Dividends Tax s64

Question 1

Section 64D – definitions

Answer 1

• The s64D definition of “dividend” extends the s1 definition to include the s31(1) deemed dividends (which were excluded from the s1 definition),
• as well as foreign dividends if the share is listed and to the extent it is not a dividend in specie.

Question 2

Section 64E – Levying of dividends tax

Answer 2

• Dividends tax is levied at 20% unless the Minister announces a change in the rate.
• Dividends tax is levied on the dividend “paid”
  A dividend is deemed to be “paid” on:
  • For listed companies, the date paid
  • For unlisted companies and dividends in specie, the earlier of the date paid or due and
  payable

The amount of a dividend in specie is:
• If it is a financial instrument (e.g. a government bond), the ruling price on the date before it is deemed to be paid
• If it is any other asset, the market value on the date it is deemed to be paid

If a debt is owed to a company
- by a person who is not a company
- and is a resident
- and is a connected person to the company
- and it is granted because of their shareholding in the company,
The difference between the market-related interest and the actual interest charged is deemed to be a dividend in specie

Dividends paid in a foreign currency are translated at the spot rate on the date deemed to be paid.

Question 3

Section 64EA – Liability for tax

Answer 3

The liability rests with the beneficial owner of the dividend (unless its a distribution in specie).

Notwithstanding the above, s64K states that the beneficial owner does not have to pay the tax over to SARS if it has been paid by any other person

Question 4

Section 64G – withholding of dividends tax by company

Answer 4

The company that declares and pays the dividend must withhold the amount of dividends tax from the payment calculated i.t.o s64E except:

• if dividend in specie
• or to a regulated intermediary

Question 5

s64H - withholding of dividends tax by a Regulated Intermediary

Answer 5

If the shares are held by a regulated intermediary, no dividends tax is withheld by the company paying the dividend.

Question 6

s64F - Exemptions (5)

1)(a), (1)(j), (1)(l), (1)(o), (2

Answer 6

(1) (a) - company which is a resident
(1) (j) - person is not a resident and dividend is paid by a foreign company in respect of a listed share in SA to the extent it is not in specie.
(1) (l) - any person to the extent it consitutes income [ie. doesnt get s10(1)(k)]
(1) (o) - dividends exempt from dividends tax if held as s12T investment
(2) - paid by a REIT and received on or before 1 Jan 2014 to the extent it is not in specie

Question 7

Section 64K – payment and recovery of tax

Answer 7

Dividends tax is due to SARS at the end of the month after the month in which the dividend is paid.

Question 8

s64F - Exemptions in respect of dividends in specie

Answer 8

• A dividend in specie is exempt from dividends tax if it would have been exempt under s64F if it had been a cash dividend.
• A dividend in specie is also exempt from dividends tax if the recipient is part of the same group of companies as defined in s41

Question 9

Section 64N – rebate of foreign taxes on dividends

Answer 9

If a dividend is subject to foreign tax (which would happen if a foreign company were listed on the JSE, and paid a dividend to a SA resident shareholder), the SA dividends tax is reduced by the foreign tax, limited to the SA dividends tax.

The foreign tax is converted at the same rate as the dividend.