Monday May 12 2025

Directors’ fees : How are they treated for tax purposes ?

Although many condominiums have volunteer directors, many opt to offer a token sum of money to their directors to encourage competent people to run for the board.  This recognizes the time these people devote to the administration of their co-ownership and compensates them for using their personal assets to administer the syndicate.

So, what is the nature of this paid sum of money?

Is it an attendance allowance, as for a corporate director, or is it rather an indemnity to compensate the directors for the expenses they incur in their voluntary capacity, or is it remuneration as a self-employed worker for tasks?

Choosing the right words is crucial when it comes to taxation, as each option does not come with the same obligations for the syndicate.

WHAT IS AN ATTENDANCE ALLOWANCE?

Attendance allowances are remuneration offered to directors for their role on a board of directors and their attendance at meetings throughout the year. 

For tax purposes, directors’ allowances are included in the calculation of directors’ personal income in the same way as salaries. This is because some individuals derive significant sums of money from their directorship (such as directors of major corporations), and the government wants this source of income to be taxed in the same way as employment income.  This also implies that the issuer of this remuneration must also contribute his share of charges, like an “employer”, to the various social programs in Quebec.

For this reason, provincial and federal tax laws require corporations to complete a T4 and a Relevé 1 for each director who has received directors’ fees as part of his or her duties, but also to be registered with the government as an “employer” so that they can make the appropriate remittances.   In 2017, Revenu Québec issued an interpretation letter on this subject in relation to amounts paid to directors of syndicates of co-ownership.

Below are the relevant forms to be completed by the syndicate to issue these returns.

• T4 form (complete box 14)
• Relevé 1 form (complete box A)

TAX LAWS ILL-SUITED TO CO-OWNERSHIP

Since syndicates are considered corporations, they must comply with tax laws, even if they are often ill-adapted to their reality.

For example, they have to file annual tax returns, which may seem like nonsense to many, since syndicates will never pay taxes because of their very raison d’être. Even if this obligation is a great waste of resources (time and money), as long as the law stands, it remains imperative for syndicates of co-ownership.

As the saying goes: the law is the law.

In the same way, a syndicate that pays directors’ fees would have to go through the whole process of registering with the governments to obtain its employer codes, and thus be able to produce the T4s and Relevés 1 that result from this remuneration, and remit the employer’s share of certain contributions (e.g.: FSS) payable to the governments.  Remember that the vast majority of condominiums have no employees and are therefore not registered as employers with the two levels of government.

Obviously, this registration process is quite complex for syndicates, who could also face penalties if they subsequently fail to file the necessary annual declarations on time (since, in addition to issuing T4 and Relevé 1 tax slips, provincial Relevé 1 summaries must also be filed annually).  It’s important to remember that syndicate administration work is often carried out by volunteers, who are neophytes in the field of taxation, and that this administrative complexity is problematic, especially as administrators change from year to year. 

On the other hand, this context is no excuse, some would say, for not respecting the law.  Civil servants apply the law, period.

Considering all this, but especially considering the negligible sums involved, should we really consider the sums paid to directors as attendance fees, even though the sum is rarely linked to attendance at board meetings?

In my opinion, there are other ways of doing things that could save you a lot of trouble, and I’ll explain why. 

EXPENSE REIMBURSEMENT OR REMUNERATION?

The amounts paid to directors are generally very small. We’re often talking $500 to $1,000 per person per year.

What’s more, these same directors incur costs throughout the year to administer their condominiums, without necessarily realizing it.  Whether we’re talking about meals at board meetings, ink costs for printer use, cell phone charges, internet charges, stationery, gas for travel, the list of costs likely to be incurred by a director (and not directly assumed by the syndicate) is long. 

What’s more, the declaration of co-ownership generally allows for the reimbursement to directors of expenses incurred, as the following excerpt from a declaration of co-ownership demonstrates. 

The directors are respectively indemnified and reimbursed from the funds of the syndicate, for:
– All costs and expenses incurred by a director as a result of an action or proceeding brought against a director arising out of an act or occurrence in or about the performance of his or her duties, except to the extent that they result from fraudulent or dishonest acts; and
– Any other costs, expenses or fees incurred by the directors in the performance of their duties.

HOW TO AVOID PROBLEMS

Until the laws are better adapted to condominium syndicates, the ideal situation would be for syndicates to adopt an expense reimbursement policy (as permitted by the declaration of co-ownership).  It’s this policy that should be voted on annually at the annual meeting, and not the “remuneration of directors”, because remember that when it comes to remuneration, tax laws require that they be treated as an employer, with the appropriate rebates.  The choice of words is very important here!

To be even more cautious, your syndicate’s policy may even require directors to submit receipts for expenses incurred before obtaining payment of the “attendance allowance” approved by the general meeting of co-owners.   

Possibly (I have no confirmation from the Ministère on this subject), if the amounts paid are reasonable in relation to the disbursements normally incurred, it would be possible for the syndicate’s policy to provide for payment of the allowance, without having to obtain receipts from the directors.  A bit like a company paying a “per diem” for its employees’ meal allowances when they travel, to reduce the administrative work involved in producing expense accounts (and avoid having to manage multiple invoices).

DON’T GO OVERBOARD WITH THIS APPROACH

The objective of this approach is to enable syndicates to comply with their obligations under tax legislation, while maintaining simplified processes better adapted to their reality.  On the other hand, remember that the amounts paid by the syndicate must be reasonable in relation to what a director would normally disburse in the course of his or her duties.

So, if your syndicate pays large sums to directors, for example, because you are self-managed or because they retain important tasks with regard to certain major works projects, then it’s probably best to register as an “employer” with the governments and treat the sums paid as “remuneration”, or formally agree a contract for services rendered.

If your syndicate is in this type of situation and you want to take the service contract route, then be aware that individuals don’t have to register for GST/QST when their annual self-employed income is less than $30,000.  A formal contract is a good way of distinguishing between the role of “administrator” and that of “manager”, while simplifying everyone’s tax obligations.

A co-owner who receives self-employed income in this way would then be obliged to declare this source of income on his or her personal tax returns (often no T4 or Relevé 1 is issued by the syndicate, although a T4A may be issued when remuneration exceeds $500).  If no T4A is issued by your syndicate, this does not relieve you of your obligation to declare the remuneration portion of the amounts received from your syndicate directly on your personal income tax returns.  Remuneration received by the director should be reported in the following boxes:

• Revenu Québec: (TP-1 D): box 107 (code “05” in box 106 to indicate “other employment income”)
• Revenue Canada: box 104

It is important to note that some tax software programs require you to enter the amounts manually in both jurisdictions, as the deferral is not always automatic for “other employment income”.

TRANSPARENCY AT THE CO-OWNERS’ MEETING

Regardless of how you qualify the nature of a cash payment to a director, it is Solution Condo’s opinion that you should present the matter to the co-owners’ assembly and have the assembly vote to obtain its approval (majority of 50% of votes +1).  Otherwise, some may argue that the board of directors was not entitled to decide to pay out these sums, since they could be associated with conflicts of interest for the directors receiving them.

Acting in this way, by seeking the support of a majority of co-owners, will avoid potential conflicts and reproaches.

On the other hand, be careful about the choice of words in your minutes.

Elise Beauchesne, CPA, Adm.A