What is Dividend Withholding Tax in South Africa
Dividends received by individuals from South African companies are generally exempt from income tax, but dividends tax at a rate of 20% is withheld by the entities paying the dividends to the individuals.
Beneficial owners generally pay a 20% tax on dividends. The company declaring the dividend withholds dividends tax on behalf of the shareholder receiving it. In specie dividends are subject to tax in the hands of the company and not the beneficial owner.
Foreign dividends received by a South African resident are added to their income. They are then taxed at the normal corporate tax rate. This results in a 20% effective tax rate.
Foreign dividends received by resident shareholders with over 10% ownership in the company are usually not taxed.
Residents in South Africa who own less than 10% of shares will pay taxes on dividends received. They can also receive a tax credit for foreign taxes paid by the shareholder.
Frequently asked questions
What is the dividend withholding tax rate in South Africa
Dividends tax is imposed at 20% on dividends declared and paid by all resident companies as well as by non-resident companies in respect of shares listed on a South African exchange.
What does withholding tax on dividend mean
Dividend withholding tax is the tax a company must take off a dividend before the payment is made to the shareholder.
Who has to pay over the dividend tax to SARS
Dividends Tax is a tax on shareholders (beneficial owners) 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).
Who should pay the Dividends Tax
The payment of dividends tax should be withheld by the Company who is declaring the dividend and then paid over to SARS on behalf of the beneficiary.
When must Dividends Tax be paid
On or before the last business day of the following month in which the Dividend was paid.
Do all shareholders get dividends
Profits made by companies limited by shares are often distributed to their members (shareholders) in the form of cash dividend payments. Dividends are issued to all members whose shares provide dividend rights, which most do. Company profits are distributed in proportion to the percentage of shares held by each member.
Who is exempt from Dividends Tax
Dividends are tax exempt if the beneficial owner of the dividend is a South African resident company, SA-retirement fund or other prescribed exempt person. In these instances the exemptions or reduced rates would apply.
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