The Hour Glass

[Boon]

Well, we must not forget bonuses paid to executives are taxable at personal level, and the marginal personal income tax rates for high income earners (> $200k chargeable annual income) are invariably higher than the prevailing Singapore corporate income tax rate at 17%.

So as the largest shareholders of THG, the Tays and Chans would actually receive more, on an aftertax basis, if the company's profits are distributed out as dividends.

http://www.iras.gov.sg/irasHome/page04.aspx?id=1190

The top marginal personal income tax rate for (>320,000) is 20% flat.

Scenario 1: Additional 2.84 million from the PBT is paid to the Tays and Chans.

Personal income tax paid = 0.2 x 2.84 = 0.568 million
Cash in hands after tax to the Tays and Chans = 0.8 x 2.84 = 2.27 million

Scenario 2 :The 2.84 million from the PBT is paid out as dividend to shareholders net of corporate tax rate of 17%

Corporate tax paid = 0.17 x 2.84 = 0.483 million
PAT = 0.83 x 2.84 = 2.36 million , to be distributed to shareholders which work out to be 1.00 cents per share (outstanding number of share = 235 million)
Tays and Chans control 52.57% of the company.
Dividends received by Tays and Chans = 0.5257 x 2.36 = 1.24 million

So as the largest shareholders of THG, the Tays and Chans would actually receive LESS and not more, on an aftertax basis, if the same amount of company's PBT are distributed out as dividends.

Please correct me if I am wrong. Thanks.