Dividends Tax

What is dividends tax?

Dividends Tax is a tax charged at 15% on shareholders when dividends are paid to them. Under normal circumstances, it is withheld from their dividend payment by a withholding agent.

A dividend is explained in section 1 of the Act.  In short it means that any payment by a company for the benefit of a shareholder in the respect that a share is owned in that company. Dividends Tax is applicable on the payment of a dividend if the company is a:

  1. South African tax resident company or;
  2. A foreign Company whose shares are listed on the JSE.
  3. Dividend payments by headquarter companies are not subject to Dividends Tax.

Dividends Tax replaced Secondary Tax on Companies in order to:

  • Align South Africa with the international norm. The recipient of the dividend is liable for the tax.
  • Make South Africa a more attractive destination for international investment by eliminating the perception of a higher corporate tax rate .

Some beneficial owners of dividends are entitled to an exemption or a reduced rate under the Dividends Tax system.

When should it be paid?

Dividends Tax applies to any dividend declared and paid.The withholding agent should pay the tax withheld to SARS on or before the last day of the following month after the dividend was paid. Dividends Tax payments should be accompanied by a return.

The difference between Dividends Tax and Secondary Tax on Companies?

The main difference is the person who is liable to pay for the tax. Dividends Tax is a tax levied on shareholders when they receive dividends. STC was a tax levied on companies on the declaration of dividends.