By Boo Kok Chuon and Chan Mei Lee, Clarie
Most people think tax planning means one thing:
Pay less tax.
That’s not tax planning.
That’s just chasing an outcome.
Real tax planning is about paying tax correctly and intentionally.
Because the way you pay yourself as a business owner affects more than tax — it affects bankability, cashflow discipline, and long-term strategy.
In our 2021 webinar on tax planning, we covered one of the most common questions directors ask:
✅ Should I pay myself via director’s fees, salary, or dividends?
This article is a short summary. If you want the full breakdown (including case studies), you can watch the webinar embedded below.
Director’s Fees vs Salary vs Dividends — What’s the Difference?
1) Director’s Fees
Director’s fees are attractive because:
✅ No CPF contribution
But there are trade-offs.
- Director’s fees are an expense, meaning they reduce the company’s profit
- From a bank’s perspective, director’s fees may be seen as less stable than salary when assessing personal loan eligibility or personal guarantees
In short: Flexible, but not always the strongest option for bankability.
2) Salary
Salary is the most straightforward and structured option.
- CPF contribution applies
- Salary also reduces company profit
- It is subject to personal income tax (progressive tax ladder)
However, salary is typically:
✅ more stable
✅ more recognised by banks
✅ easier to support in loan applications
In short: Boring, but powerful — especially if you want financing flexibility.
3) Dividends
Dividends are paid from after-tax profits, meaning:
- The company must first make profits and pay corporate tax
- Dividends are not guaranteed or automatic — they depend on available retained earnings
From a bank’s perspective, dividends are often viewed as:
⚠️ less predictable
⚠️ discretionary
⚠️ not a regular income stream
In short: Great for wealth planning, but not always “income” in the bank’s eyes.
One Key Insight Most Owners Miss
If your personal income is already in a higher tax bracket, it may be more sensible to avoid pushing everything into personal taxable income.
Why?
Because Singapore corporate tax is a flat 17%, while personal income tax is progressive.
That doesn’t mean you always take dividends.
It means your extraction strategy should be designed around:
- your income tier
- your reinvestment plans
- your loan and property plans
- your long-term wealth objectives
Watch the Full Webinar
This article is only the headline summary.
🎥 Watch the full webinar below, where I go through practical case studies and how these strategies work in real life.
Want This Done Properly?
If you want a clean and defensible structure for how you pay yourself (and why), we can help you map it out based on your business strategy.
📩 Book an appointment with us at info@icon.sg and we’ll review your current setup and propose an optimised plan.
Antidote #1:
Tax planning isn’t about paying less.
It’s about paying correctly — and intentionally.
