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Do I qualify to pay Dividends Tax?

Posted 30 March 2012 under Tax

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Taxpayers will no doubt notice a number of emails and letters from banks / financial advisors asking them to submit a form related to dividends tax. What is this all about?

A new Dividends Withholding Tax or DWT has been created which replaces the old Secondary Tax on Companies (STC) from 1 April 2012. A shocking fact is that the new version is now a whopping 15%, up from 10%. So for every R1 declared as a dividend, you as the taxpayer, will only receive 85c. The remaining 15c will be paid over to SARS.

The DWT will by default apply to all individuals with investments. It will also apply to foreign investors, though some may be able to reduce the tax based on a Double Tax Agreement (Look out for future blog posts on this topic). That confusing form you have received asks you to state why you should NOT be subject to the DWT, and lists a few exemptions. The most important being:

  1. South African company/close corporation

  2. Government body;

  3. Public benefit organisation;

  4. A special trust;

  5. Certain research, public service and public funding bodies; and

  6. Pension funds, retirement funds, retirement funds, benefit funds and preservation funds.

If you ARE one of the above, you will need to complete the form and state which one is applicable to you. Otherwise the financial institution who sent you the form will assume you are liable for DWT.

If you are unsure about whether you qualify or not, ask Tim below.

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