Dividends tax is a tax levied on the shareholder at a rate of 20% on dividends paid. However, where a dividend in specie is paid, dividends tax is a tax levied on the company declaring the dividend. Dividends tax is normally withheld by the company paying the dividend and is payable at the end of the month following the month in which the dividend was paid. The repayment of contributed tax capital by a company would be regarded as a return of capital and not subject to dividends tax.

Dividends tax exemptions

A dividend is exempt from dividends tax if the dividend is not a dividend in specie and the beneficial owner is:

• A SA company
• The Government and various quasi government institutions
• Public Benefit Organisations
• Environmental rehabilitation trusts
• Pension, provident, similar funds and medical schemes
• A shareholder in a registered micro business (only the first R200 000 of dividends paid during a particular year of assessment)
• A non-resident and the dividend is paid by a South African Listed non-resident company

Where the dividend comprises of a dividend in specie, the following exemptions are applicable:

• The same exemptions as above subject to the beneficial owner submitting a declaration and written undertaking
• Where the beneficial owner forms part of the same group of companies

Loans to connected persons

Dividends tax will be calculated as 20% of the difference between the official rate of interest in respect of the debt and the amount of interest payable in respect of the debt. Where the official rate of interest on the debt does not exceed the actual interest payable on the debt, the value of the deemed dividend is deemed to be nil. Dividends tax on a loan to a connected person is regarding is a dividend in specie and as such the liability of the company and not the shareholder.