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TAX Dividends Tax


– a guide for Investors


Under DT, dividend payments to non-residents may, if not exempt, be subject to a reduced rate where the relevant double taxation agreement between South Africa and their country of residence provides for such.


This normally requires the non-resident recipient to be a company and to hold between 10% and 25% of the share capital of the SA company declaring the dividend.


Dividends fall within the definition of gross income


Because dividends fall within the definition of gross income, you are still required to declare dividends received in your income tax return. Many taxpayers make the mistake of not declaring their dividends, usually citing the fact that they're exempt from taxation.


STC payable


STC is payable on the net amount — which is the dividend declared — less the sum of dividends received or accrued during the dividend cycle.


Rates


Table – Rates of STC for dividends declared during specified periods


From


17 March 1993 22 June 1994 14 March 1996 1 October 2007 1 April 2012


Until


21 June 1994 13 March 1996


30 September 2007 End March 2012 Until further notice


Rate 15% 25%


12,5% 10% 15%


Dividend cycle A dividend cycle refers to the time between dividend declaration dates. A dividend cycle ends on the date on which a dividend accrues to a shareholder, while subsequent dividend cycles page 14


If a dividend was declared between 1 September 1992 and 17 March 1993, on the day following that date of declaration 





begin immediately after the previous cycle has ended. The first dividend cycle of a company begins on the later of 1 September 1992, and: 


2012/2013 t


on the date on which the company was incorporated, and


the date on which the company became a resident.


Payment date of DT


DT is payable on or before the last day of the month following the month in which the dividend cycle ends.


Withholding tax obligations Dividends tax initially requires the company declaring the dividends to withhold dividends tax on payment. However, liability for withholding tax shifts if the dividend is paid to a regulated intermediary. This includes central securities depository participants, brokers, collective investment schemes and listed investment service providers.


Dividends tax can be reduced or eliminated upon the timely receipt of a written declaration that the shareholder is entitled to an exemption or to tax treaty relief.


An exception to this principle is dividends since the liability for the DT remains on the company paying the dividend (as under STC), and is not transferred to the recipient. (Dividends in specie, also known as property, are those paid out in the form of assets from the issuing corporation or another corporation, such as a subsidiary corporation.)


Beatthemarket.co.za | March 2012


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