⚠ Directors' Fees Are Fully Taxable — But Dividends Are Not
Directors' fees and salaries paid by a company to its directors are fully assessable to salaries tax in HK. However, dividends paid out of a company's after-tax profits are not subject to any further individual-level tax in HK. This creates a legitimate remuneration planning opportunity — but one that must be structured carefully to avoid anti-avoidance provisions.
Common Challenges
Salary vs Dividend Optimisation
Paying yourself predominantly via salary maximises your taxable income at 15%. Increasing dividend extraction from after-tax profits reduces personal salaries tax at the cost of corporate profits tax.
⚠ Risk: Suboptimal mix → higher combined effective tax rate on your total remuneration
Benefits-in-Kind Taxation
Company cars, accommodation, club memberships, and other benefits provided to directors are assessable employment income. The valuation rules are complex.
⚠ Risk: Underdeclaring benefit values → IRD assessment + penalties
Cross-Border Directorships
Directors of HK companies who reside or perform duties overseas face complex source-of-income questions — particularly for fees earned at board meetings held outside HK.
⚠ Risk: Wrong source determination → double taxation or IRD enquiry
Director Loan Accounts
Loans from the company to directors can be treated as income or create profits tax complications if not properly documented and priced.
⚠ Risk: Informal director loans → IRD reclassification as salary + interest charges
Who Is This For?
Owner-directors of HK private companies
Entrepreneurs who are both the majority shareholder and a working director of their HK company.
Non-executive directors receiving fees
Those receiving directors' fees from one or more companies for board service.
Directors with complex remuneration packages
Those receiving salary, bonus, share awards, benefits, and dividends simultaneously.
Directors of multiple group companies
Those receiving fees and salaries from several related companies.
Overseas directors of HK companies
Non-HK-resident directors who attend HK board meetings and receive directors' fees.
What We Do
Director Remuneration Structure Review
We model the optimal mix of salary, fee, bonus, dividend, and benefit to minimise combined personal and corporate tax.
Using actual income and profit figures for precision analysis
Dividend vs Salary Tax Modelling
We quantify the tax impact of shifting HKD 100,000 from salary to dividend at different profit levels.
Including corporate profits tax and MPF implications
Benefits-in-Kind Valuation
We calculate the assessable value of all director benefits using IRD's prescribed methods.
Housing benefits (rental value vs prescribed rate), cars, club memberships
Director's BIR60 Filing
We prepare your personal salaries tax return including all employment income, fees, and benefits from all directorships.
Coordinated with your company's IR56B employer filing
Cross-Border Directorship Tax Analysis
For directors performing duties in multiple jurisdictions, we determine the HK-assessable portion of fees.
Board meeting location analysis and day-count methodology
Annual Remuneration Planning Review
Each year before March 31, we review your current-year position and adjust remuneration for the optimal year-end outcome.
Including bonus timing, dividend declaration, and QDAP contributions
How It Works
Remuneration Structure Assessment
1–2 daysWe map all income flows from your company/companies and model your current effective tax rate.
Optimisation Modelling
2–3 daysWe model alternative remuneration structures and present a clear analysis of tax savings.
Implementation & Documentation
1 weekWe assist with board resolutions, dividend declarations, and service agreements to formalise the optimal structure.
Annual Filing & Review
AnnualWe file your BIR60, coordinate with your company's accounts, and conduct an annual review.
Case Studies
Owner-director of HK trading company
- •Previously paying HKD 1,800,000 salary (full salaries tax)
- •Restructured to HKD 800,000 salary + HKD 1,000,000 dividend
- •Salaries tax on HKD 800,000 significantly lower
- •Company profits tax on HKD 1,000,000 dividend profit at 8.25%
- •Combined effective rate fell from 15% to 9.8%
“The salary-to-dividend restructuring was TAX.hk's key recommendation. It transformed my annual tax position.”
Non-executive director with 4 board fee arrangements
- •Total fees HKD 580,000 from 4 companies
- •One Cayman company with board meetings in Singapore
- •Singapore meeting days (16 days) excluded from HK assessment
- •HKD 25,400 correctly excluded as non-HK-sourced
- •Benefits-in-kind from one company correctly valued and declared
“TAX.hk identified the Singapore board meeting exemption that I had never considered in 5 years.”
Frequently Asked Questions
Can I pay myself in dividends to avoid salaries tax?
Partially. Dividends paid by a HK company to individual shareholders are not subject to any further HK tax at the individual level — there is no dividend withholding tax in HK. However, to fund those dividends, the company must have after-tax profits. The company will have already paid profits tax at 8.25% (first HKD 2M) or 16.5% (above HKD 2M). The combined effective tax on salary vs dividend depends on your personal salaries tax rate vs the company's profits tax rate.
I receive directors' fees from three companies. How are these taxed?
All directors' fees from employment directorships are assessed together as salaries tax income in your BIR60. Each company files an IR56B reporting their fees. The IRD consolidates all fees and applies progressive rates to the combined total. If any directorships are non-executive and the fees relate to services performed outside HK, a source-of-income analysis may reduce the assessable amount.
My company provides me with a car. How is this valued for tax?
The annual benefit value of a company car under the IRO is HKD 30,000 or the actual depreciation plus running costs (if you can demonstrate lower), whichever is higher. Where a car is provided with a driver, the driver's costs are also assessable. Fuel costs for private use are a separate assessable benefit. We advise directors on whether keeping a car in the company name is tax-efficient.
I want to pay my spouse a salary as a director. Is this tax-efficient?
Paying a genuine salary to a spouse who performs real work as a director can be tax-efficient — it shifts income to a potentially lower-bracket taxpayer and creates a deductible cost for the company. However, the IRD may challenge arrangements where the salary does not reflect market rates for the services rendered. We advise on appropriate salary levels and ensuring proper employment documentation.
I am an overseas director who attends HK board meetings twice a year. Am I taxed in HK?
Directors' fees are sourced to where the directorial services are performed. If you attend board meetings physically in HK, fees attributable to those meeting days may be HK-sourced and assessable. For two meetings of 2 days each (4 days out of 365), only 4/365 of your annual fee would typically be assessable. The amount is usually small but should be correctly reported.
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