What is the best way to return cash from a dormant company to shareholders ?

[littlecupid]

Forum with many accountants and financial experts any comment ?

[piggo]

dormant company meaning?

[littlecupid]

dormant company meaning?

Means no business activity but there is still some cash in the bank accounts.

We want to liquidate the company. The way I understand is to declare dividend but that will be taxed ?

Is there some other way ?

[Musicwhiz]

Conduct a Capital Reduction exercise, instead of declaring a dividend.

[mrEngineer]

Means no business activity but there is still some cash in the bank accounts.

We want to liquidate the company. The way I understand is to declare dividend but that will be taxed ?

Is there some other way ?

Why would it be taxable if dividends were to be given? On investor side, we are not taxed in singapore but on company side why so? In US, why do they call it double taxation when giving out dividends?

[etan]

SG private limited company?

File in for Strike off - easier process. I think winding up process cost more.

Hold directors meeting, director approved, less out all debts and fees, finally return all credit balance to directors / shareholders.

Amt returned must be huge chunk to attract personal income tax at higher rate?

Not so simple?

http://www.guidemesingapore.com/incorpor...iquidation

[d.o.g.]

Means no business activity but there is still some cash in the bank accounts.

We want to liquidate the company. The way I understand is to declare dividend but that will be taxed ?

Is there some other way ?

Maybe you should provide more details about the company and its shareholders.

The simplest case is that the company is domiciled in Singapore, there are no liabilities, the only asset is cash, and all the shareholders are Singapore individuals. In such a case a dividend + strike-off would probably suffice. For Singapore individuals the dividend is not taxable.

Alternatively the company can be liquidated and proceeds returned to shareholders. This would probably cost more, but the proceeds would then constitute a return of capital, which may not be taxable for foreign shareholders and thus be better for them.

[littlecupid]

Means no business activity but there is still some cash in the bank accounts.

We want to liquidate the company. The way I understand is to declare dividend but that will be taxed ?

Is there some other way ?

Maybe you should provide more details about the company and its shareholders.

The simplest case is that the company is domiciled in Singapore, there are no liabilities, the only asset is cash, and all the shareholders are Singapore individuals. In such a case a dividend + strike-off would probably suffice. For Singapore individuals the dividend is not taxable.

Alternatively the company can be liquidated and proceeds returned to shareholders. This would probably cost more, but the proceeds would then constitute a return of capital, which may not be taxable for foreign shareholders and thus be better for them.

The company has been dormant for 3-4 years and let's say there is 100K in cash in the bank.

There are 2 share holders now. 1 Singaporean and 1 foreigner, but the Singaporean will offer to buy over the foreigner stake via a share transfer.

So once there is only 1 shareholder (which is Singaporean), the Singaporean can just declare divdend to take out 100 K from the bank without further taxes at the corporate and individual ?

Sorry for asking as I am really very new to such things.

Thank you.

[d.o.g.]

So once there is only 1 shareholder (which is Singaporean), the Singaporean can just declare divdend to take out 100 K from the bank without further taxes at the corporate and individual ?

Dividends can only be declared out of profits. So you need to look at how the equity is accounted for. Equity is made up of capital and retained profits. You can declare dividends up to the amount of retained profits. The dividends are tax-free provided corporate taxes have already been paid on the retained profits. The remaining capital can only be obtained in a winding-up.

Best to talk to the company accountant, or whoever is going to be appointed to wind up the company. Remember that free advice is worth what you paid for it.