💼 7 Smart Ways Directors Can Get Paid — And Their Tax Implications

Published: 21 Apr 2025

As a company director, there are various ways to legally and strategically receive compensation. (😉😉 yes they are legal)

Each method comes with different obligations, tax treatments, and planning opportunities.

Here’s a quick guide to help you make informed decisions and stay compliant:

1. Fixed Salary (Director’s Remuneration)

This is the most straightforward method. If you’re also employed by the company, you can receive a fixed monthly salary under a valid employment contract.

No board approval needed, but all statutory contributions and deductions must be properly accounted for.

2. Director Fees

Director fees require board approval, subject to your company’s constitution.

These fees often include meeting allowances or payments for participating in committees or advisory roles.

Typically, director fees are paid annually in one lump sum.

While the company isn’t required to contribute to EPF, SOCSO, or EIS for these fees, PCB (Potongan Cukai Bulanan) reporting and income tax declaration is still mandatory.

3. Dividends

If you're both a director and a shareholder, dividends offer a tax-efficient way to enjoy business profits.

However, take note — a 2% dividend tax will apply if your total dividends exceed RM100,000 in a year.

Proper planning can help you maximise your returns while staying within compliance boundaries.

4. Reimbursements

Legitimate business-related expenses — such as travel, medical, or company purchases — can be reimbursed to directors.

Just make sure all claims are well-documented and kept.

With e-invoicing becoming mandatory, having clear records will be more important than ever.

5. Management or Consulting Fees

If you provide additional services to the company — often through a separate legal entity — you may be compensated through management or consulting fees.

However, it’s important to note that these must be backed by a valid commercial contract.

Since this isn’t considered employment income, no EPF, SOCSO, EIS, or PCB deductions are required.

However, to stay compliant with tax authorities, ensure that fees are set at arm’s length and supported by proper documentation.

6. IP Rights and Royalties

Do you have a brand, trademark, or intellectual property (IP) that you’ve developed?

You can license or assign your IP to the company through a formal agreement and earn royalty income.

Just remember — royalties are taxable and must be declared as part of your personal income.

This is a great option for directors with valuable personal IP assets.

7. Loans to the Company

Not keen on injecting more capital? Consider giving a formal loan to the company instead.

This allows the company to access funding while you, as a director, can earn interest on the loan.

A proper loan agreement is essential, and the interest income must be reported in your personal tax filings.

📣 Now you know…

Each compensation method has unique tax implications.

Whether it’s dividends, consulting fees, or reimbursements, proactive planning can help you optimise your income and avoid penalties.

If you are still unsure, always consult a tax professional to ensure you’re making the most of your options while staying within the legal framework.

Need advice tailored to your situation? Our team is here to help.

Reach out today for strategic, compliant, and personalised guidance.