Can I pay myself Director Bonus?

[DontKnow0]

Hello,

I set up my pte ltd in March 2015. Now, since I will need to file my personal income tax for income earned in Year 2015, I would like to make sure I draw right amount of money from the company which gives me best tax advantage from both personal and corporate income tax perspective.

Since I never paid any salary to myself in year 2015, I don't think paying myself salary now would be the right choice, because it seems too late to do that already which would not reduce my corporate tax in Year 2015 and salary must be paid on monthly basis. Correct me if I'm wrong.

So I thought of paying myself Director's Fee or Director's Bonus. But the problem with Director's Fee is that I understand this must be passed at AGM, and I didn't hold AGM in Year 2015. And even if I did it on 31 Dec 2015, I would have to file Annual Return to ACRA within one month after that (i.e. by 31 Jan 2016). Now, it's too late already to file the Annual Return.

So it seems Director's Bonus is my last option. Could anyone let me know whether this can work out? Must Director's Bonus already be passed in AGM? Can I just record Director's Bonus Accrual in my book for FY2015 (so to reduce the taxable income on my company in Year 2015) and transfer the money from my corporate bank account to my personal account sometime this year (Year 2016), without doing any AGM or breaching any laws? If this works, I will claim the Director's Bonus in my personal income tax to be submitted by 15 April this year which is tomorrow....so please, if anyone could help me with this as soon as possible...

Thank you!

[DontKnow0]

Hi, just to add on to my previous questions...

If I can't do Director's Bonus, can I just record Salary Payable and CPF Payable in my FY2015 books, so to increase my company expenses and, thus, reduce the taxable corporate income in FY2015? In this case, the salary and CPF are only accrued in FY2015, and will be paid to me and CPF account later this year 2016 as a lumpsum. And meanwhile, I will still put this salary into my personal income tax to be filed by April this year (even though I may not have got the salary and CPF paid yet by then). Would this work? Thanks.

[Strong Eagle]

Mate,

You seem to be operating under a number of misconceptions. If you have not already files your corporate income tax return you can do anything you want to do. Until you file you can create any AGM/EGM notice you want and file/pass any directors resolutions you want.

If you have already filed, then your year is already fixed, and the only way to change things would be to file an amended return. Usually amended returns are filed to correct reporting oversights, so you could file saying that you 'forgot' to include your salary, for example.

The reason you can do this is because you are the shareholder and director. No other shareholders are going to complain that things weren't done "by the book". ACRA and IRAS will never try to prove that you actually had your AGM/EGM meeting on a specific date... all they care about is that the company minutes contain the resolutions enabling various actions.

So, backdate whatever you want to backdate, set up your salary and fees however you want.

Be aware that directors fees, bonuses, etc are effective upon the payment date recorded in the resolution regardless of actual payment date. If you set Nov, 2015 as the date of record for payment of directors fees at a EGM, they are an expense to the company in 2015 and must be recorded as income on your 2015 personal return, even if you did not actually receive the money until July 2016.

One last piece of advice. You say you want to set things up to give yourself the "best tax advantage from both personal and corporate income tax perspective." You can certainly set things up this way. The first $100,000 of corporate profits are not taxed for the first 3 years. Dividends are not taxable to you in Singapore. so, you can pay nothing company or personal for at least 3 years.

Are you a Singapore citizen? Then, no problem... they may not like it, and it is the way things are structured. Are you an EP or PR? Then this is a much more dangerous road to travel... a foreigner avoiding tax by taking dividends instead of a salary. Even as a citizen, you may well be challenged as IRAS, just like many other taxing jurisdictions, has the view that work of various types should be compensated at reasonable rates.

From a tax perspective it doesn't matter if you pay yourself a salary or directors fees... both are subject to income tax. If you are a citizen or PR, the only difference is that you must pay CPF on salaries but not on directors fees.

Hello,

I set up my pte ltd in March 2015. Now, since I will need to file my personal income tax for income earned in Year 2015, I would like to make sure I draw right amount of money from the company which gives me best tax advantage from both personal and corporate income tax perspective.

Since I never paid any salary to myself in year 2015, I don't think paying myself salary now would be the right choice, because it seems too late to do that already which would not reduce my corporate tax in Year 2015 and salary must be paid on monthly basis. Correct me if I'm wrong.

So I thought of paying myself Director's Fee or Director's Bonus. But the problem with Director's Fee is that I understand this must be passed at AGM, and I didn't hold AGM in Year 2015. And even if I did it on 31 Dec 2015, I would have to file Annual Return to ACRA within one month after that (i.e. by 31 Jan 2016). Now, it's too late already to file the Annual Return.

So it seems Director's Bonus is my last option. Could anyone let me know whether this can work out? Must Director's Bonus already be passed in AGM? Can I just record Director's Bonus Accrual in my book for FY2015 (so to reduce the taxable income on my company in Year 2015) and transfer the money from my corporate bank account to my personal account sometime this year (Year 2016), without doing any AGM or breaching any laws? If this works, I will claim the Director's Bonus in my personal income tax to be submitted by 15 April this year which is tomorrow....so please, if anyone could help me with this as soon as possible...

Thank you!