How Should You Pay Yourself As a Sole Company Director In Singapore?

Being your own boss is fun as you have full flexibility to structure your finances. As a company director in Singapore, one of the key decisions you’ll often grapple with is how to remunerate yourself.

Understanding the various methods to draw a paycheck, and their associated legal and financial implications, is crucial to making an informed decision.

This article aims to provide clarity on the best ways to pay yourself, considering the Central Provident Fund (CPF) contributions, taxation rules, and credit score implications.

Why Pay Yourself? Can’t You Just Withdraw Dividends?

I have encountered a number of people who run their own company as the sole director/employee run into several financial issues because they do not pay themselves a fixed salary. You’ll definitely want to take note of these implications before making the decision!

There are several reasons why paying yourself might lead to a more favorable outcome.

1. Tax Savings

Companies in Singapore are taxed at a flat rate of 17%, whereas individual income tax rates follows a progessive tax rate structure.

Base on IRAS tax guidelines on the personal income tax rates, the point which your personal income tax reaches the tier that is higher than the corporate tax rate of 17% is on your first $160,000 (chargeable income – after all tax reliefs applied).

What this means that if you are intending to pay yourself a salary of more than $160,000, you will actually be paying more in taxes than if you had reported the profits in your company.

Disclaimer: NOT Financial Advice
With this tax implication in mind, you may actually consider paying yourself a salary of less than $160,000 to enjoy lower tax rates, whilst reporting the rest of your income in your company profits.

Remember that any salary you pay to yourself as a director can be expensed off from the company and you will not be taxed twice.

2. Unable to Enjoy The Full Loan Sum for Big Ticket Items

When considering how to pay yourself, it’s crucial to contemplate your future financing needs, particularly if you’re planning to take significant loans for housing or vehicles. Banks in Singapore often perceive self-employed individuals as higher risk borrowers and typically apply a haircut of 30%* or more on the loan amount they are willing to extend.

*Disclaimer: this figure is an estimation based on many conversations different bankers but should not be set in stone as the final amount may be higher or lower.

I have met many business owners that do not pay themselves a fixed salary run into issues when trying to take out a loan for their housing mortgage.

In contrast, having a stable, regular salary may improve your credit score and enhance your borrowing power, making it easier to secure loans. While this doesn’t necessarily mean you shouldn’t opt to be self-employed, it does underscore the importance of considering your broader financial picture when deciding how to pay yourself.

How to Pay Yourself As Your Company Director

1. Pay a Fixed Salary

The simplest method to pay yourself is to draw a fixed monthly salary. This form of payment is an operating expense to the company and is deductible for corporate tax purposes. However, it is essential to note that this income is taxable for you as an individual under the Inland Revenue Authority of Singapore (IRAS) regulations.

If you choose to pay yourself a salary, one smart tip is to use GIRO, a popular and convenient electronic funds transfer service. By tagging your transaction reference with ‘SAL’ or ‘SALA’, you may enjoy the full benefits of high interest rate bank accounts that may help you earn over 4%+ interest (which is really neat given the current market conditions!), as these banks often offer improved rates when you credit your salary into their accounts.

2. Pay as an Independent Contractor (Self-Employed)

An alternative method is to invoice your company for services rendered, essentially acting as an independent contractor. For example, for marketing services, or as a consultant, etc.

This method of payment is attractive, as it allows greater flexibility and potential tax advantages, such as claiming allowable business expenses against your income.

3. Declaring Dividends

The method of declaring dividends is much easier if you are the sole owner of the company. Do note that dividends are NOT expensed out, which means that all profits are declared under the company and will be subject the the corporate tax rate of 17%.

Should You Pay Yourself CPF?

Under Singapore’s laws, CPF contributions are mandatory for salaried employees but not for self-employed individuals. CPF serves as a social security savings scheme, covering retirement, housing, and healthcare needs.

If you pay yourself a fixed salary, both you and your company are required to make CPF contributions. However, as an independent contractor, the obligation is solely on you to make MediSave contributions, which is a part of the CPF scheme dedicated to healthcare expenses.

Hence, while being self-employed may afford more flexibility, it also necessitates more financial planning for the future.

You can use the self-employed tax calculator here to make estimations on the impact to your taxes.


Whether you choose to pay yourself a fixed salary or operate as an independent contractor, it is essential to consider CPF contributions, tax implications, and the potential impact on your credit score.

As a sole company director in Singapore, understanding these factors will allow you to make the best decision for both your personal financial health and the wellbeing of your company. It is always recommended to seek professional advice, as everyone’s circumstances differ and these choices can have long-term financial impacts.