- The maximum rate of tax for certain oil and gas profits will reduce from 5% to 0% (as under Secondary Tax on Companies (STC))
- New rules will apply for listed and unlisted companies as to the date a dividend is deemed to be paid. For listed companies, tax is now triggered by the actual payment only, whereas for unlisted companies the dividends tax is still triggered when the dividend is paid or becomes due and payable (whichever is earlier). For dividends in specie the same rules apply as for unlisted companies.
- New valuation rules for distributions of assets in specie apply. Where an asset is a financial instrument listed on a recognised stock exchange, the ruling price on the day before the dividend is deemed to be paid will apply. For any other assets the market value of the asset on the day before the dividend is deemed to be paid will apply.
- Deemed dividends as a result of a debt owing to the company by a connected person are deemed to be dividends in specie and the tax has therefore to be paid by the company and not the beneficial owner.
- Anti-avoidance provisions covering certain dividend cessions, share borrowing and share re-sales were added.
The following changes apply to the use of Secondary Tax Credits credits:
- Where an error is made in claiming an STC credit the liability for the shortfall of dividends tax as a result thereof falls on the company and not the beneficial owner.
- The following dividends do not qualify in calculating the STC credit:
- Dividends which had to be disregarded in calculating the “net amount” under STC
- Foreign dividends
- The carry forward period was reduced from five (5) to three (3) years (i.e. all remaining STC credits expire on 1 April 2015)
- A dividends tax return will be required with every dividend payment (and no longer only if tax is payable) and/or the receipt of a dividend which was exempt
- Late rebate claims can now result in refunds
- In terms of rebates the withholding agent needs to have proof of the foreign taxes paid before it may reduce the amount it withholds.
Further to previous communiques regarding trade testing currently in progress, SARS would like to advise that the due date for Dividends Tax Legal Changes data submissions is effective from 1 May 2014.
Trade testing concluded on 12 April 2014 and provides an opportunity to prepare your systems for electronic submissions through one of the following channels:
- Connect:Direct™: suitable for bulk submissions (more than 50 000 lines of third party data)
- HTTPS: suitable for submissions up to 50 000 lines
This new data platform was launched on 26 April 2014.
What is Dividends Tax?
- South African tax resident company; or
- Foreign Company whose shares are listed on the JSE.
- Dividend payments by headquarter companies are not subject to Dividends Tax.
- align South Africa with the international norm where the recipient of the dividend, not the company paying it, is liable for the tax (South Africa was one of a few countries with a corporate level tax on dividends, such as STC)
- make South Africa a more attractive destination for international investment by eliminating the perception of a higher corporate tax rate (STC is an extra corporate tax) coupled with lower accounting profits (STC had to be accounted for in the Statement of Comprehensive Income (Income Statement))