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Dividends received by shareholders are typically tax-exempt due to the one-tier corporate tax system.

However, there are some dividends that are taxable, such as dividends from co-operatives and dividends received via a partnership.

Many Singaporeans own dividends either through owning shares of a company or buying shares of a public company on the market. If you have recently bought a share or are considering buying a share, you should be aware of whether your dividends are taxable. This article will answer that question by exploring some important factors for shareholders and directors. Being compliant with Singapore's tax regulations is important, and this article will guide you in ensuring that you are compliant with Singapore’s stringent requirements. 

What are Dividends?

Dividends represent the returns earned by owning shares in a company, whether in the form of cash payouts or additional shares. In a private limited company in Singapore, dividends are profits distributed to shareholders, typically sourced from the company's retained earnings. 

The decision to declare and distribute dividends rests with the company's directors, often decided and voted upon at the Annual General Meeting (AGM). While cash payments are the norm for dividends, they can also take the form of additional shares or other assets, providing shareholders with a tangible benefit from their investment in the company.

Are Dividends Taxable?

In Singapore, dividends received by shareholders are typically tax-exempt, thanks to the one-tier corporate tax system, where taxes are paid on profits before dividends are distributed. However, it's crucial to seek advice from a tax advisor or the Inland Revenue Authority of Singapore (IRAS) for personalised guidance on tax matters related to dividends.

💡 Read more: Find out more about Singapore’s tax system and rates in 2024.

Examples of Tax-Exempted Dividends in Singapore

  1. One-Tier Corporate Tax System: Singaporean resident companies, except for cooperatives, operate under this system for dividends.
  2. Tax Exemption for Resident Individuals: Dividends received from foreign companies by resident individuals in Singapore are typically tax-exempt.
  3. Exemptions for Companies: Companies receiving foreign dividends must meet specific conditions to qualify for tax exemption.
  4. Exemption for Foreign Dividends: Singaporean residents generally do not pay taxes on foreign dividends except those received through a Singapore partnership.
  5. Exemption for REITs: Dividends from Real Estate Investment Trusts (REITs) are usually exempt, with exceptions for dividends through a Singapore partnership or if related to REITs' trade, business, or profession.

When will Dividends be Taxable?

  1. Dividends from Co-operatives: Dividends received by Singapore resident individuals from co-operatives are subject to taxation.
  2. Foreign-Sourced Dividends via Partnership: Foreign-sourced dividends received through a partnership in Singapore are taxable for Singapore resident individuals.
  3. Income Distribution from REITs via Partnership: Income distribution from Real Estate Investment Trusts (REITs) through a partnership in Singapore is taxable for resident individuals, especially if related to the carrying on of a trade, business, or profession in REITs.

Foreign Sourced Dividend: Is it Taxable?

Dividends received from foreign income are generally taxable in Singapore for companies incorporated in the country, but exemptions may apply based on specific conditions and criteria.

These exemptions can be complex and depend on various factors, such as the nature of the foreign income and applicable tax treaties. Therefore, it is essential for companies to thoroughly review the relevant tax regulations and seek professional advice to determine the tax treatment of foreign dividends in each specific case. Consulting with tax experts can help companies navigate the complexities of international taxation and ensure compliance with Singapore's tax laws.

Here are some reputable tax advisors in Singapore to consider:

  1. Singapore Corporate Services
  2. CST Accountants & Advisors
  3. J Accounting Pte Ltd

Conclusion

In conclusion, the taxation of dividends in Singapore is subject to various factors and regulations, particularly for companies receiving foreign income. While dividends received from Singaporean companies are generally tax-exempt for resident individuals under the one-tier corporate tax system, foreign dividends may be taxable depending on specific conditions and criteria. 

It is crucial for individuals and companies alike to carefully review the relevant tax laws, seek professional advice when necessary, and stay informed about any updates or changes in regulations to ensure compliance and optimise their tax strategies. By understanding the nuances of dividend taxation in Singapore, taxpayers can effectively manage their finances and make informed decisions regarding their investments and income streams.

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FAQs

What is the tax rate on dividends in Singapore?

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There is no such thing as a dividends tax rate in Singapore. However, dividend income is part of the personal income and corporate income. The corporate income tax rate is 17%, whereas the personal income tax rate is progressive. 

How are dividends taxed for shareholders of a Singapore resident company?

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