The new Dividends Tax came into effect in South Africa on the 1st of April, changing the way taxation on share dividends is collected. This new legislation means that the tax shareholders pay on dividends will be deducted from the dividend before it is paid out, and understanding the new law is essential to prevent confusion when filing your provisional tax returns.
What is Dividend Tax?
Dividends are now taxed at 15% of the total dividend amount, with every company listed on the JSE having to comply. Unless you are subject to a double taxation agreement with another country, SARS will collect this tax directly from the company paying the dividend or a registered intermediary.
Like PAYE, the new Dividend Tax makes it easier for SARS to collect taxes on company dividends while making it simpler for taxpayers to file returns. Shareholders should also be aware that certain exemptions apply to the new Dividend Tax, and that certain procedures are required in order to comply with the new law.
Complying with the Law
Shareholders will be required to complete a declaration form for each share trading account they own, confirming their SARS details and providing their tax number to ensure that the tax on dividends is applied correctly and credited to their SARS account. Any exemptions that the shareholder may be entitled to must also be included on the form.
Certain companies and individuals may be exempt from paying Dividend Tax, while others may pay a reduced amount of tax. Most of the entities that are exempt are specialised trusts, companies, and retirement funds, and the majority of shareholders will have to pay the full 15% as required. If you’re in any doubt about your tax status, consult your financial advisor who will explain the process to you in greater detail.