Singapore has been consistently recognized as one of the best countries for business in the World Bank’s annual report. With policies that support international participation and 100% foreign shareholding, Singapore attracts foreign directors and business owners.
In this blog post, we delve into a crucial aspect for foreign directors and business owners: the taxability of a foreign director fee in Singapore. Understanding the tax implications is vital for making informed decisions and maximizing the benefits of conducting business in Singapore.
Can a Foreigner be a Director For an Organization?
Yes. Foreigners residing overseas have the opportunity to own shares in a Singapore-registered company and can be appointed as foreign directors.
However, you must appoint a locally resident director to fulfill the mandatory requirements of setting up a Singapore company.
It’s worth mentioning that you have the flexibility to appoint both local and foreign directors, as long as there is a minimum of one local director within the company’s board of directors. This allows for a diverse leadership structure while ensuring compliance with local regulations.
Types of Director Fee in Singapore
A director fee in Singapore encompasses the compensation paid to directors in recognition of their role and responsibilities within a company. These fees serve as remuneration for the directorial services they provide.
Meanwhile, foreign directors’ employment income is also subject to taxation, which can be either at a flat rate of 15% or 24% of the progressive resident tax rates, depending on whichever results in a higher tax amount unless specifically exempt or subject to a reduced rate.
The director fee in Singapore can take different forms, including:
- Director Fee: This is the most prevalent form of remuneration, typically disbursed in cash and determined by the company’s shareholders.
- Performance-based Bonus: Directors may receive a performance-based bonus in addition to their director’s fees. This bonus is typically linked to the company’s financial performance or the accomplishment of specific objectives.
- Share-based Remuneration: Directors may also be granted remuneration in the form of shares or share options within the company.
- Benefits in Kind: Directors might receive benefits such as medical insurance coverage, housing allowances, or car allowances.
Approval Process for Director Fee in Singapore
Independent directors or non-executive directors can only receive director fees in Singapore. This is in contrast with executive directors who only receive a salary from the company.
For directors to receive their fees, the shareholders must vote in favor of this decision, as stipulated by Section 169(1) of the Companies Act 1967. An ordinary resolution must pass with simply a vote held in a shareholders’ meeting. At least 50% of the shareholders must vote in favour of the resolution.
Disclosure of Foreign Director Fee in Singapore
It is not explicitly mandated by law to disclose the fees paid to directors to shareholders. However, it is strongly recommended for companies to embrace corporate transparency by including this information in their Annual Report.
In the event that voluntary disclosure is not made, Singapore legislation empowers shareholders to request the company to reveal the amount of compensation paid to directors. This authority is granted under Section 164A(1) of the Companies Act 1967.
You may be compelled to disclose directors’ fees if either of the following conditions is met:
- Written notice is issued by at least 10% of the total members of the company.
- Written notice is issued by a member or multiple members holding at least 5% of the total issued shares of the company.
Once such a notice is received, it becomes obligatory to provide an audited statement detailing all fees paid to directors. A copy of statement must be provided within 14 days to shareholders of the company.
Failure to comply with this requirement exposes all directors of the company, as well as the company itself, to potential fines of up to $10,000 each.
Tax Obligation for Foreign Director Fee in Singapore
For the income due and payable from 1 Jan 2016 to 31 Dec 2022, foreign directors are subject to withholding tax rate of 22% on their director fee in Singapore. However, as of income due and payable from 1 Jan 2023 onwards, there will be an increase from 22% to 24% in the income tax rate for foreign individuals. This adjustment aims to establish parity between the income tax rate for foreigners and the top marginal income tax rate that applies to residents, ensuring fairness and equality in treatment.
CPF Contributions for Foreign Director Fee in Singapore
A foreign director fee in Singapore is not subject to CPF contributions. Company required to pay CPF contributions for employees who are Singapore Citizens or Singapore Permanent Residents and who are earning total wages of more than SGD50 per month. A director fee in Singapore is not classified as salary payment which is why CPF contributions are not necessary.
How can we help?
Premia TNC is dedicated to providing comprehensive assistance and support tailored to meet your specific needs. Whether you are a foreign entrepreneur looking to establish a business in Singapore, seeking advice on tax obligations, or navigating regulatory requirements, Premia TNC has the expertise to assist you at every stage.
Premia TNC’s services cover a wide range of areas, including company incorporation, company secretarial, taxation, and more. With a deep understanding of the local business landscape and regulatory framework, Premia TNC offers valuable insights and strategies to help you make informed decisions and optimize your business operations.
Contact Premia TNC today to discuss your specific requirements and discover how their team of experts can assist you in navigating the complexities of doing business in Singapore effectively.
Frequently Asked Questions
1. Is a foreign director fee in Singapore subject to taxation?
Yes, the foreign director fee in Singapore is generally subject to taxation in Singapore. However, the tax treatment may vary depending on the specific circumstances and residency status of the director.
2. What is the tax rate applicable to foreign director fee in Singapore?
A foreign director fee in Singapore is subject to a tax rate of 22% for the years of assessment (YA) 2017 to YA 2023. Starting from YA 2024, this will be increased from 22% to 24%.
3. What is considered the official date of payment for a director fee in Singapore?
The official date of payment for director fee in Singapore is the day they are voted and approved during the company's Annual General Meeting.
4. How should foreign directors fulfill their tax obligations in Singapore?
Foreign directors should ensure compliance with the government’s tax laws by accurately reporting and paying taxes on their director fee in Singapore. It is recommended to consult with a professional or seek advice from the Inland Revenue Authority of Singapore (IRAS) to understand the specific tax obligations and filing requirements.
