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Tax on Dividends received by Share Holder

Posted 15 November 2015 under Tax Questions



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Hannes says:
11 November 2015 at 11:16

I have a EME Company registered for turnover tax. The profit is under R200 000, thus exempt from Dividend Tax. When I pay dividends to one of the two 50/50 share holders, must that share holder pay any tax on the dividends received, and can I pay all dividends to only one share holder?

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TaxTimTaxTim says:
12 November 2015 at 8:07

Dividends must be paid equally to all shareholders of the same class of shares so you would have to pay the amounts 50/50. They will be exempt provided the turnover is less than R200 000.


Hannes says:
13 November 2015 at 12:25

Is it 200 000 turnover or 200 000 dividends?


TaxTimTaxTim says:
13 November 2015 at 13:57

If the turnover of a company is less than R200 000.


Hannes says:
14 November 2015 at 21:12

Sorry but I am now totally confused, I understand the following:

What is Dividend: a sum of money paid regularly (typically annually) by a company to its shareholders out of its profits (or reserves).

From SARS: - Are there any exemptions applicable to Dividends Tax?

Yes if:
- Shareholders in a registered micro business (6th Schedule to the Act) (insofar as dividends do not exceed R200,000 per year)

So that then means you do not have to pay dividends tax up to R200 000 and as you indicated if you have a 50/50 shareholder setup it is R100 000 to each shareholder. Can the Company give R200 000 dividends to one shareholder?


TaxTimTaxTim says:
15 November 2015 at 10:19

You cannot give dividends to only one shareholder. Dividends are a percentage of profits paid out to the owners of the company which are declared as a whole, so in other words the shareholders receive a portion of the dividends based on their ownership percentage of the company.


Hannes says:
15 November 2015 at 19:51

Do I understand the R200 000 dividend Tax exemption correct? ie a Exempt Micro Enterprise business do not have to pay dividends tax up to the first R200 000 dividends paid to share holders.


Hannes says:
15 November 2015 at 19:55

I further assume then that if you are a EME registered for turnover tax that you only declare dividends to SARS once over the threshold of R200 000.


Hannes says:
15 November 2015 at 20:01

Two more Questions please:

1 - Must the Shareholder receiving the exempt dividends from the EME company when completing his personal IT12 show these dividends?
2 - Will there be any more tax applicable to the shareholder on the exempt dividends received in his personal capacity?


TaxTimTaxTim says:
15 November 2015 at 22:10

No, there will not be any further tax implications and yes the shareholder would need to show these dividends in his tax return under the section "amount considered non-taxable".


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