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Are Dividends Taxable in South Africa?

A dividend is a payment not considered as a business expense when calculating corporation tax and corporation tax on losses. Dividends are distributed when all the business expenses have been accounted for, paid from the gross profit.

As a shareholder (in either a company that is resident in South Africa or in a foreign company the shares of which are listed at a South African Exchange) you will become liable for the Dividends Tax when a dividend is paid to you. However, the relevant withholding agent will have to withhold and pay the tax to SARS. The withholding agent should also send you the required declaration and undertaking form(s) for completion if you wish to qualify for any of the exemptions or a reduced rate under a DTA (foreign residents only). The completed form must be sent to the withholding agent before it may exempt the dividend payment or withhold at a reduced rate.

Dividends are tax exempt if the beneficial owner of the dividend is an SA-resident company, the Government, public benefit organisations, certain exempt bodies, closure rehabilitation trusts, retirement funds, shareholders in a registered micro-business (provided the dividend does not exceed R200 000 in the year of assessment), are exempt from Dividends Tax. The exemption also applies to dividends in specie. Thus, the concept of ‘beneficial owner’ is very important.  See Section 64D of the Income Tax Act for more information on who is a beneficial owner.

This means that the dividend payments could be exempt from Dividends Tax depending on the nature or status of the recipient. The exemptions are “elective” in the sense that it will only apply where the company distributing the dividend or regulated intermediary receives the required notifications (“declaration” and “undertaking” in the form prescribed by SARS) from the recipient prior to payment of the dividend.


For more information, please contact us on: gervasem@alertsprofessionalservices.co.za