Dividends Tax or Anti-Avoidance?

Author: Ian Statham, Corporate Tax Partner and Keelen Snyders,Tax Trainee at BDO Tax Services

The Minister of Finance, in his 2017 budget speech, announced an increase in the top marginal rate to 45% for personal income tax. This will apply to individuals earning a taxable income of more than R1,5m per annum. The budget highlighted that this will impact 100 000 taxpayers and contribute almost R10bn to the fiscus.

Dividend withholding tax will be increased from 15% to 20% which will serve as an anti-avoidance measure. Dividend withholding tax is levied on shareholders and replaced the Secondary Tax on Companies (STC) which was levied on companies at a rate of 12.5%. This change seeks to limit tax arbitration between salary income and dividend income.

Taxpayers earning less than R1,5m taxable income per annum, will likely choose to remain on a salaried package and not opt to receive dividends. This could also imply that sole proprietors or small and medium-sized enterprises (SMEs) would rather elect to retain profits in the company for other investment opportunities rather than declaring dividends.



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BDO International:

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BDO in South Africa is the South African member firm of BDO International. BDO is the brand name for the BDO network and for each of the BDO member firms. The global BDO network provides audit, tax and advisory services in 157 countries, with over 64 300 people working out of 1,400 offices worldwide. Service provision within the international BDO network of independent member firms (the BDO network) is coordinated by Brussels Worldwide Services BVBA, a limited liability company incorporated in Belgium with its statutory seat in Brussels.


Issued by:

Lee Moteetee

Ogilvy Public Relations


On behalf of:

BDO South Africa

Genea Frade

National Marketing & Communications Manager


Lee Moteetee

Senior Account Manager

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