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Director salary

time 2016/07/07

Here are basic rules that you may want to know about the tax issues related to director salaries:

Director salary has to be fixed amount during a fiscal year

Director salary is only deductible if the amount of salary is fixed during a fiscal year. The corporate tax law says that it will not be deductible if the amounts changes during his period. This means bonus paid to director will not be deductible unless you meet certain conditions.

Timing to change director salary

The General Shareholder Meeting decides director salaries. And its regular meeting is supposed to be held within 2 months from the end of its fiscal year.

So, you can raise or lower your salary within 3 months after the end of fiscal year.


Relatives and people involved in management are also to be regarded as director.

Lower director salary

Of course, you can lower director salary if the company’s financial is deteriorated by business circumstances. But you need to be careful. The law says you can change the salary only if the business situation is “deteriorated”.


Bonus to a director can be deductible in two occasion.

1) Predefined salary

If director’s salary and bonus is approved by its General Shareholder Meeting and reported to the tax office in advance, it will be deductible.
The application form has to be submitted earlier of either one month after the resolution and 4 months from the end of previous fiscal year.

For a small/medium sized company, a director may have more than two roles. If this director has a role as management to supervise and a role to operate business as a worker, bonus paid for work’s part of contribution will be deductible.

To appear that the bonus is paid for a worker portion, it has to be paid at the same timing as other workers and the amount has to be determined by using the same criteria as others.


(Marunouchi Business District)




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