Dividends tax - 9 months down the line

• Jurisdiction: South Africa
• Author: Michael Rudnicki
• DOI: 10.10520/EJC174300
• Published date: 01 December 2012
• Date: 01 December 2012
• Pages: 9-15
• Published By: Siber Ink

9

© Siber ink

Dividends Tax

9 MONTHS DOWN THE LINE

MICHAEL RUDNICKI

ABSTRACT

Now that the new dividend tax is in full swing, and after further amend-

ments have been tabled in the Taxation Laws Amendment Bill B34 of 2012,

an article on some of the relevant aspects of the legislation and practical

application needs to be written.

The concept of ‘beneficial owner’ is a difficult one. The term is defined

in the Act but is subject to interpretation. The beneficial owner may be the

person other than the registered shareholder. The relevance of the identity

of the beneficial owner is important because this is the person liable for the

dividend tax if payment is not withheld by the company declaring or paying

the dividend.

Many draft versions of the dividend tax legislation have attempted to

clarify the timing of the dividend tax trigger. The legislation has settled with

a deemed ‘payment’ date which differentiates between listed and unlisted

companies.

STC credits are available for utilisation up until dividends declared on 1

April 2015. The rules relating to the utilisation of the STC credits are relatively

complex and are dealt with by practical example.

The rules relating to related-party interest-free loans being the subject of a

dividend tax are vastly different to the STC rules associated with related-party

interest-free loans. The differentiating feature is that the tax is calculated on a

deemed market-related interest rate and not on the value of the loan.

The final part of the article deals with the concept of a ‘regulated inter-

mediary’ (‘RI’). This classification of a dividend recipient is exempt from the

dividend tax. The RI is also the entity liable to withhold the dividend tax.

Accordingly, the identification of an RI is important for the declarer and payer

of the dividend.

Introduction

Now that the Dividends Tax legislation is in full swing,1 coupled with

numerous amendments tabled before Parliament in 2012,2 it is time to

address some practical examples to illustrate the impact of the provisions

relating to the tax on dividends (‘dividend tax’ or ‘DWT’).

1

Effective 1 April 2012: Government Notice 1073 in Government Gazette 34873 of 20

December 2011.

2

Taxation Laws Amendment Bill B34 of 2012, expected to be promulgated in

December 2012 (’2012 TLAB’).