Taxation of Director Fees




Director fees refer to the monetary consideration (e.g., per diem) received by the members of the Board of Directors in a corporation.


The Board of Directors is the governing body of a corporation. It has the following primary functions:

  1. To exercise corporate powers.
  2. To conduct all corporate business.
  3. To control and hold corporate property.


Director fees form part of the income of the director, hence is subject to income tax. The taxability of the director fees would depend on whether the director has an employee-employer relationship with the corporation or none. Consider the following instances:


  1. Director is an employee of the corporation, at the same time


This means that the director is currently employed in the corporation. For instance, the President of the corporation is currently sitting as a member of the Board of Directors. The director fees received by directors, who are employees of the corporation at the same time, are considered compensation income. Thus, subject to withholding tax on compensation using the tax of 5%-32% withholding tax table. If he doesn’t earn any other income, he is no longer required to file for an income tax return under the rules of substituted filing. However, if he earns other taxable income (e.g. business income, income from the practice of profession), he must file an annual income tax return and include therein the director’s fees.


  1. Director is not an employee


The director has no employer-employee relationship with the corporation and only confined to attending and participating in meetings of the board of directors. The director fees received by directors, who are not employees of the corporation, are not treated as compensation income but rather, it falls under “Gross Income derived from the conduct of business or exercise of profession”. It will be subjected to the following creditable withholding tax:



Gross Income ≤ P720, 000             15%

Gross Income > P720, 000             10%


He needs to file an annual income tax return at the end of the taxable year.


Revenue Memorandum Circular No. 4-2008

Revenue Memorandum Circular No. 77-2008



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