Isetan Singapore and S44 tax credits

“Minority investors want Isetan to pay out tax credits” as per today’s ST on page 29.

With $61mio tax credits, the investors are asking for only $2 dividend from a maximum $7.50 for a full advantage on the credits.

Does Isetan has the monies?
As per Jun 2006 accounts, it is reported that it has a $100mio cash in its balance sheet. Then why not pay since cashflow is not an issue?

Has the cash been earmarked for investment?
No such info presented. It is reported that the answer lies with the higher tax rate on income received in Japan as compared to Singapore.

Isetan Tokyo, which owns 61% of Isetan Singapore, would have to pay a higher tax in Japan on dividends received from Singapore.

Moral of the story

  • Minority investors should not expect to receive much dividends from a company with this kind of tax complication.
  • If you are investing for dividend yield, then please do your homework.

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