Implementing requirements for new dividends tax
25 Apr 2012Companies and regulated intermediaries that need to submit tax returns and make payments to the South African Revenue Service (SARS) for the new dividends tax have been able to do so from 20 April 2012. SARS eFiling or a SARS branch office may be used for this purpose.
As announced by the Minister of Finance, Mr. Pravin Gordhan, in his 2012 Budget Speech, the dividends tax will be levied on shareholders when they receive their dividend payment. The tax will be withheld by either the company declaring and paying the dividend or by a regulated intermediary distributing the dividend, who will pay the tax over to SARS.
SARS has reached an agreement with the main stakeholders that are affected by the implementation of the new dividends tax to phase in the tax return requirements that will replace the secondary tax on companies (STC).
SARS and the stakeholders agreed that in the first phase of implementation only the dividend payment side (pay out and pass-on) will need to be declared by capturing the relevant information in the dividends tax return (DTR02).
The following procedures will apply
Withholding agents Companies or a regulated intermediary will be required to withhold the tax, make payment to SARS and to file a dividends tax return (DTR02). The return must be submitted to SARS by each entity that is involved in the dividend distribution chain.
The tax payment should be made on or before the end of the month following the month in which the dividend was paid to the beneficial owner.
The dividend tax rate will be 15% unless the dividend payment is exempt from tax or is subject to a reduced rate.
Under the dividend tax, the individual who receives the dividend payout is liable for the tax (under STC it was the company). However, the company or regulated intermediary that pays the dividends will withhold the tax before paying over the dividend. The individual shareholder will therefore receive a dividend payout with the 15% tax already deducted.
A number of entities are exempt from the dividends tax. A few examples are local companies, any of the three tiers of government, approved public benefit organisations, mining rehabilitation, trusts, as well as pension, provident funds, preservation, retirement annuity, beneficiary and benefit funds, among others.
Exemptions will only apply where the withholding agent has received the required notification prescribed by SARS from the recipient prior to payment of the dividend. Where the notification is not submitted in time the withholding agent is required to withhold tax at the full rate.
Dividend payments to foreign residents may be subject to a reduced rate where a Double Taxation Agreement (DTA) between South Africa and their country of residence provides for such.
This normally requires the foreign beneficial owner to be a company and hold between 10% and 25% of the share capital of the South African company declaring the dividend.
To qualify foreign residents must notify the withholding agent involved of their status prior to payment of the dividend. If they do not do so, the withholding agent is required to withhold tax at the full rate.
If a notification is not provided to a withholding agent prior to the payment of a dividend, it may be provided subsequently and a refund claimed from the withholding agent. This will, however, delay the benefit of the exemption or reduced rate.
Returns and filing
Dividends tax returns can be submitted via eFiling or at a SARS branch.
It is envisaged that in future beneficial owners who receive dividends which are exempt from dividends tax (such as South African companies, pension funds, etc) will be required to submit information to SARS about the dividend received, details of the entity that it was received from, as well as details about the entity that declared the dividend.
The Dividends Tax page on the SARS website also has other useful information, including an introduction to dividends tax and answers to some of the most Frequently Asked Questions (FAQs).
Issued by: South African Revenue Service
25 Apr 2012
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