What are Dividends?

At the end of the financial year, the company’s board will assess the financial status of the company and decides if the company has perform well in terms of financial to distribute payouts to the shareholders as a final dividends. If the assessment is done during the financial year, it will be term as interim dividends.

 

Where did the funds for Dividends come from?

Dividends are paid through the company’s profit or reserves; hence if the Company has not been making money since the start of the operation, there are no dividends to be paid out.

 

How much Dividends to distribute to Shareholders?

Dividends are also paid to shareholders according to the shares held by each of the shareholders. For example, Company A has made a profit of S$100,000 after tax in 2019 assuming that there is no loss or profit from previous years, the amount of dividend that the company are able to pay out will be S$100,000. Also, assuming there are two shareholders in the same company whereby Shareholder A holds 60% of the shares and Shareholder B holds 40% of shares. Shareholder A will have a payout of S$60,000 while Shareholder B will get a payout of S$40,000 in dividends.

 

Declaring Dividends

For both interim and final dividends, you will require a directors’ resolution in order to issue the dividends. The Corporate Secretary of the company will be responsible for issuing such resolution after approvals from all shareholders at the end of the financial year (Final) or during the year based on the estimates of the Company’s financial (Interim).

 

Taxation on Dividends

Singapore practices one-tier tax system, hence dividends will not be taxed during the declaration of Shareholder’s personal income tax filing. This is because dividends are profit after paying corporate taxes; hence it will not be taxed again on a personal level.

 

For more information on Dividends payout, contact us for a free consultation.