016, then I may request that they be paid in arrears by asking that the be approved at an EGM in 2017.
And in reality, the whole point is moot. Directors fees must be paid in the year that the AGM/EGM awarded them.
Withholding tax rate on non-resident workers is 15%, however, this does not apply to director fee paid to non-resident director. Withholding tax rate on non-resident director is 22% (20% before 1/1/2016).
Last but not least, director income tax paid by the company should be computed based on
tax-on-tax basis.
