WEICHAI POWER CO., LTD. 濰柴動力股份有限公司
Weichai Power (2338) hits investors with taxable bonus shares
Company circular, 20-Apr-2017
Yes, it's stupid, but China thinks that a bonus share is a benefit, not just carving the pizza into smaller slices. Weichai Power has declared a final dividend of CNY0.25, but will also make a 1:1 bonus issue out of retained profits, so the new shares will be subject to 10% withholding tax on par value. That results in tax of CNY0.025 on the dividend, CNY0.10 on the bonus share, and a total tax of CNY0.125, or 50% of the dividend. It's even worse for PRC human investors on the SZ-HK Connect, who will suffer a 20% withholding tax, reducing the dividend to zero!
Company circular, 20-Apr-2017
Yes, it's stupid, but China thinks that a bonus share is a benefit, not just carving the pizza into smaller slices. Weichai Power has declared a final dividend of CNY0.25, but will also make a 1:1 bonus issue out of retained profits, so the new shares will be subject to 10% withholding tax on par value. That results in tax of CNY0.025 on the dividend, CNY0.10 on the bonus share, and a total tax of CNY0.125, or 50% of the dividend. It's even worse for PRC human investors on the SZ-HK Connect, who will suffer a 20% withholding tax, reducing the dividend to zero!
Truly pointless bonus issues and splits
Why do boards propose bonus issues and stock splits? We look at the drawbacks and the false and misleading reasons often advanced for such actions. If liquidity is really a concern, then a reduction in board lot size is the simplest and best way to go. Splits and bonuses are more a sign of desperation than of a sophisticated, value-focused board. (27-Dec-2010)
Why do boards propose bonus issues and stock splits? We look at the drawbacks and the false and misleading reasons often advanced for such actions. If liquidity is really a concern, then a reduction in board lot size is the simplest and best way to go. Splits and bonuses are more a sign of desperation than of a sophisticated, value-focused board. (27-Dec-2010)
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