The Inland Revenue Authority of Singapore (IRAS) clarifies that that an individual is normally assessable to tax on his director’s fees or bonuses from employment when he becomes entitled to receive those fees or bonuses.
Similarly, a company may claim deduction for director’s fees or employees’ bonuses when the company becomes liable to pay those fees or bonuses.
IRAS typically allows a business to deduct director’s fees or employees’ bonuses for the year in which they are properly ascertained and accrued as expenses in its financial accounts in accordance with generally accepted accounting principles.
The IRAS has issued an e-Tax Guide that seeks to clarify in particular the tax treatment of contractual bonuses payable in accordance with the terms of a bonus plan adopted by an employer; the tax treatment of both director’s fees approved in advance and director’s fees approved in arrears; and the situations where IRAS will not allow deduction of director’s fees or employees’ bonuses for the year in which they are accrued (largely when they were not properly approved).
Where a company claims a deduction on director’s fees, it is required to provide the following information in its tax computation: the date on which the director’s fees were approved; the amount approved; the year in which any unapproved amount is written back (if applicable); and the amount (if any) of director’s fees approved in arrears at the relevant annual general meeting but the directors were entitled to the fees only after the accounting year in which such fees were approved.