The new Dividend Tax (DT) became effective on 1 April 2012; therefore any dividend declared and paid after the 31 March 2012 will be subjected to DT and not STC.DT is levied at 15% (STC was levied at 10%) and is levied on the recipient of the dividend (STC was levied on the declaring company); unless it is a dividend ‘in specie’ where the liability still lies with the declaring company.
The collection of DT will work similar to how it worked under the old STC regime: the stockbrokers or the companies paying out the dividend will still need to pay the DT on behalf of the recipient, the person or entity receiving the dividend. The person or entity receiving the dividend will therefore only receive the net dividend (dividend declared less DT withheld by the declaring company).
Under the old STC regime certain dividends were exempt based on the status of the company, now under the new DT regime dividends can be exempt based on the nature or status of the recipient of the dividend.
Dividends will be exempt from dividends tax if the beneficial owner is:
- A South African company or close corporation.
- The Government, a provincial administration or municipality.
- A PBO approved by the Commissioner in terms of section 30(3).
- An environmental rehabilitation trust.
An institution board or body contemplated in section 10(1)(cA). This is any institution,
A pension or provident fund or medical aid.
- board or body that:
- In the furtherance of its sole/principal object conducts scientific, technical or industrial research.
- Provides necessary/useful commodities, amenities or services to the state or members of the general public.
- Caries on activities designed to promote commerce, industry or agriculture or any branch thereof.
- A person contemplated under section 10(1)(t), e.g. CSIR & SANRAL.
- A shareholder of a micro business (up to the first R200 000 of dividends paid per annum).
- A non-resident beneficial owner where the dividend was declared by a non-resident company in respect of shares that are listed on SA securities exchange.
DT will be levied at a reduced rate if:
The person or entity receiving the dividend is a non-resident for South African tax purposes and the country where the foreign recipient is a resident has a double tax agreement (DTA) with South Africa.
For the updated DTA summary, refer to SARS website: http://www.sars.gov.za/home.asp?pid=73591
As stated earlier in this article, if you are the recipient of a dividend ‘in specie’ (e.g. the company distributes assets to shareholders), the company will be liable for the DT on the market value of the assets distributed. For example: The dividend declared is R200 but on the other hand the assets are worth R300 – the DT will be calculated on the market value of the assets, the R300. The DT that the company will be liable for is therefore R45.