Dividends are the profits that organizations or shareholders receive from their share of the company’s ownership. It can be paid out in cash or in any other type of bonus; for instance, an organization might choose to pay its shareholders dividends in the form of a firm’s shares. The method of dividend payment is typically decided at the early stage of buying shares or owning a company.
Singapore law has comprehensive rules and regulations for different types of income and treating dividends as taxable or not. Dividends can be subjected to tax when they are remitted into Singapore. By availing the services of audit and accounting firms in Singapore, the companies can get a professional opinion of the experts when deciding if their dividends are taxable or not.
Singapore has a single-tier system in which the profit tax submitted by companies are not charged on stakeholders of the firm. As a result, most of the dividend income is not taxable, because it gets covered under the Singapore tax incentives.
Taxable Dividends in Singapore
The following are the dividends that are typically taxable in all types of the organization operating in specific industries:
- Income generated from the Real Estate Investment Trusts (REITs) through the companies operating in Singapore by trading, commerce operations or holding a position in REITs.
- Shares from foreign individuals who have invested in enterprises in Singapore.
- Dividends that are co-funded through several companies or business owners.
Having a thorough understanding of the dividends that are subject to tax in Singapore is important to ensure you are availing of the correct Singapore tax incentives. Furthermore, audit firms in Singapore use this kind of information to prepare thorough reports of the companies after auditing and ensuring the dividends are covered in the right section of the financial reports.
Non-Taxable Dividends in Singapore
The following types of dividends are not taxable in Singapore
- Income circulation from Real Estate Investment Trusts, except distributions generated by an individual through trading, business processes, and REITs.
- Shares bought after 1st January 2008 by a Singapore resident business as per the one-tier company tax system.
- Foreign dividends that were amassed on or after 1st January 2004 through local individuals. Moreover, if a state resident obtained foreign shares through a partner in Singapore, the tax on dividends might be exempted depending on the industry of the company.
- Dividends from companies like private resident organizations, CPF approved bank schemes are also nontaxable dividends.
- Shares obtained through local organizations registered under the Singapore Stock Exchange.
Important Information About Dividends
Companies that pay underlying taxes on foreign dividends must be able to produce additional documentation when required. Such documents are usually essential while applying for tax incentives in Singapore. According to the Inland Revenue Authority of Singapore, the following documents are essential:
- Thoroughly audited accounts of the foreign companies paying the dividends. In some cases, the report of consolidated accounts might also be acceptable.
- Alternative documents like certification from financial institutions, a confirmation letter from the foreign company, and confirmation of tax payment are also essential.
- Dividends given by the resident companies are exempted from the customer’s receipts.
- 17% is the prevailing corporate tax in Singapore. It is completely different from the dividends and accounting firms in Singapore also treat qualifying activities for these taxes differently.
In a Nutshell
In short, the currently available tax incentives in Singapore allow a significant number of companies and shareholders to enjoy tax exemption on their dividends. By engaging the professional services of an audit and accounting firm in Singapore, companies can rest assured that they obtain accurate information about dividends payments. Furthermore, independent audit reports are often essential in applying for tax incentives and facilitating companies to get tax exemptions on dividends. For more information, feel free to get in touch with us.