Thursday, February 26

Tax on stock dividend

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For companies listed on SGX, the dividends being distributed by these companies are not taxable but they need to be added to your taxable income for the year. This is because all companies are under the one-tier corporate tax system now. Under this system, tax paid by a company on its income is a final tax and dividends paid by a company are exempt from tax in the hands of the shareholders.

However, once the dividends are in the hands of the shareholders, they must declare it on a personal basis as IRAS will tax it under their total income. As stated from IRAS, you will need to declare the taxable dividends under 'other income', and the amount of tax deducted which can be taken from your dividend vouchers or statements, under ‘Singapore tax deducted at source’ in your tax form.

If you are a Singaporean citizen, you will not have to declare it as the companies which distributed the dividends to you will provide information on your taxable dividends to IRAS. Below is a diagram taken from IRAS that shows the type of dividend that needs to be declared.
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2comments

  1. AnonymousJanuary 22, 2010 at 7:59 PM

    Hi Kay,

    I need some clarifications on the article as I do not know much about the previous tax regime as regards to distributed dividends.

    It seems like we basically still pay taxes on the dividends base on our personal income tax rate (which can be higher then company tax rate).

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  2. KayJanuary 23, 2010 at 12:27 AM

    Hi,

    From what I seen from some forums, it seems that if your personal income tax rate is higher than the company tax rate, they will rebate the difference to you and vice versa. I'm not exactly that sure so you may wish to check this out with IRAS.

    Kay

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