Who pays dividend tax in South Africa?
Dividends Tax is payable by the beneficial owner of the dividend, but is withheld from the dividend payment and paid to
Personal Income Tax
In South Africa, you are liable to pay income tax if you earn more than: R95 750 and you are younger than 65 years. If you are 65 or older but younger than 75 years old, the tax threshold (i.e. the amount above which income tax becomes payable) is R148 217.
While the U.S. government taxes dividends paid by American companies, it doesn't impose tax withholdings for U.S. residents. In other words, each U.S. investor receives the full dividend amount and is responsible for reporting their annual dividends to the IRS each year and paying taxes accordingly.
How dividends are taxed depends on your income, filing status and whether the dividend is qualified or nonqualified. Qualified dividends are taxed at 0%, 15% or 20% depending on taxable income and filing status. Nonqualified dividends are taxed as income at rates up to 37%.
Dividends received by individuals from South African companies are generally exempt from income tax, but dividends tax at a rate of 20% is withheld by the entities paying the dividends to the individuals.
Dividends are tax exempt if the beneficial owner of the dividend is an SA-resident company, SA-retirement fund or other prescribed exempt person.
Corporate, business, or company tax in South Africa is payable by all registered businesses in the country to the South African Revenue Service (SARS for short). Generally, South African-based businesses are liable to pay South African corporate tax on their worldwide income.
The Page 2 2 Income Tax Act was amended in 1994 to ensure that the President and Deputy President/s pay income tax on remuneration. This amendment was approved by the new government of President Mandela to ensure that the tax laws apply equally to all South African residents.
Thus, Table 24 indicates that, whereas the net tax burden on whites in South Africa is about 20 percent of their respective income, the corresponding ratio in the average industrial country would be about 10½ percent.
Certain nonresident aliens who are in the U.S. for more than 183 days will be subject to capital gains taxes. Nonresident aliens are subject to a dividend tax rate of 30% on dividends paid out by U.S. companies.
How to avoid dividend tax?
You may be able to avoid all income taxes on dividends if your income is low enough to qualify for zero capital gains if you invest in a Roth retirement account or buy dividend stocks in a tax-advantaged education account.
It is taxed accordingly at your usual rate of income tax, but the 'personal savings allowance' can mean all, or a portion of this, is tax free – there's more information on this from the HMRC website here. For funds with less than 60% in fixed income investments, any income will be classed as dividend.
| Dividend Tax Rate, 2022 | ||
|---|---|---|
| Filing Status | 0% Tax Rate | 20% Tax Rate |
| Single | $0 to $41,675 | $459,751 or more |
| Married Filing Jointly | $0 to $83,350 | $517,201 or more |
| Married Filing Separately | $0 to $41,675 | $258,601 or more |
Dividends are taxable regardless of whether you take them in cash or reinvest them in the mutual fund that pays them out.
Pension payments, annuities, and the interest or dividends from your savings and investments are not earnings for Social Security purposes. You may need to pay income tax, but you do not pay Social Security taxes.
Interest from a South African source, earned by any natural person under 65 years of age, up to R23 800 per annum, and persons 65 and older, up to R34 500 per annum, is exempt from income tax.
The sale of shares or investments attract Capital Gains Tax in the same way as the sale of a property. You would add up the amount received for the shares sold (Proceeds) and take off the amount paid for the shares when you bought them (Base Cost). The difference would be the capital gain.
ARE TRUSTS TAXABLE OR EXEMPT? In general, payments of dividends to trusts will be subject to DT and the company paying the dividend (or the regulated intermediary) will withhold the DT from the dividend payable to the trust.
A dividend WHT of 20% applies to any dividend paid by a resident company to a non-resident or by a non-resident company to a non-resident where the shares in respect of which the dividends are paid are listed on a South African exchange.
Dividends are paid out to the owner from after-tax profits. Where salaries reduce the profit before tax, dividends don't. So let's say that you have R100,000 that you want to pay out to the owner, this is how salaries and dividends differ: Salary: The salary will reduce the profit.
How much tax do I pay on interest earned in South Africa?
Individual taxpayers enjoy an annual exemption on all South African interest income they earn, set by SARS every year. This interest exemption has remained unchanged for a number of years and for the 2023 tax year is set at R23 800 for individuals under 65 years old, and R34 500 for individuals 65 years and older.
Foreign dividends received by or accrued to an SA-resident taxpayer are included in income based on a formula and taxed at the normal CIT rate, which results in an effective tax rate of 20%.
Non-residents of South Africa are subject to tax on income derived from a source in South Africa. SA branches of foreign companies are not considered to be separate legal entities for tax purposes, and no tax is withheld on transfers of profits to the head office.
Other not-for-profit organisations (that are not approved PBOs or are not exempted from paying tax elsewhere under Section 10 of the Income Tax Act) are liable for income tax and other taxes and duties on the same basis as ordinary taxpayers.
| President of the Republic of South Africa | |
|---|---|
| First holder | Nelson Mandela |
| Deputy | Deputy President |
| Salary | R 3,900,000 annually (2019) |
| Website | www.thepresidency.gov.za |
