Taxation of Dividends

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Taxation of Dividends

From 2003, Singapore will adopt a one-tier corporate tax systems. This means that for companies that use the new system immediately, the dividends they pay out will be the net dividends and are exempt from income tax. However, for those that do not want to participate in the scheme immediately, IRAS will allow them to pay franked dividends during the period of 2003-2007. For franked dividends, investors will receive the net dividends after deducting corporate taxes. If their marginal tax rates are lower than the corporate tax rate, which is 18% with effect from Assessment Year 2008, they can claim a tax rebate on the dividend tax when submitting their tax returns.

When receiving franked dividends, you can minimise your tax burden by letting your spouse with the lower marginal bracket receive the dividends. Foreign dividends received by tax residents will also be exempt from tax.