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Tax on dividends for shareholders in Singapore
A dividend is the distribution of corporate profits to eligible shareholders. The amount of dividend to be distributed is determined by a company’s board of directors. Dividends are usually issued in proportion to the number of shares owned by the shareholders. This means that the more shares you own, the higher the value of the dividend you will receive.
Dividends can be paid to shareholders in cash (the most common choice), stock, or other property within Singapore.
Dividends are a great perk for shareholders, but what are the tax implications for receiving dividends as a shareholder?
Types of dividends available?
Interim dividends
The board of directors have the ability to declare an interim dividend at any point before the company’s annual profit or loss has been determined OR at any point between the two annual general meetings.
Interim dividends are paid from either the company’s retained earnings, from the profit and loss accounts or from the profits from the accounting year in which the dividend was declared.
Final dividends
Final Dividends are declared after the company’s annual general meeting has heard the financial statement for the past fiscal year.
How are dividends calculated?
Dividends are usually issued based on the number of shares held by a shareholder. An expected dividend can be calculated by taking the dividend payout per share and multiplying it by the number of shares owned.
It is also common for companies that have raised funds to have specific provisions in the Company Constitution or the Shareholders Agreement, which grants additional priority or additional dividends rights to the investors.
Please also note that there is no dividend ceiling in Singapore.
How often are dividends paid out?
Usually companies issue dividends on a quarterly basis. However, it is not uncommon for dividends to be paid twice a year, once a year, or even monthly.
Are dividends from a company registered in Singapore taxable?
Private Limited Companies (Pte. Ltd.) are subject to a single tier taxation system. Under this system, dividends are not subject to tax from the receiver’s perspective. This is due to the funds from which dividends payments are made, usually the company’s profits, have already been subjected to corporate tax.
Therefore, any dividends paid by a Private Limited company to a resident or non-resident shareholder are not subject to Tax in Singapore.
Question about dividends in Singapore?
If you need more information about dividends in Singapore, why not talk directly to one of our experts.
Please note that this article is for information purposes only and does not constitute legal advice.
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