Dividends are income obtained from your share of rights in a business, which may be paid out to you in cash or in kind. Companies can pay dividends to their stockholders in the form of corporate stocks. Singapore has an advanced tax background, which is based on national policy and this means that individuals and businesses are taxed on incomes made in the city-state and on foreign located income submitted into the state.
The Singaporean principles for taxation allow for a favorable regime in which the basis is a territorial one (meaning that companies, as well as individuals, are only taxed on their Singapore-sourced income). Foreign income, a category in which dividends are also included, can be subject to tax when they are remitted into Singapore. However, this will not apply when that income from dividends was already subject to taxes in another jurisdiction where the rate had a certain minimum. By requesting specialized accounting services in Singapore, like those offered by our firm, investors can gain complete insight into the rules that may apply in their particular case, depending on where the source income is derived from.
Also in terms of the dividend tax in Singapore, the authorities impose a single-tier system where the profits tax paid by a company is not charged to its shareholders. According to this rule, most types of dividend income are not taxed, as described below in this article.
Our accountants in Singapore can offer more details about the tax treatment of dividends that include taxable and non-taxable shares.
What are the taxable dividends in Singapore?
The next dividends are matter to income tax:
• income from Real Estate Investment Trusts (REITs) derived by individuals through a company in Singapore or from carrying out a trade, commerce or occupation in REITs;
• shares that are foreign-sourced derived by individuals over an enterprise in Singapore;
• dividends funded by co-operatives.
Understanding which dividends are subject to tax is important, and our accounting services in Singapore also cover the taxation of dividends for companies that are subject to this tax. Entrepreneurs can always reach out to our agents for complete information tailored to the needs of their company. Our specialists can answer all the questions about the dividend tax in Singapore.
GST registration is also among our accounting services in Singapore.
What are the non-taxable dividends in Singapore?
The local tax policies state that, in most cases, the following types of dividends are not taxable:
• income distribution from Real Estate Investment Trusts, except circulations derived by persons during a business or from the continuation of a trade, occupation or business REITs;
• shares paid on or after 1 Jan 2008 by a Singapore resident business under the one-tier company tax system;
• foreign dividends established in Singapore on or after 1 Jan 2004 by local individuals. If a state resident obtains foreign-sourced shares through a partnership in Singapore, these dividends may be excused from the state tax if definite circumstances are met;
• other dividends: Singapore dividends from unit companies; dividends from private resident companies; Singapore dividends from approved CPF investment Scheme agent banks;
others: shares from local companies registered on the Singapore Stock Exchange.
Our accountants in Singapore counsel the future clients that they don’t need to declare taxable dividends in their tax form if the association specifies on the share voucher that they will deliver the dividend info to IRAS. In all other cases, individuals are expected to state all of their taxable dividends when they fill in the profits tax return under the “Other Income” category.
The dividend tax in Singapore is one of the most important levies in the city-state, and if you have any questions about it, please send them to us.
Grouping of shares
As our accountant in Singapore reminds investors, non-income producing shares, local and foreign include:
• shares that are considered as non-income producing if they have not generated any dividend income since the date of purchase;
• costs that are not deductible as the expenses earnt on the shares do not produce dividend income chargeable in Singapore.
Shares that generate tax-free dividend income (for example, one-tier and foreign-sourced dividend income submitted to Singapore in the year and excused from tax) have deductible expenses.
In terms of the dividend tax in Singapore, a corporation that takes up a loan to finance the acquisition of 10,000 shares in a certain Ltd will have a deduction of the interest expense acquired on the loan, against the dividend income from the said number of shares in the given Ltd.
Additional information about the dividend tax in Singapore
Companies that pay an underlying tax on the income out of which the foreign dividends are sourced need to provide additional documentation, as per the requirements set forth by the Inland Revenue Authority of Singapore.
The documents are the following:
- the audited accounts of the foreign company paying the dividends; in some cases, the consolidated accounts of the foreign company can also be accepted.
- alternative documents such as a certification from the bank or a confirmation letter from the foreign company that the foreign tax has been paid.
One of our accountants can provide complete details about these explicative documents. The following taxation factsheet is useful for investors who wish to know the general taxes payable by companies in Singapore:
- 0% on dividends: dividends paid by resident companies are exempted in the hands of the recipient.
- 17% corporate tax: this is the standard corporate income tax rate in Singapore; for the assessment year 2019, 75% of the first 10,000 SGD of the regular taxable income and 50% of the next 290,000 SGD are tax exempt.
- 7% GST: the goods and services tax has a standard 7% value with a 0% rate for international services as well as exports of goods.
Please contact our accounting firm for tax advice on the dividend tax in Singapore and other financial services.