Dividend Withholding Tax

by | Apr 26, 2024 | Advisory Services | 0 comments

Do you have a resident company that is declaring dividends to its shareholders/beneficial owners? Let us unpack the tax implications!

What is dividends tax?

Dividends tax is a tax levied on shareholders when dividends are paid to them, the company paying dividends is obligated to withhold the tax and pay it over to SARS.

Companies liable to pay dividends tax

  • South African resident company
  • Foreign company whose shares are listed on South African stock exchange.

Dividends tax is payable by the beneficial owner of the dividend, however, must be withheld from the dividend payment and paid to SARS by the declaring entity. In cases whereby the declaring entity fails to withhold the tax, the beneficial owner remains liable for tax due.

How much should be declared to SARS as dividends tax?

The rate of dividends tax is currently 20% for any dividend paid on or after 22 February 2017, regardless of the declaration date of the dividend and unless an exemption or reduced rates are applied.

The payment of dividend tax should be accompanied by the submission of both the DTR01 and DTR02 returns. The penalties and interest may be levied for late payments of dividends tax or the late submission of the return.

The tax withheld should be paid to SARS on or before the last day of the month following the month in which the dividend was paid.

Exemption from dividends tax

Below is a list of some of the entities which are exempt from the dividends tax, let us unpack:

  • Resident company– A dividend is exempt from dividends tax if the beneficial owner is a resident company (i.e state owned company, private company, personal liability company and etc)
  • Government- Should the beneficial owner of the dividend consist of the government of South Africa in the national, provincial, or local sphere, this will be exempted from dividends tax.
  • Public benefit organisation- the public benefit organisation must be approved by the commissioner under s30(3) to qualify for the exemption.
  • Dividend paid by a foreign company to a person that is not a resident is exempt from the dividends tax.
  • Environmental rehabilitation trust- A dividend is exempt from dividends tax if the beneficial owner is a trust whose object is to apply its property solely for the rehabilitation of mining areas upon their closure.

Sentinel International Advisory has a team of tax professionals who are always available to assist or advise companies with compliance and the declaration of dividends tax return to SARS.

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