Firms Rush to Pay Dividend to Avoid Tax Changes from 2009

Companies are in a race to pay big dividends and issue bonus shares before the new personal income tax law which includes provisions to tax dividend income will take effect January 1, Vietnam News Agency reported.

 

They are seeking to pay out profits to shareholders even at a time when the global economic turmoil is driving down their profitability and share prices.

 

A large number of listed firms also plan to advance some cash dividend payments for next year, to enjoy a loophole in the tax law that exempts from tax any dividend received prior to January 1, 2009.

 

Although financial reports of listed firms in the third quarter of this year showed that liabilities stood at a ratio of 150 per cent over equity, many firms were still choosing to pay dividends. Many of them may then seek loans at higher interest rates for new capital investment, the agency said.

 

SJC Securities Director Huynh Anh Tuan warned listed companies against paying dividends in the form of bonus shares which will cause dilution of share prices, which is extremely bad at this time.

 

Meanwhile, some stock analysts argued companies should use retained earnings to reinvest in production, business expansion and job creation rather than paying so high dividend as currently.

 

Among the firms that have announced large-than-usual dividends are Nhi Hiep Brick Co. (NHC) with 30 per cent, TRC, GIL, ACB 25 per cent, ACL 20 per cent, Kinh Do Corp. (KDC) 18 per cent. Many had plans to pay as high as 50 per cent-70 per cent this year. (VNA)