Dividends — when your company has made a profit, you get to choose whether you want to invest it in growing the business or distribute between shareholders. The distributed profit is called dividends. In Singapore, the dividends are tax-exempt to the shareholders.
How to declare dividends
To distribute dividends, the directors must issue a resolution. There are two types of dividends: interim and final ones. For the interim dividends, the distribution can be approved based on the estimated numbers for the year. The final dividends are subject to the shareholders’ decision in the end of the financial year. Usually they take a vote during AGM.
What you need to know about Dividends
You can only distribute dividends if you have a profit. It is a criminal offence to approve and pay dividends if the company’s balance is negative. If the profit exists, you can decide how much of it you want to pay out to the shareholders. The important thing is you need to offset the previous losses and pay all your taxes first. For example, your company has made a profit of S$50,000 in a given financial year. However, there’s a S$10,000 losses accumulated from the year before. You have to cover those first, then you can distribute the remaining S$40,000 as dividends.
Dividends in Singapore
Each shareholder typically receives dividends according to their share. Whether you distribute interim or final dividends, a declare warrant must be issued for every single shareholder. It is your Corporate Secretary job to prepare these and save them in the accounting books.