Since April 1st 2012, Dividends Tax applied to dividends received from your investments. There is however a difference between dividends paid and interest earned from investments. In this article, we will touch on the difference between Dividends Tax and tax on interest earned.
What is Dividends Tax?
If you own shares and receive dividends from these shares, you are classified as a shareholder. As a shareholder, you are charged a Dividends Tax of 15% on any dividends paid to you.
A dividend is classified as any amount transferred to you by a South African company relating to a share in that company, irrespective of whether that amount is transferred by way of a distribution or as a consideration for the acquisition of a share in that company.
Dividends Tax becomes payable when a South African resident company or foreign company with shares on the JSE, pays you a dividend. The amount of 20% (raised in Feb 2017 from 15%) is in most cases withheld from the amount you receive by a withholding agent. Therefore, the dividend sum you receive should already have the Dividends Tax applied to it.
It is important to differentiate between a ‘dividend received’ and a ‘payment received’ for interest deriving from an investment. Why? This is important because interest on investments are subject to taxation.
Taxation on Interest
If you earn interest on your investments and the interest is from a source within South Africa, you receive an allocated exemption per year. The exemptions are detailed below according to the tax year:
|Person younger than 65||R23 800||R23 800||R23 800||R23 800||R23 800||R22 800|
|Person 65 and older||R34 500||R34 500||R34 500||R34 500||R34 500||R33 000|
What about Secondary Tax on Companies (STC)?
‘Secondary Tax on Companies’ is a tax that was applied to companies on declaration of dividends. This related to any dividends declared prior to 1 April, 2012.
South African resident companies were liable for STC at a rate of 10% on dividends that were declared on or before 31 March 2012. STC was replaced by Dividends Tax on 1 April 2012.
While the above information applies in the majority of cases, it is always best to consult with a tax practitioner to ensure that you are meeting your tax obligations. For friendly assistance with any tax related queries, contact Dirmeik Consulting on:
Cape Town: 021 421 4444,
Johannesburg: 010 007 3026,
Durban: 031 007 0881