Singapore
  • Hong Kong
  • UK
  1. Osome Blog Singapore
  2. How Do Dividends Work in Singapore?

How Do Dividends Work in Singapore?

How Do Dividends Work in Singapore?

You’ve made a profit and are thinking about paying it out to shareholders. Here’s all you need to know about dividends in Singapore.

Before we start, just a quick announcement: we provide no nonsense online accounting services. Just so you know.

What is a dividend?

Proof of share ownership.

A share certificate is a verification that proves you own shares of a company, and that you are a certified shareholder of that company.

When your company has made a profit, you get to choose whether you want to invest it into growing the business or distribute between shareholders. The distributed profit is called dividends.

No Tax on SG Dividends

Singapore has a one-tier tax system so income is only taxed once. The dividends are tax exempt to the shareholders.

How much can I distribute?

Dividend distribution rules say you can distribute all profit remaining after paying your taxes and settling your losses. Let’s say after tax your business has made a profit of S$30,000 this financial year. If you have S$10,000 losses from the year before, you need to offset those first. The remaining S$20,000 can be distributed as dividends.

How much does each shareholder get?

Usually, each shareholder gets dividends according to their share. If you want to set up a different ratio, you can state that in the shareholder distribution agreement.

Can I distribute dividends if my company has not made a profit?

No. If your company has declared and paid dividends when there are no profits, the directors who were aware of and approved the payment will be guilty of a criminal offense. The consequences may be a fine of S$5,000 or a year in jail.

The company’s debt to creditors also has to be paid by the directors. Even the ones who didn’t know there was no profit have to pay the debt as these cases are considered as negligence or breach of fiduciary duty.

What do I need to do to declare dividends?

There are interim and final dividends. Decisions on interim dividends are made by the board based on the estimates for the year. A directors’ resolution is enough.

Final dividends are approved by the shareholders at the end of the financial year. That requires their unanimous agreement in a vote. This usually happens during the Annual General Meeting (AGM).

For both interim and final dividends, your Corporate Secretary must issue declare warrants to each shareholder. The details have to go into your accounting books.

As soon as you have agreed on paying dividends, they become the company’s debt to shareholders until paid.

SG Secretary

Can I pay myself dividends instead of salary and save on taxes?

Paying taxes as a director.

As a company director, you would have to pay taxes on the salary you earn.

If you are a director or an employee in your business, you should have a reasonable salary adequate to your role. A business owner who gets only dividends will not have a source of income if his business stops making a profit.

So look at it this way: dividends are what you and other shareholders receive as a bonus for having a profitable business.

Attention

If you are a foreigner, the salary and the taxes you pay affect your legal status: the Ministry of Manpower looks at these when deciding on your visa.

Do I need to declare dividend income?

No. Just make sure your company will provide the dividend information to IRAS and state this on the dividend voucher.

Does total return include dividends?

Yes, it does.

How can I calculate the dividends payout ratio from the balance sheet?

Easy.

  • Take the total common shareholders’ equity figure (you will find it on your company’s balance sheet).
  • Divide this amount by the company's present share price.

When are Singapore dividends taxed?

In the year they are declared payable.

Why do companies pay dividends?

To put it simply, a company needs to stimulate all its shareholders’ interest in holding the stocks. And as a thank you gesture for their support, a company lets them share the profit.

Are dividends recorded on the balance sheet?

As soon as the dividends are paid, there is no need to record them on the balance sheet.

Do dividends go on the balance sheet?

The balance sheet usually contains the dividends you declared but haven’t yet paid.  You put them under the heading current liabilities.

Where are dividends paid from?

Dividends usually originate from the company's net profits.

Next steps

If you have some questions left, ask our experts for help. Or hire us to take care of your dividends and ensure that you do not break any laws. Talk to us via a secure chat to learn more.

Share this post:

Tips to run your business smarter.
Delivered to you monthly.

You'll receive a verification email you'll have to open and confirm the subscription.

You might like it

NewCampus Manages Documents Worry-Free With Osome’s Corporate Secretary
Seller Spotlight

NewCampus Manages Documents Worry-Free With Osome’s Corporate Secretary

New Campus had set up its operations in Dubai for around 5 years, working with a traditional company secretary company. When they wanted to set up their company in Singapore, venture capital fund 500 startups recommended that they try Osome.

Ajay Experiences Paper-free Accounting for his Startup Tinvio
Seller Spotlight

Ajay Experiences Paper-free Accounting for his Startup Tinvio

When Tinvio started operations to build a communication and commerce platform for merchants and suppliers, they were looking for an annual corporate secretary and monthly accounting service so that they could focus on growing their business while upholding corporate diligence.

How Does Fulfillment and Storage Impact Your Bottom Line?
E-commerce

How Does Fulfillment and Storage Impact Your Bottom Line?

So, you have reached a turning point in your company’s growth and feel like you need to focus more on order processing and fulfillment. That’s great because that will allow you to grow your sales.

An E-Commerce Seller's Introduction to Currency Risk
E-commerce

An E-Commerce Seller's Introduction to Currency Risk

If you trade in a stronger currency, you will have to pay more for fewer items, which can squeeze your profit margins and make competing with other businesses difficult for you. It can also affect your ability to make profitable investment opportunities.

This is How Amazon's Supply Chain Works
E-commerce

This is How Amazon's Supply Chain Works

In order for Amazon to run at full capacity, a wide range of functions must work together. Because of this, Amazon's supply chain plays such an important role in its success and operation.

A Guide to Choosing Your E-commerce Store Name
E-commerce

A Guide to Choosing Your E-commerce Store Name

Choosing a good brand name once you have registered your company is important for an e-commerce business store because it will grow to be the brand that users identify with.

How To Choose the Perfect Domain Name for E-commerce
E-commerce

How To Choose the Perfect Domain Name for E-commerce

A domain name is an identity and at the same time, the address for customers to get to e-commerce businesses’ stores online. Thus, choosing the perfect domain name is important for your e-commerce business.

Why You Should Protect Yourself As You Build Your Business
Running My Business

Why You Should Protect Yourself As You Build Your Business

Despite the measures that the Government had implemented to assist in holding back retrenchments and offsetting employees’ wages, the pandemic and its impact are enduring. All the more reasons for you to get insurance now.

13 Best Co-Working Offices in Singapore
Entrepreneur's Bootcamp

13 Best Co-Working Offices in Singapore

Trying to beat the work-from-home slump? Give your productivity a much-needed booster at an amazing co-working space of your choice. From stunning views, amenities, to convenient central locations, you’d surely find a space to get your inspiration flowing.

How To Convert A Private Limited Company Into A Public Limited Company
Secretary

How To Convert A Private Limited Company Into A Public Limited Company

While the public limited company structure shares some similarities with the private limited company structure, its features make it more ideal for large businesses.

Understanding Customer Lifetime Value for Online Sellers
Running My Business

Understanding Customer Lifetime Value for Online Sellers

Once you establish a customer lifetime value, you'll realize that acquiring a new client is much more costly and time-consuming than selling to existing clients.

A Guide to Calculating Taxes for Freelancers and Self-Employed
Tax

A Guide to Calculating Taxes for Freelancers and Self-Employed

During tax season, it can get increasingly frustrating or confusing for freelancers and self-employed people as they are not clear about their tax obligations.

Tips to run your business smarter. Delivered to you monthly.

You'll receive a verification email you'll have to open and confirm the subscription.

We’re using cookies! What does it mean?