The issue pertaining to whether a trust is liable for dividends tax should a company pay a dividend to the trust as the registered owner of the shares has recently been clarified by SARS. By way of background, dividends tax must be paid by the beneficial owner, the concept being defined as the person that is entitled to the benefit of the dividend attaching to a share.
Author: Nyasha Musviba
Withholding employees' tax in respect of an incentive scheme
The South African Revenue Service (SARS) recently released Binding Private Ruling 117 in which it had to be considered whether, and by whom, employees’ tax had to be withheld in respect of certain share options granted to employees in circumstances where the employer and the person granting the share options are not the same person.
Loans to shareholders and deemed dividends
Draft legislation confirming transition from STC to dividends tax released IN the 2012 Budget Speech delivered by Minister of Finance, Pravin Gordhan, on February 22, it was announced that the taxation of dividends will be increased from the current 10 percent secondary tax on companies (STC) to a 15 percent dividend withholding tax, with effect from April 1, 2012. Draft legislation confirming this proposal has now been released.
Conversion of a public company to a private company
The South African Revenue Service (SARS) has released a number of binding class and private rulings of late. One of the interesting rulings is Binding Class Ruling 033 (BCR 33) which deals with the capital gains tax consequences for a public company upon conversion, in terms of the Companies Act, No 71 of 2008, to a private company.
Dividends tax and trusts
General Traditionally, two types of trust are recognised in our law, namely the bewind trust and the ownership trust. In the case of a bewind trust, the founder transfers ownership of the trust assets to the beneficiary, while the trustee is responsible for the administration of the trust assets. In the case of an ownership trust, the founder transfers ownership of the trust assets to the trustee and the rights of the beneficiary in respect of the trust assets are usually determined by the trust deed. Two subcategories of the ownership trust are recognised. Where the trustee may from time to time exercise his discretion in order to vest the trust assets (income or capital) in the beneficiary, the trust is referred to as a discretionary trust. Where the rights in respect of the trust assets automatically vest in the beneficiary (without the trustee having to exercise a discretion), the Read More …
Dividends tax on dividends in specie paid to non-residents
Mr A is tax resident in the United Kingdom (UK). He owns some shares in X Pty Ltd, a private company incorporated and tax resident in South Africa (SA). On 15 April 2012, X Pty Ltd declares and pays a dividend in specie to its shareholders, including Mr A.
The impact of statutory mergers on current tax legislation (part 2)
by Robert Gad and Janel Strauss We have previously written on the mismatch between the statutory merger provisions in section 113-116 of the new Companies Act 71 of 2008 (“Companies Act”) and the current tax legislation. In part 1 of this article we considered the interplay between statutory merger provisions and the tax rollover relief provisions contained in sections 41 to 47 of the Income Tax Act 58 of 1962 (“ITA”) and explained how a statutory merger transaction may not necessarily qualify for the tax rollover relief. We also considered the implications that the transfer of administrative tax obligations from a target company or companies (“TargetCo”) to the acquiring company or companies (“AcquireCo”) may have on parties entering into an “amalgamation or merger,” as this term is defined in the Companies Act.
Outstanding loans to shareholders and the advent of dividends tax
Companies and their shareholders have been anticipating the changeover from Secondary Tax on Companies (STC) to Dividends Tax for quite some time now, the effective date being 1 April 2012. There are various transitional aspects to consider.
company mergers and tax (part 1)
by Robert Gad and Janel Strauss In a series of articles we will consider the relationship between the merger and acquisition rules in the new Companies Act 71 of 2008 (“Companies Act”) read with the relevant provisions of the Income Tax Act 58 of 1962 (“ITA”) and of the new Tax Administration Bill. In this first article we focus on the application of the various tax “rollover” rules to merger and acquisition transactions, in particular with regards to the newly introduced statutory merger. We also consider the general ambit of the new statutory merger and its impact on the administrative tax obligations that the parties involved have in terms of the ITA.
Dividends ceded to companies not exempt from income tax
Dividends are generally exempt from income tax, subject to the exceptions contained in s10(1)(k)(i) of the Income Tax Act, No 58 of 1962 (the Act). The Taxation Laws Amendment Act, No 24 of 2011 (the TLAA) introduced a new exception to the dividend exemption, namely ceded dividends.