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Stock stakeholders hail changes in taxes on retained earnings, stock dividend

  • Published at 09:56 pm June 30th, 2019
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Mehedi Hasan/Dhaka Tribune

They think the changes will serve both company owners and stock investors, and revive the ailing capital market

Capital market stakeholders have hailed the changes brought in the proposed Finance Bill 2019 on taxing retained earnings and stock dividend of listed firms.

They think the changes will serve both company owners and stock investors, and revive the ailing capital market.

With the changes, listed companies now can transfer a maximum 70% of their net profits after tax as retained earnings and reserve. A company has to give the rest 30% as stock, and cash dividend. 

If any company fails to do so, 10% tax will be imposed on the transferred retained earnings, and reserve, according to the revised provision of the Bill on stock dividend issue.

The proposed Finance Bill 2019 imposed 15% tax on a company if its retained earnings and reserve exceeded 50% of its paid-up capital.

Besides, the proposed Bill imposed 15% tax on stock dividend.

The parliament on Saturday revised the proposed taxation on stock dividend. Now, listed companies must give minimum 30% of its net profit as dividend, equally in stock and cash.

If any company fails to do so, it will have to pay 10% tax on retained earnings and reserves.

President of Dhaka Stock Exchange Brokers’ Association (DBA) Shakil Rizvi has told Dhaka Tribune that the revision will benefit both investors and  directors of listed firms.

“The latest revision will make the market more dynamic and increase participation of small investors in the capital market,” says Shakil.

“This is an unprecedented decision. This will increase the companies’ tendency to give dividend to their shareholders,” DSE Director Md Rakibur Rahman told Dhaka Tribune.

DSE Director Minhaz Mannan Emon says: “The decision will directly benefit small investors. Finally this can help revive the country’s capital market.”

Earlier, soon after the draft budget was announced, stakeholders and experts had demanded that the proposed tax on retained earnings, reserve and stock dividend be scrapped.