A foreign dividend is a payment made by a foreign company to you because you own shares in the foreign company. It’s a way for the company to share its profits with you.
In most cases, if a taxpayer holds less than 10% of the shares and voting rights in a foreign company, the foreign dividend received is taxable. The full amount must be declared in the tax return, but SARS allows a partial exemption, meaning only 20/45 (or roughly 44.4%) of the dividend is actually taxed.
If foreign tax has already been paid on the dividend, this must also be declared. SARS will then reduce the South African tax by the amount of foreign tax paid, to avoid double taxation.
However, if the taxpayer holds 10% or more of the shares and voting rights in the foreign company, the entire foreign dividend is exempt from tax in South Africa.
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