Shareholders have access to the profits of a Singapore company in the form of dividends. These may be paid in cash or in kind and their taxation is regulated by the Inland Revenue Authority.
Our accountants in Singapore have prepared a guide on dividends in Singapore so that you can better understand the taxation principles in this case.
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Dividends from Singapore companies
Just like any other income, dividends represent amounts of money that are derived from the rights of the shareholders in a company. These are usually paid in cash or in kind and their provenience is corporate stocks.
When it comes to the taxes that need to be paid for these incomes, individuals are and companies are taxed on the profits generated in Singapore, but also on the income obtained outside the city-state and for which financial statements have been filed with the Inland Revenue Authority.
The taxation of dividends can be complicated as there are several rules to comply with, which is why if you need support, our accountants in Singapore are at your service.
The following video clarifies the taxation of dividends in Singapore:
Taxable dividends in Singapore
Some dividend payments in Singapore are subject to income tax. These include the following:
- those dividends paid by co-operatives;
- income distribution from real estate investment trusts, when the distribution is derived by individuals through a partnership in Singapore;
- dividends paid by a foreign entity, derived by individuals through a partnership in Singapore.
A tax exemption for foreign-sourced income does apply in Singapore for foreign-sourced dividends. This exemption is granted when all three conditions, as described in the Income Tax Act, are met. The experts at our accounting firm in Singapore can describe these situations and determine if you qualify for the exemption.
Non-taxable dividends in Singapore
In general, divined payments made by Singapore resident companies, according to the one-tier corporate tax system, are not taxed (except for co-operatives, as stated above). Singapore imposes no withholding tax on dividend payments made by resident companies. Foreign dividends received by resident individuals in Singapore are also exempt from tax. A clear example of non-taxable dividends includes those dividends received from private resident companies or dividends from resident companies that are listed on the Singapore Stock Exchange.
Companies and individuals in Singapore can declare their dividend income on the tax return (under the “Other income” category). This declaration is not mandatory if the company indicates the fact that they will provide the dividend information to the IRAS.
Our team of accountants in Singapore can help you with additional details about reporting dividend income.
The taxation of dividends obtained from abroad
Natural persons and companies obtaining dividends from foreign-sourced incomes must be declared in Singapore and they will be taxed here. However, when the taxes for the respective dividends were paid in the country they were obtained in, no additional taxes will be imposed in Singapore on the principle of the avoidance of double taxation. For this purpose, an agreement must be in place.
If you need information on the taxation of dividends and how natural persons and companies are levied in the city-state, our accounting firm in Singapore can offer detailed information. Also, specialized support will be provided on a case-to-case basis.
Profits of Singapore companies from which dividends arise
In order to be able to issue dividends, a Singapore company’s directors must make a proposition to the shareholders. However, it should be noted that these can only be paid from the profits made by the company, therefore before making the decision that dividends can be paid, the shareholders must make sure the business has the profits from which it can issue them. From this point of view, profits will cover:
- only the amounts of money generated by the company alone, even if the business is part of a group (such as is the case of holding companies),
- dividends can also be paid if the total assets of the company are worth less than the capital contribution of the shareholders (however, they are conditioned by the net income of the business),
- dividends can also be paid from the capital appreciation of a company,
- profits can also include amounts of money earned in the past financial year and that have been set aside for the following one.
What should be noted when it comes to the distribution of dividends is that a Singapore company’s Articles of Association can contain specific provisions on the profits from which dividends can be paid. This is why it is best to consult with an accountant in Singapore before the distribution and payment of the dividends are made.
The declaration of dividends in Singapore
As mentioned above, the directors will propose the distribution of dividends to the shareholders and the proposition must come under the form of a declaration. The managers will also recommend a rate at which the dividends will be paid followed by its voting during the Annual General Meeting of the shareholders. If approved, these will be referred to as final dividends. However, it is also possible to pay interim dividends which are issued before the end of the financial year, provided that they can be reflected in the profits of the business.
In Singapore, dividend payments are usually made before the filing of financial statements.
In the case of interim dividend payments, these must be accompanied by the interim financial statements.
Our Singapore accountants can help you prepare and file the financials statements with the Inland Revenue Authority.
The declaration of dividends in Singapore implies the preparation of various accounting documents, among which:
- the dividend register,
- the resolution through which the payment of the dividends were made,
- the approval of the shareholders,
- the minutes of the meeting during which the issuance of the dividends was decided.
Our specialists can offer more information on the details that must accompany the financial declarations related to the issuance of dividends in Singapore.
Income tax rates applied in Singapore
The following rates are levied on income in Singapore:
- the corporate tax rate which is set at a rate of 17%,
- a 0% rate is applied dividends payments made by Singapore companies to their shareholders,
- dividends obtain abroad and not capitalized in Singapore by individuals and companies will be subject to a 0% rate,
- the taxation of dividends earned abroad and declared in Singapore will be taxed at rates ranging between 0% and 17%.
Contact us for detailed information on taxation in Singapore and for personalized accounting services.