All you need to know about dividend tax in South AfricaEmma
Dividends Tax is a tax charged at 15% on shareholders when dividends are paid to them, and, under normal circumstances, is withheld from their dividend payment by a withholding agent (either the company paying the dividend or, where a regulated intermediary is involved, by the latter). Dividends Tax applies to any dividend declared and paid after 1 April 2012. The main difference between the new Dividends Tax and the old Secondary Tax on Companies (STC) lies inwho is liable for the tax. Dividends Tax is a tax imposed on shareholders (beneficial owners of dividends) on receipt of dividends, whereas STC is a tax imposed on companies on the declaration of dividends.
The main objectives behind the change to Dividends Tax were:
•To align the level of the taxation of dividends in South Africa with the international norm where the recipient of the dividend, not the company paying it, is liable for the tax relating to the dividend (South Africa was one of a few countries with a corporate level tax on dividends)
•To make South Africa a more attractive international investment destination by eliminating the perception of a higher corporate tax rate (STC was an additional corporate tax) coupled with lower accounting profits (STC had to be accounted for in the Statement of Comprehensive Income [Income Statement]).
There is no overlapping period between STC and the “new” Dividends Tax. If a dividend is declared prior to 1 April 2012(irrespective of actual payment date) it will be subject to STC. Only where the dividend is declared and paid on or after 1 April 2012 will it be subject to Dividends Tax.
Who pays the dividend tax to SARS?
Generally speaking the Dividends Tax is a withholding tax. As such, the tax is withheld from dividend payments and paid to SARS by the company paying the dividend or, where a regulated intermediary is involved, by the latter. The person liable for Dividends Tax (The Shareholder) remains ultimately responsible to pay the tax should the company fail to do so. If you are receiving dividends from a company of which you are a shareholder, make sure the company is paying the relevant withholding tax to SARS.
Which companies or organisations are exempt from dividends tax?
Dividends payable to the following beneficial owners could be exempt from Dividends Tax
• South African resident companies
• Government (all three spheres)
• Public Benefit Organisations (approved ito section 30(3) of the Act)
• Mining rehabilitation trusts (section 37A of the Act)
• Section 10(1)(cA) persons
• Section 10(1)(d) funds (e.g. pension fund, provident fund or medical scheme)
• Section 10(1)(t) entities (e.g. CSIR and SANRAL)
• Shareholder in a registered micro business (6th Schedule) (insofar as dividend <R200,000 per year)
• Non-resident and the dividend is received from foreign company listed on JSE
Dividend Tax at a glance:
|Payment date||End of month following month wherein theDividends Tax is triggered|
|Returns||To be submitted in respect of all dividendpayments and receipts (where the recipient is
|Failure towithhold / pay||Could become liability of “person” who failed towithhold / pay|
|Personal liability||Unlisted companies: the person who controls/ regularly involved in financial affairs &
shareholder / director is personally liable for tax,
additional tax, penalty and interest for which the
company or Responsible Individual (RI) is liable
|Failure to pay ontime||Interest accrues on a daily basis|
|Assessment &Recovery of tax||Provisions re assessment & recovery of tax &administrative penalties apply|
|Refunds||Withholdings by company to be refunded:• Future withholdings by company (one year)
• Excess to be claimed from SARS(after one year)
• Claims to be made within three to four years
of dividend payment date
Withholdings by RI to be refunded from:
• Future withholdings by RI (any withholding)
• No recovery from SARS possible
Understanding Dividend Tax
If you are not a chartered accountant or a high level financial executive, chances are you may not understand the legislation or the implications of Dividend tax in South Africa. If you do not have an experienced high level financial expert such as a Financial Director / Financial Manager currently employed in your business, there are companies, like The Finance Team, that outsource these high level financial executives on a part time or interim basis. They will be able to guide you through the process and assist with establishing systems within your business that will make calculating, submitting and paying dividend tax simple and easy.