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Dividend Withholding Tax

by Nicci - Posted 17 January 2012

Secondary Tax on Companies (STC) will be replaced by a Dividend Withholding Tax (DWT) as from 01 April 2012.    A company declaring and paying a dividend will be liable to withhold a dividend tax of 10% of the amount paid to a shareholder.   The amount must then be paid to SARS by the last day of the month following the month in which the dividend was paid.

A company does not need to withhold dividends tax if it receives a written declaration that the shareholder is entitled to an exemption from the tax.  

The new tax has extended the personal liability of directors of private companies though - directors are personally liable where the dividends tax is not withheld and paid by the company.

Dividends paid to the following entities are exempt from dividends tax::

1.    A company that is resident in South Africa.

2.    The Government or a Municipality.

3.    A Public Benefits Organisation.

4.    A rehabilitation trust.

5.    A Pension or Provident Fund or a registered Medical Scheme.

6.    A shareholder in a registered micro business.

7.    A shareholder that is a natural person and the dividend is a transfer of an interest in a residence (available until 31 December      2012).