In the world of Singapore business, understanding taxation, especially when it comes to dividends, is crucial. This guide provides straightforward answers to a common question: Is dividends taxable in Singapore?
This guide will clarify when dividends become taxable, cover how to report dividend taxation, and provide insights into the critical distinction between corporate tax and dividend taxation.
What Are Dividends?
Dividends are distributions from a company’s profits to its shareholders. The dividend you receive depends on how many shares you own in the company. Typically, Singapore dividends are paid in cash or other assets, such as company shares.
In Singapore, companies can reinvest their profits or distribute them to shareholders as dividends. It is done to encourage shareholder investment and to acknowledge their support. For taxes, individuals and companies are taxed on net chargeable income in Singapore and abroad if financial statements have been filed with the Inland Revenue Authority of Singapore (IRAS).
Is Dividends Taxable In Singapore?
In most cases, Singapore doesn’t tax dividends at the individual level. It aligns with Singapore’s one-tier corporate tax system, where dividends from Singapore-resident companies are tax-free for shareholders. The corporate retained earnings that fund these dividends have already been taxed.
In addition, foreign dividends received by Singapore resident individuals and income from Real Estate Investment Trusts (REITs) are exempt from Singapore tax.
However, there are exceptions. Dividends paid by co-operatives and certain situations involving foreign dividends received via partnerships in Singapore or income derived from REITs through partnerships or business activities can be subject to taxation. Awareness of these exceptions is essential to ensure compliance with Singapore’s tax regulations.
What Are Taxable Dividends In Singapore?
Now that we know the answer to the common question, “Is dividends taxable in Singapore?”, let us explore the specific circumstances when dividends become taxable:
Dividends from co-operatives in Singapore are taxable. Co-operatives, organizations designed for the benefit of their members, distribute taxable dividends.
- NTUC Fairprice Co-operative Ltd
- MCCY Registry of Co-operative Societies
- The Singapore Police Co-operative Society Ltd
- NTUC Healthcare Co-operative Ltd
Foreign-sourced Dividends through Partnerships in Singapore
Income tax may be due by individuals who receive dividends from foreign sources through a Singaporean partnership. Certain exceptions may apply, depending on specific conditions.
REIT Income Distribution
Income derived from REITs can be taxable. It applies if individuals receive REIT income through a Singaporean partnership or engage in a business, profession, or trade involving REITs.
What Are Non-Taxable Dividends In Singapore?
Aside from answering the question, “Is dividends taxable in Singapore?”, it’s also essential to distinguish between taxable and non-taxable dividends to navigate dividend taxation effectively. Here’s a concise breakdown of what falls under the non-taxable category:
Dividends from Singapore-based businesses (apart from cooperatives) that are subject to the one-tier corporate tax regime
The one-tier tax system in Singapore means that when a company pays taxes on its profits, dividends distributed to shareholders are typically not subject to further taxation at the shareholder level, except for co-operatives.
Foreign dividends received by Singapore residents
Under certain circumstances, residents of Singapore may receive dividends with foreign source income exempt from Singapore tax.
Earnings from REITs, excluding those obtained by people through a Singapore-based partnership or through the active practice of a trade, business, or profession in REITs
Generally, REIT distributions are non-taxable in Singapore, unless they are received via a partnership or are connected to a company, trade, or profession in REITs.
How To Report Dividend Taxation In Singapore?
- Income Recognition – In the year dividends are declared payable to shareholders, they are regarded as income.
- Check Dividend Voucher – You don’t need to disclose taxable dividends in your income tax return if the organization(s) on the dividend voucher say they will report dividend information to IRAS.
- Reporting Taxable Dividends – When organizations don’t report to IRAS, declare taxable dividends under ‘Other Income’ in your Income Tax Return.
- Documentation – Keep dividend vouchers and related records for potential audits or clarifications.
- Tax Credits – If you’ve paid foreign taxes on foreign dividends, you might qualify for foreign tax credits. Maintain records of foreign tax payments.
- Filing Deadlines – Remember filing deadlines to avoid penalties or additional taxes.
- Professional Advice – Seek professional tax guidance for complex financial situations or uncertainties about dividend taxation.
Important Information About Dividends
It’s important to distinguish between corporate tax and dividends in Singapore. The corporate tax rate in Singapore is 17%, but dividends are taxed separately. Corporate tax applies to a company’s overall profits, while dividend taxation relates to distributing these profits to shareholders.
In addition, for companies paying underlying taxes on foreign dividends and seeking tax incentives in Singapore, specific documentation is required:
- Audited accounts of foreign companies paying dividends are necessary. These provide evidence of underlying tax payments.
- Alternatively, certifications from financial institutions confirming tax payments by the foreign company can be accepted. A confirmation letter from the foreign company itself outlining tax payments is also valid.
- Ensuring clear evidence of tax payment on foreign dividends is crucial. This confirmation supports both tax incentives and compliance with Singapore’s tax laws.
How We Can Help: Our Taxation Service
At SJH Advisory, we are committed to simplifying taxation’s intricacies, including whether dividends are taxable in Singapore. Our seasoned team of accredited business consultants specializes in providing you with precise and timely guidance on all aspects of taxation, including dividend taxation. We stay updated with the latest changes in Singapore’s tax laws, ensuring you receive accurate advice tailored to your business’s unique needs.
Ready to explore how SJH Advisory can support your business? Contact us today for a FREE consultation. Our experts are here to help you navigate the intricacies of taxation and guide you toward financial success.
Is Dividends Taxable In Singapore - Frequently Asked Questions
Yes, dividends are generally subject to taxation in Singapore. However, the tax treatment varies depending on the dividend type and source.
Yes, there are exemptions for dividend taxation in Singapore. Generally, dividends paid to shareholders by a Singapore resident company under the one-tier corporate tax system are not taxable. In addition, resident individuals in Singapore may also be exempt from tax on foreign dividends, provided certain conditions are met. Lastly, Income distribution from Real Estate Investment Trusts (REITs) is also exempt from dividend taxation, except distribution derived by individuals through a partnership in Singapore, or from the carrying in of a trade, business or profession in REITs.