rate is applicable. The current STC rate is 10%.
tax table for individuals Exemptions
Under STC the dividends declared by certain companies were exempt based on the status of the declaring company (i.e. section 10 exempt entities; fixed property companies; certain gold miners; intra- group; tax holiday companies and/or registered micro businesses).
They are relatively rare and are most often securities of other companies owned by the issuer. They may, however, take other forms such as products and services.
Furthermore, where low/no interest loans are provided by a company to a person (by virtue of shares held in that company); the interest benefit provided is deemed to be a dividend and is consequently subject to DT.
Under DT the default position is that tax at 10% should be withheld (or paid in the case of a dividend in specie) once a dividend is paid, unless one of the exemptions or a reduced Beatthemarket.co.za
| March 2012
Under DT dividend payments could be exempt from DT depending on the nature or status of the recipient. The exemptions are 'elective' in the sense that they will only apply where the company distributing the dividend or relevant withholding agent receives the required
notifications ('declarations' and 'undertakings' in the form to be prescribed by SARS) from the recipient prior to the dividend being paid.
Calculating STC and DT
The calculation of STC is based on the net outflow of dividends (outgoing less incoming) in any particular 'dividend cycle', whereas DT is based on the gross outflow of dividends with no reference to any period. Additionally, the recipient's liability for DT can be reduced for a period of five years with the amount of any 'STC credit' available to the company. The STC credit is derived from two possible sources, i.e. any
unused STC credit of the company brought forward from the final dividend cycle under the STC system, as well as any new pro rata portion of any STC credit received by the company under the DT (less any dividends paid).
Payment of liability
Under STC, payment of the tax was previously made to SARS by the company liable for the tax (on or before the end of the month following the month in which the dividend cycle ended).
Under DT however, the payment of tax will normally not be made by the party liable for the tax (the beneficial owner
Differences Between STC and Dividend Tax
This basic overview outlines the differences between STC and DT:
triggered by declaration of a dividend falls on the company declaring
Base & person liable The liability for STC is:
is payable on top of the dividend distributed.
triggered by payment falls on the recipient (i.e. beneficial owner) of the dividend
In contrast as a general principle, the liability for DT is:
is withheld from the dividend payment by either the company distributing the dividend or, where relevant, certain withholding agents.
About the author: Lourens Kruger is currently a senior financial consultant at Agility Investments (Pty) Ltd. He completed his articles and is presently studying towards the Chartered Financial Analyst (CFA) qualification. Special fields of interest include accounting as it relates to legal matters, tax structuring/planning, financial modelling, transaction structuring and accounting reconstructions.
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