With no tax, MNCs ramp up dividends | Economic Times

Mumbai: The big dividend rush by MNCs is on. Taking advantage of the absence of dividend distribution tax (DDT), many multinational companies have been doling out large dividends over the past two months. Finance minister Nirmala Sitharaman in her budget for 20/21 removed the dividend distribution tax on corporates and transferred it to investors from April 1. The trend of large dividend payouts is expected to continue, say experts.Pharma major Pfizer paid a special dividend of Rs 320 per share, or 3,200 per cent, last month compared to Rs 22.50 last year. Sanofi India paid Rs 106 per share dividend and a one-time special dividend of Rs 243 per share recently. Sanofi’s payout last year was 66 per share compared to this year’s total dividend of Rs 349 per share.“The abolition of DDT augurs well for MNCs as the foreign parent entity can claim credit for the corporate taxes paid in India on dividends in their home jurisdictions,” said Amit Tandon, MD of proxy advisory firm Institutional Investor Advisory Services, (IiAS). “MNCs are likely to pay higher dividends from current fiscal onwards.”Oracle Financial Services paid a dividend of Rs 180 per share. The company did not pay any dividend last year. Bayer CropScience paid an interim dividend of Rs 90 per share in June compared with Rs 18 per share last year. ESAB India, which did not pay any dividend last year, paid Rs 70 per share in June. 76721124“In case of non-resident investors, there is a clear advantage as they will be able to resort to the provisions of a tax treaty, which may prescribe a lower rate subject to qualifying conditions being met,” said Sunil Badala, partner & head, financial services, tax, KPMG in India. “For instance, the Mauritius Treaty prescribes a rate of 5 per cent if the shareholding is more than 10 per cent in the Indian company.The 25 largest locally-listed MNCs paid nearly Rs 18,000 crore in aggregate dividends in FY19.