A Guide for Dividend Tax: Is dividend taxable in Singapore?
Last updated: March 2024
Dividends represent earnings from owning a portion of the company, distributed to shareholders in the form of cash or additional shares. This article explores the taxation of dividends, exemptions, and whether to prioritize dividends or salary payments. Understanding these factors is crucial for shareholders and directors, ensuring compliance with tax regulations and optimizing financial strategies.
What are dividends?
Dividends are the earnings you get from owning part of a company. They can be given to you as cash or other benefits, like more shares. In a private limited company in Singapore, dividends are distributions of profits made to the company’s shareholders. These distributions are typically paid out of the company’s retained earnings and are a way for shareholders to receive a return on their investment in the company.
Dividends can be declared and paid at the discretion of the company’s directors (agreed and voted at the AGM), subject to certain legal and regulatory requirements. They are usually distributed in the form of cash payments.
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Are dividends distributed to shareholders and directors in Singapore taxable?
In Singapore, dividends distributed to shareholders are generally tax-exempt in their hands under the one-tier corporate tax system (tax paid on profits before distribution of dividend). It is essential to consult with a tax advisor or the Inland Revenue Authority of Singapore (IRAS) for specific guidance.
Examples of dividends that are not taxed in Singapore
Singapore resident companies, except cooperatives, follow the one-tier corporate tax system for dividends.
- For resident individuals in Singapore, dividends received from a foreign company are generally not taxed.
- Companies receiving foreign dividends however, have to meet certain conditions for it to be tax exempted.
- Resident individuals in Singapore typically don’t pay taxes on foreign dividends, except those received via a Singapore partnership.
- Dividends from Real Estate Investment Trusts (REITs) are usually exempted, except for those through a partnership in Singapore, or if related to the carrying on of a trade, business or profession in REITs.
Under what conditions are dividends taxable in Singapore?
Dividends received by Singapore resident individuals from co-operatives, foreign-sourced dividends received through a partnership in Singapore, and income distribution from Real Estate Investment Trusts (REITs) through a partnership in Singapore, or if related to the carrying on of a trade, business or profession in REITs.
Are foreign-sourced dividend income taxable?
Yes, dividends received from foreign income are generally taxable in Singapore for companies incorporated in Singapore, and not individuals. However, there are exemptions available upon fulfilling specific conditions and criteria. It is essential to review the relevant tax regulations and seek professional advice to determine the tax treatment of foreign dividends in each specific case.
Is it better to pay yourself more dividends or salary in Singapore?
Whether it is better to pay yourself more dividends or salary in Singapore depends on various factors, including your personal financial situation, tax implications, and business needs.
Dividends are typically not taxed, but they may not be deductible as business expenses.
Salary, on the other hand, is tax-deductible for the company but subject to progressive tax rates for the individual.
It’s advisable to consult with a tax advisor or accountant to determine the most tax-efficient compensation structure for your circumstances.
Got questions? Speak to our tax experts for the best advice for your business.
Frequently asked questions
What is the tax rate on dividends in Singapore?
There is no “dividend tax” in Singapore, however, dividend income forms part of the income of companies and individuals in Singapore and the corporate income tax rate is a flat rate of 17% while the individual tax rate is progressive.
Are there any exceptions to taxable dividends in Singapore?
Generally most dividends in the hands of a Singapore resident individual are tax exempt while companies may require more conditions for dividend incomes to be tax exempt.
How are dividends taxed for shareholders of private limited companies in Singapore?
Dividends distributed to shareholders of private limited companies in Singapore are generally tax-exempt under the one-tier corporate tax system.
What are the reporting requirements for dividend income in Singapore?
Individuals need not report their tax exempt dividend income as these do not form part of their assessable income whereas companies are required to report all sources of income, including dividend income, in their tax returns to the Inland Revenue Authority of Singapore (IRAS).
Can dividends be reinvested without tax implications in Singapore?
Dividends reinvested are treated to have been received by the individual or companies and the same rules in determining the taxability will apply.
