Dividends withholding tax arrives on time

In a government gazette, Treasury has confirmed that the promised dividends withholding tax is to come into operation on 1 April 2012.    This is concurrent with the Taxation Laws Amendment Bill, currently before president Zuma for assent, calling for the replacement with new regulations of the secondary tax on companies.

The dividends withholding tax will place a 10% tax on dividends declared and paid by domestic companies, also applying to foreign companies listed on the JSE.    Companies must now pay shareholders the gross dividend minus the withholding tax, a number of exemptions applying.

Comment has been to note that tax liability shifts away from the shareholder, giving Treasury a greater chance to increase its receipts. A “withholding” system is provided for, hence the name.

Dividends for tax purposes will not apply to (inter alia) government bodies, micro-businesses where revenue is less than R200,000, where the beneficiary is a “resident company” or where the dividend is paid by a foreign company listed on the JSE to a non-resident beneficiary.

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