Director fee

[Minke]

Does anyone know how much and how often a director can withdraw director fees from the Ltd in Singapore?

Are all the director fee withdrawals subject to approval from some
party or would the director be able just to withdraw different amounts every now and then? If yes, would it be enough for accounting purposes to show the account statements where the withdrawals can be seen or are some official vouchers required? What kind of vouchers those should be if required?

Just haven't been able to get the right answers from any consultants I have been talking to. I understand that CPF contributions are not payable on director fees and that the normal personal income tax rules apply for director fees but don't really have any idea on the practicalities mentioned above.

Would really appriciate your help. Thanks a lot in advance!

[deveb]

I am interest to know also ... especially if any document or receipt requird when fee are drawn.

[Strong Eagle]

Directors fees require that a directors resolution be passed and entered into the minutes of the company records. The resolution specifies when and how much is to be paid.

Here is the catch. Director's fee income tax is payable in the year in which the fees were authorized. So, if in December, 2008 I authorized $50,000 but did not take the money until March, 2009 I would still pay income tax on the amount in 2008. It's not when you take the money, it is when you authorize it.

So, if you authorized monthly payouts of the total authorized fee, the total amount is taxable in the year authorized.

[Minke]

Very good points! Do you know if I can start to authorize director fees right after the incorporation of Ltd? I am planning to authorize and withdraw director fees right after receiving monies from customers.

Let say I am getting paid 150K salary from my full time job this year from which I will need to pay income tax as usual. Do you know what kind of tax implications the Director fees will have in this kind kind of situation where you have two separete source of taxable income? Thanks

[Strong Eagle]

You can authorize directors fees when ever you want to. Most firms fix a timetable but there is nothing in the law. Note that you must be a registered director in order to draw directors fees, and in fact all monies you take out of the company must be in the form of directors fees.

As far as tax implications, if you earn $150K right now and you also take $50K in directors fees then your taxable income will be $200K.

[David-asia]

An accountant told me that the first $20,000 in directors fees is not taxed. This right?

David

[Strong Eagle]

An accountant told me that the first $20,000 in directors fees is not taxed. This right?

David

That's news to me. Directors fees are taxable just like everything else. The accountant is blowing smoke out his/her arse.

There is a 20% personal tax rebate for 2009 due to the recession.

http://www.iras.gov.sg/irasHome/page04.aspx?id=184

[David-asia]

Still trying to get a hold of singapore taxes.

Any reason you would pay yourself a directors fee rather than a Non-contractual bonus?

David

[Strong Eagle]

Still trying to get a hold of singapore taxes.

Any reason you would pay yourself a directors fee rather than a Non-contractual bonus?

David

If you are PR then directors fees are not subject to CPF whereas a bonus is. If you are EP then it doesn't matter since you cannot participate in CPF.

Also note that a non contractual bonus is taxable in the year approved or granted, not the year received. So, if in Dec 2008 you granted a bonus paid in 2009, it is taxable in 2008.

Note that accounting rules do require that fees, salaries, and bonuses paid to directors are reported on a separate line from other employee salary and bonues.

[jpatokal]

Any reason you would pay yourself a directors fee rather than a Non-contractual bonus?

I don't see any reason why you'd opt for either instead of taking out dividends...

[Strong Eagle]

Any reason you would pay yourself a directors fee rather than a Non-contractual bonus?

I don't see any reason why you'd opt for either instead of taking out dividends...

Could be a big difference here, JP. For Singapore, if you actually have to pay corporate income tax it is at a 17 percent rate, although there are allowances and exclusions that lower the overall rate. So, you pay corporate tax on dividends but not personal income tax. So, the decision as to whether to pay dividends or directors fees/bonus depends upon making tax calculations for both company and individual and choosing the cheaper way.

If you are a US citizen, dividends make a BIG difference. Dividends are not subject to the earned income exclusion, so an American in Singapore will almost never want dividends but directors fees and bonuses which are considered earned income.

[David-asia]

I don't see any reason why you'd opt for either instead of taking out dividends...

As a US citizen, we have taxes on worldwide income... I believe dividends from your singapore corp. are treated as passive income, which i think we have to pay self employment taxes on in addition to regular income tax. (i'm not a lawyer or accountant)

David

[jpatokal]

Could be a big difference here, JP. For Singapore, if you actually have to pay corporate income tax it is at a 17 percent rate, although there are allowances and exclusions that lower the overall rate.

Yes, "if". Most new companies get 0% corporate tax for three years.

If you are a US citizen, dividends make a BIG difference. Dividends are not subject to the earned income exclusion, so an American in Singapore will almost never want dividends but directors fees and bonuses which are considered earned income.

D'oh! Too bad for you Merkins then

[Strong Eagle]

Yes, "if". Most new companies get 0% corporate tax for three years.

That's on the first $100,000 only. After three years there are still certain tax allowances as well. But as noted, I can't take dividends because of US tax consequences.

[dejavulupa]

Sorry for my ignorance. What's director fee?