Your company made a profit of S$150,000 this year and you want to take money out. A S$60,000 salary leaves you S$3,150 better off than paying yourself dividends only, before CPF. The gap comes from the way each route is taxed.
How each route is taxed
Salary is a business expense. The company deducts the salary, so the company pays less tax. You pay personal income tax on the salary at resident rates, which start at 0%.
Dividends come from profit the company has already paid tax on. Under Singapore’s one-tier system, you pay no further tax on them. The company gets no deduction for them.
So the question is whether the company tax you save on salary is larger than the personal tax you pay. At S$150,000 of profit, the answer is yes.
A worked example
Corporate tax is 17%. Partial tax exemption lowers the amount taxed: 75% of the first S$10,000 and 50% of the next S$190,000.
Route A: dividends only
– Exempt: S$7,500 + (50% x S$140,000 = S$70,000) = S$77,500
– Taxable profit: S$150,000 – S$77,500 = S$72,500
– Company tax: S$72,500 x 17% = S$12,325
– Profit after tax, paid as dividends: S$150,000 – S$12,325 = S$137,675
– You receive S$137,675, with no personal tax
Route B: S$60,000 salary plus dividends
– Profit after salary: S$150,000 – S$60,000 = S$90,000
– Exempt: S$7,500 + (50% x S$80,000 = S$40,000) = S$47,500
– Taxable profit: S$90,000 – S$47,500 = S$42,500
– Company tax: S$42,500 x 17% = S$7,225
– Profit after tax, paid as dividends: S$90,000 – S$7,225 = S$82,775
– Personal tax on the salary: S$0 on the first S$20,000, S$200 on the next S$10,000, S$350 on the next S$10,000 and S$1,400 on the last S$20,000, which is S$1,950
– You receive S$60,000 – S$1,950 + S$82,775 = S$140,825
The difference is S$140,825 – S$137,675 = S$3,150. Another way to see the same result: company tax falls by S$12,325 – S$7,225 = S$5,100, and you pay S$1,950 in personal tax, so S$5,100 – S$1,950 = S$3,150.
These figures ignore corporate tax rebates and personal reliefs. They also ignore CPF. A salary brings CPF contributions for Singapore citizens and permanent residents, which lowers your take-home pay while building your own CPF balance.
What else to weigh
Salary is a fixed cost every month. Dividends depend on profit and on the cash your company holds, so you need enough retained profit before you declare one.
Personal tax rates rise as your salary rises. A bigger salary stops paying off at some point, so the best amount changes with your profit.
A regular salary also creates a payroll record. Banks and lenders look at one when you apply for a loan.
Our corporate tax page explains how we work out the mix for owner-managed companies: https://www.cschow.com.sg/corporate-tax-singapore/
This article gives general guidance and does not replace advice on your own situation.
Send a WhatsApp message to +65 9876 3553 or email henry@cschow.com.sg. Tell us your profit and what you take out today, and we will talk through your numbers.
Henry Chow
Public Accountant
C S Chow & Co