Singapore investors need to be aware of the tax implication if they are looking to invest in high dividend yield investments. In Singapore’s context, dividends paid by Singapore listed companies are not taxable in the hands of investors. This does not means there is no tax to pay as the company has already paid its corporate tax. Therefore, there is no tax difference whether the total return comes mainly from capital gains or dividends. However, in other countries, tax could be imposed both on dividends received and capital gains. If the effective tax on dividends is lower than capital gain, naturally it is more beneficial to invest in high dividend paying stocks as far as the post-tax return is concerned.

Many Singapore investors who read investment literature written in foreign context are often confused by this and thus they are easily misguided. Due to the prevalence use of the Internet, many investors are able to invest in securities listed in foreign exchanges. The tax implication becomes even more important to the extend it is possible to overpay more than 20% in the stock price. Read more: HERE (client only, login required)

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