Is Dividend Taxable in Singapore? A Complete Guide

Earning dividends is a great source of passive income, and Singapore’s tax policies make it especially appealing. But do you need to pay tax on dividends in Singapore? The answer depends on factors like the source of the income and how it’s distributed, making it crucial to understand your tax obligations to avoid compliance issues or unnecessary tax payments.

This guide will help you navigate dividend taxation in Singapore, clarifying taxable and non-taxable dividend scenarios and explaining how to declare them correctly, so you can make the most of Singapore’s tax-friendly policies.

Dividends received by shareholders, whether interim or final, are typically exempt from tax in Singapore, meaning no tax is payable on the dividends earned.

This is because Singapore operates a one-tier corporate tax system, where taxes are paid on a company’s profits before dividends are distributed, avoiding double taxation at both the company and shareholder levels. For example:

• The company makes a profit of SGD 100,000. It will pay 17% corporate tax, which equals SGD 17,000, making the remaining profit SGD 83,000.
• After paying the corporate income tax, the company decided to distribute all SGD 83,000 as dividends to its shareholders. Each shareholder receives SGD 10,000 in dividends, and they do not pay tax on this amount as the company has already paid tax on the profits.

Dividends are also not subject to Goods and Services Tax (GST) in Singapore, as they do not involve the provision of goods or services.

According to the Inland Revenue Authority of Singapore (IRAS), dividend income received by resident individuals is generally tax-exempt, including the following:

• Dividends from Singapore resident companies, including companies listed on the Singapore Stock Exchange, but excluding those from cooperatives.
• Dividends from foreign companies, except those received through a partnership in Singapore.
• Income distributions from Real Estate Investment Trusts (REITs) are typically not subject to dividend tax, except those received through a partnership in Singapore or in connection with trade, business, or profession involving REITs.
• Distributions from Unit Trusts and share buybacks through Special Trading Counters (STC).

Dividends from the following sources are considered taxable income, which means you will have to pay tax on them:

• Dividends from cooperatives, such as those registered under the MCCY Registry of Co-operative Societies or NTUC Healthcare Co-operative Ltd.
• Foreign-sourced dividends received through partnerships in Singapore. However, some of these dividends may qualify for tax deduction or exemption under the Foreign-Sourced Income scheme. 
• Income distributions from REITs received via partnerships or related to the conduct of trade, business, or profession involving REITs.

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.

For business owners and shareholders in Singapore, deciding whether dividends or salary is better depends on your financial goals, tax planning, and overall business strategy.

Generally, dividends are more tax-efficient since they are not subject to personal income tax but are not deductible as a business expense. On the other hand, salaries are tax-deductible for the company but are subject to progressive personal income tax rates for individuals and require Central Provident Fund (CPF) contributions, which involve deductions from employees and payments by employers.

While a combination of both dividends and salaries is often the most effective approach, we recommend consulting a tax advisor to tailor the structure to your specific circumstances.

Non-taxable dividends, according to the Singapore Income Tax Act, do not need to be declared. However, taxable dividends must be reported in the year they were payable to shareholders. This can be done in the Income Tax Return under the “Other Income” section unless the company states on the dividend voucher that they will pass the details to IRAS.

You can file your Income Tax Return online via myTax Portal by following these steps:

1. Prepare the required documents, including Singpass/SFA, Form IR8A, and the business registration number or partnership tax reference number.
2. Sign in with a Singpass or Singpass Foreign User Account (SFA).
3. Click on “Individuals,” then “File Income Tax Return.”
4. Check the pre-filled information.
5. Declare the dividends under the “Other Sources of Income” section.
6. Update existing tax deductions and reliefs.
7. Submit and receive the acknowledgement receipt.

Singapore offers several tax incentives that can benefit businesses to reduce the overall tax burden and increase the amount of profits available for distributions as dividends to shareholders, including:

• Start-up Tax Exemption Scheme: 75% exemption on the first SGD 100,000 of normal chargeable income for the business’s first 3 years of operations.
• Partial Tax Exemption (PTE): 75% exemption on the first SGD 10,000 of normal chargeable income and a further 50% exemption on the next SGD 190,000 for all companies.
• Foreign-Sourced Income Exemption: Certain foreign-sourced income, including dividends, is exempt from tax if it meets specific conditions, such as the income being subject to tax in the foreign country at a rate of at least 15%.

In conclusion, understanding the taxation of dividends in Singapore starts with knowing their source. Dividends from Singaporean companies are often tax-exempt, but certain sources, like cooperatives, may be taxable under specific conditions. By staying informed about dividend taxation laws, seeking expert advice, and keeping up with regulatory updates, you can ensure compliance and make the most of Singapore’s tax-friendly environment.