Income Tax for Non-Resident Directors
Singapore law requires at least one local director to be appointed to the board of directors. However, it is also possible to designate non-resident directors to the board as well.
Non-resident directors are subject to different tax requirements than tax residents of Singapore. The number of days an individual spends in Singapore throughout a calendar year is used to determine whether they are a resident or non-resident for tax purposes.
In this article we will take a look at how non-resident directors’ tax is calculated.
Who qualifies as a non-resident director?
Under Singapore law being classed as a non-resident director depends on the length of your stay in Singapore for work. You would be classed as a Non-resident if you;
- Have worked or stayed in Singapore for less than 183 days in a calendar year.
Please note that the Inland Revenue Authority of Singapore (“IRAS”) may, on a discretionary basis, assess an individual to be a tax resident if their employment in Singapore is expected to cover a continuous period of at least 183 days over 2 calendar years (i.e. 2-year administrative concession).
Taxable income for a non-resident director includes the following:
- Director’s Fees
- Gains from stock options or any other share ownership plan.
What are the Tax rates for a non-resident director?
The tax rate in Singapore for non-resident individuals is 22%. This rate applies to all income earned including rental income from properties, pension and director’s fees from Singapore.
However, employment income and certain other types of income are taxable at reduced withholding rates
Remuneration as a director
In Singapore, a non-resident director can receive remuneration for undertaking the following activities:
- As a Board Director or
- As a Board and Executive Director or
- Income earned from gains made via stock options/awards.
Remuneration received by a non-resident director through their role as a board director, is subject to a withholding tax at a rate of 22%. This form of income may be subject to a lower rate should a valid tax treaty between the director’s home country and Singapore be applicable.
Any due withholding tax payments must be made by the company by the 15th of the second month following the day the director’s compensation was paid. Payment of withholding tax does not require the director to submit a tax return and upon payment a letter of Confirmation of Payment (COP) will be sent.
Board and Executive Directors
Singapore companies may appoint a non-resident director to the position of executive director. As an executive director, they will be responsible for the company’s daily activities and business operations.
Other applicable positions that a non-resident director can fulfil under this category include:
- Managing Director,
- Chief Executive Officer.
Any remuneration received from undertaking these positions is considered not subject to withholding tax but rather taxed at the flat rate of 15%.
Income earned as a Board and/or Executive Director as a non-resident director requires the submission of a tax return to report, the tax authority in Singapore will then issue the director a tax assessment letter.
Income earned from gains from stock options/awards
Any profits derived from the sale stock options or income from stock awards is subject to tax. Such gains must be declared on a non-resident director’s yearly tax return as “employment income.” Additionally, the company must report the profits on stock options or stock awards through the submission of Form IR21A. This form must be filed within 30 days after the date of exercise, assignment, release, or acquisition of the shares.
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