FAQ – Capital gains tax on dividends

A taxpayer, who receives a dividend payment each month, is not sure how to reflect capital gains on her tax return. She writes:

I have an investment that pays me a dividend of R6 000 a month. I have no other assets.

I rent a place to stay and do not have a job, so I receive no other income.

How would I reflect the capital gains on my Sars return? Under primary residence? Do I have to pay tax on the gains?

Marc Sevitz of TaxTim responds:

Your dividends earned each month will be subject to a 15% withholding tax before the amount is paid out to you, if they are received from a local company.

This is a final tax and you do not need to pay any further tax on this amount.

When your shares are sold and you make a capital gain or loss, the total amount for the year from these transactions will be summarised and your investment house will send you an IT3c showing this summary.

This is the document you would use to complete your tax return by showing the selling price of the shares under proceeds and the cost of the shares under base cost under the Local Capital Gains section of the ITR12.

You would not record this under Primary Residence.

Your first R30 000 of gains is tax free and thereafter your capital gains are subject to a maximum tax rate of 13.3%.