Remuneration for Director

[RK6216]

I am a US citizen and recently became a Director of a Singaporean investment company. Is there an upper limit for remuneration as a Director of the company? The company is an investment corporation that invests in digital marketing businesses in Singapore. Once i receive remuneration, can i pay Singaporean taxes; and claim appropriate credits when filing my US taxes? Thank you in advance.

[Myasis Dragon]

There is no upper limit to remuneration.

You have not provided enough information.

Where is your legal residence?
Are you living in Singapore on an EP or PR? If yes, have you been (or will you be) there for 330 days or more?

Where you live and where your current tax home matters as to whom you pay taxes to.

[PNGMK]

I hope you weren't scammed.

[RK6216]

There is no upper limit to remuneration.

You have not provided enough information.

Where is your legal residence?

I am a resident of the US and pay my taxes in the US. US taxes are higher than Singapore. My intention is to pay taxes in Singapore; and claim credit when i file my US taxes (there is no tax treaty between the US and Singapore).

Are you living in Singapore on an EP or PR? If yes, have you been (or will you be) there for 330 days or more?

I do not live in Singapore and come to Singapore for short visits (less than 30 days in a year). I do not have a EP or PR in Singapore.

Where you live and where your current tax home matters as to whom you pay taxes to.

I live in the US and pay income taxes in the US.

[RK6216]

I hope you weren't scammed.

It is not a scam. The company has been operating for more than 10 years and invests in digital businesses. Some of their investments have been very successful. One of their investments was acquired by one of the largest advertising agency holding groups in the world.

[Myasis Dragon]

You will be classified as a non-resident director of a Singapore based company. As such, your income will be taxed at a flat rate of 22 percent, with virtually no deductions possible.

Because you are a non-resident director, your Singapore company must withhold your taxes and remit them to IRAS, then send you the remainder. Example: You get paid $1000 in directors fees. Your Singapore company sends $220 to IRAS and $780 to you. As a non-resident director, you will file a tax return to formalize your tax payments, and to have a tax record for your US tax return. Deductions available to you are extremely limited, so you'll essentially pay the entire 22 percent of your income.

As you have noted, there is no tax treaty between Singapore and the USA. Secondly, the USA taxes you on your world wide income, that is, even if you earn your money out of the country, and it is taxed elsewhere, you must still declare it and pay taxes on your US 1040.

So, you will have to declare the $1000 you got from your Singapore directorship on your US 1040, and pay US taxes on that amount. What the USA government allows you to do is take a tax credit for foreign taxes paid. So, to use the above example again, if your total USA tax bill were to be $500, you could deduct the $220 paid to Singapore and only pay $280 in US taxes. Note that tax credits claimed from foreign income can only be claimed up to the total amount of US taxes. If you paid $4000 in foreign taxes and only $3000 in US taxes, $3000 is all you can claim.

Two final notes. First, since you are a US resident, you are not able to take advantage of the foreign earned income exclusion which would have protected your first $105,900 from US taxes. You would need to have your legal domicile outside the USA for at least 330 days per year in order to qualify.

Second, because you are a director of a Singapore company, you are considered to be tax resident for tax purposes, even though you don't live in Singapore, because you are considered to be working for the Singapore company in Singapore. This is also true of anyone in the company who is essentially "senior management". This differs from "normal" employees who are generally taxed in their country of residence.

[Myasis Dragon]

I hope you weren't scammed.

Ever since PNGMK wrote this, I have been wondering just how lucrative a non-resident directorship could be, especially when the OP asks if there is an upper limit to remuneration. In my world, compensation is generally based on an individual's value add, so I've been wondering what a non-resident director could do that could generate director fees with high upper limits.

The company invests in "digital businesses". So perhaps the OP:

• Invests in digital businesses. But why would one hold a directorship to invest in digital businesses? Would not one take a stock position through investment if in a private limited? Or join a limited master partnership where returns from investing would be returned to partner's capital accounts? Or even a loan with variable payback if the investment hits a home run? But director's fees? I dunno.
• So maybe the OP is providing investment advice. It must be really great advice to be looking at the high end fees that the OP implied. Maybe because the OP is in the US and knows a lot of digital startups, there is a connection between the Singapore company and the OP. But still... wouldn't one normally be looking at a compensation plan for services rendered and not payment in director's fees?

But that just doesn't feel right. And so, with a little help from a friend, I found out that even though the OP says that, "I live in the US and pay income taxes in the US," curiously enough, he has been posting from Chennai, India IP addresses. This seems odd to me, as it doesn't appear to be a VPN setup.

Anyway, what could you do with a non-resident foreign directorship such that it would generate lots of fees? And the answer I came up with is money laundering or tax evasion. The new non-resident director "discovers" slathers of business opportunities that are soon sending cash into the Singapore company, and very soon, the non-resident director is rewarded with substantial fees.

I dunno... maybe I've been reading too many cheap spy novels while this corona virus devastates the global economy. Just tossing this out.

[tim.li]

One additional tax consideration to think about is if you are given shares of the company as a part of your compensation. If given enough you may also need to file Form 5471 with your tax return.

https://www.irs.gov/forms-pubs/about-form-5471

[PNGMK]

I agree Myasis. IT looks suspect. If it's legit then I'd hardly imagine a director being paid a LOT of money would need advice from a free board.