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.
Category: Dividend Tax
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.
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.
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.
Dividends tax: questions and answers
The dividends tax, a new form of tax on dividends paid by companies, comes into effect in South Africa soon. Here are some practical questions and answers about the new tax.
Dividend cessions
The antecedent divestment of a right to a dividend has been a feature of our tax law for longer than I have been in practice. See Hiddingh v CIR 1941 AD 111. The Government are obviously
The perils of share incentive schemes for employers
A lot of focus has been placed on the tax implications that flow from an employee’s participation in share incentive schemes. However, employers need to be aware of the potential tax consequences that may arise where such schemes are not administered in accordance with the provisions of Income Tax Act, Act 58 of 1962 (“the Act”).
Closure of dividend schemes
In a long awaited announcement it was indicated by the Minister of Finance that there are several dividend schemes that undermine the tax base. One method makes use of a scenario where the owner of shares cedes the rights to dividends to a third party in return for a payment. The benefit that a third party receives, is not only found in the exempt dividend, but also an STC credit. Another scheme involves the receipt of dividends from shares in which the taxpayer does not have any meaningful economic risk,
Dividends now taxable in certain share incentive schemes
Companies must ensure that dividends declared to their employees after 1 January 2011 as part of their employee share incentive schemes are still exempt from income tax otherwise companies and their employees may be in for a surprise.