Dividends from a Singapore company

A Singapore company may pay a dividend only out of profits. If it is a resident company on the one-tier system, IRAS generally treats the dividend as not taxable for the shareholder, and Singapore has no withholding tax on dividends.

Accounting services
Raffles Place office towers in Singapore's business district in soft morning light

Last updated

A Singapore company can pay dividends only out of profits, and under the one-tier corporate tax system the dividend is generally not taxable for the shareholder. IRAS also does not impose withholding tax on dividends. Checked on .

Can a Singapore company pay a dividend whenever it has cash?

No. Cash in the bank is not enough. Section 403(1) of the Companies Act says no dividend is payable to shareholders except out of profits, and the Act counts a bonus as a dividend. A company with losses or only share capital left cannot pay one.

The penalty falls on people, not just the company. A director or manager who wilfully pays or permits an unlawful dividend commits an offence, with a fine of up to S$5,000 or up to 12 months in prison. That person can also be liable to creditors for the amount by which the dividends went over the profits.

Before you sign a resolution, look at your latest accounts. If you are unsure that retained profit covers the amount, ask your accountant first. The Companies Act page covers director duties more broadly.

How are dividends taxed in Singapore?

For the shareholder, IRAS says dividends paid by a Singapore resident company under the one-tier system are generally not taxable, as the company's tax is final. The only stated exception is co-operatives. Dividends from private resident companies, and from companies listed on the Singapore stock exchange, fall in the non-taxable group on IRAS's examples list.

The company's own profit is taxed first, at the flat corporate rate of 17%. See corporate tax. The dividend is paid from what is left. There is no second layer of Singapore tax when it reaches the shareholder.

IRAS adds a reporting point. Dividends count as income in the year they are declared payable, and taxable ones go under Other Income, unless the company's voucher says it will send the information to IRAS.

Is there withholding tax on dividends to foreign shareholders?

No. Singapore does not impose withholding tax on dividends, so a company paying a shareholder in India, the UK or Hong Kong deducts no Singapore tax. Other payments, such as interest and royalties, are different. The withholding tax page lists them.

Your own country is a separate matter. It may tax the dividend when you receive it, and a tax treaty may give relief. See double tax agreements. We do not give advice on other countries' tax rules.

What are the steps to pay a dividend?

IRAS and the Companies Act do not set a fixed form, so the steps below follow common practice and your company's constitution. Check the constitution first, since it can add conditions.

  1. Check distributable profit. Use up-to-date accounts, not a guess.
  2. Decide the type. An interim dividend is declared by the directors during the year. A final dividend is normally approved by shareholders after year end, often by written resolution in a small private company.
  3. Pass the resolution and minute it. Record the amount per share and the payment date.
  4. Pay the shareholders in proportion to their shares, following the register of members.
  5. Issue a dividend voucher to each shareholder, and book the payment in the accounts.

Keep the resolution, voucher and bank record together. Auditors and your accountant will ask for them.

What other points trip owners up?

  • Dividend or salary. A salary is a company cost and taxable for the person, and brings CPF duties where they apply. A one-tier dividend is not taxable for the shareholder but comes from profit already taxed. The right mix depends on your facts, so ask a tax agent.
  • Foreign dividends received by the company. A dividend received from abroad is a different case, and the foreign-sourced income exemption page covers it.

What records should the company keep?

Keep your own set of dividend records. Each dividend should have a dated resolution, a voucher per shareholder and the matching bank payment. Record each dividend in the accounts as a distribution of retained profit. Link the voucher to the register of members, so the amount per share matches the holdings on the record date.

If a shareholder lives abroad, write the country on the voucher. The shareholder may need the voucher to claim relief at home, and your accountant may need it to show that no Singapore tax was withheld.

What about dividends that go to the wrong person?

Dividends are normally paid in line with the shares held. If one shareholder is paid more than their share without a share class that allows it, you may have a dispute. Check the constitution and any shareholders' agreement. A written resolution signed by every shareholder is the cleanest record in a small company. Where a director is also the only shareholder, keep the paperwork all the same, because the accounts and the bank statement must still tell one story.

Independent guide

This page comes from SingaporeCompanySetupGuide.com, an independent guide. We are not IRAS or ACRA, and we do not draft resolutions. If you want a secretary or accountant to prepare the dividend papers, use the quote form. We pass your request to suitable providers, and they reply with their own prices.

Sources

Good to know

Questions people ask

Do shareholders pay tax on dividends from a Singapore company?

Generally no. IRAS says dividends paid by a Singapore resident company under the one-tier system are not taxable, because the company's tax is final. Co-operatives are the stated exception. Your home country may still tax them, so check there.

Can a Singapore company pay dividends out of share capital?

No. Section 403 of the Companies Act allows dividends only out of profits. A director who wilfully pays a dividend in breach commits an offence and can be liable to the company's creditors.

Is there withholding tax on dividends paid to a foreign shareholder?

No. IRAS says Singapore does not impose withholding tax on dividends. The company does not deduct anything when it pays a shareholder abroad, but the shareholder's own country may tax the dividend under its rules.

What is the penalty for paying a dividend without profits?

The Companies Act sets a fine of up to S$5,000 or up to 12 months in prison for a director or manager who wilfully pays or permits it. That person may also owe the creditors the amount by which dividends exceeded profits.

Do I report dividends on my Singapore tax return?

Only if they are taxable. IRAS says dividends are reported in the year they are declared payable, under Other Income, unless the company says on the voucher that it will give the details to IRAS. One-tier dividends are not taxable.

Are dividends better than salary for a company owner?

They are taxed differently, not always better. A salary is deductible for the company and taxable for you, a one-tier dividend is not taxable for you but comes from profit already taxed at 17%. Work it through with a tax agent.

More on this site

Keep reading

Want help paying a dividend?

Send the quote form and we pass it to suitable accounting and secretarial providers.

Accounting services