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My shares and tax
Know your facts
Shares attract two kinds of returns, capital growth (appreciation) and dividends . Based on current South African tax laws, dividends are subject to Dividend Withholding Tax, and capital growth is subject to Capital Gains Tax .
If you hold a share as a long-term investment (the time period of holding the share is taken into account), any capital growth (appreciation) upon disposal will be subject to Capital Gains Tax. On the other hand, if you were to buy and sell shares many times at short intervals, you may be considered as holding shares as trading stock and any capital gain will be subject to Income Tax . Income Tax is higher than Capital Gains Tax.
Interest income vs. Dividend income
Dividends Tax (DT) became effective 1 April 2012. DT is a tax imposed on shareholders at a rate of 15% on receipt of dividends, whereas Secondary tax on Companies (STC) is a tax imposed on companies (at a rate of 10%) on the declaration of dividends.
DT is categorised as a withholding tax, as the tax is withheld and paid to SARS by the company paying the dividend or by a regulated intermediary (i.e. a withholding agent interposed between the company paying the dividend and the beneficial owner, and not by the person liable for the tax, i.e. the beneficial owner of the dividend. Dividend declarations need to be submitted on time by the beneficial owner of the dividend to the company paying the dividend to determine the correct withholding tax amounts.
Foreign Dividends received:
As from 1 April 2012, foreign dividends received by individuals from foreign companies that are listed on the JSE are taxable at a maximum rate of 15%, but exempt if the individual is a non resident. No deductions are allowed for expenses incurred to produce foreign dividends.
Example:
The taxpayer receives dividends of R50 000 from a foreign company also listed on the JSE.
| Foreign cash dividend accrued | R50 000 |
| DT payable | (R 7500) |
| Net dividend paid | R 42 500 |
| Foreign dividends paid from foreign companies not listed on the JSE fall outside the scope of dividends withholding tax in SA, However, on assessment, the SA resident must include this amount when declaring his world wide income to SARS. | |
Interest received:
Example:
The SA taxpayer receives interest of R50 000 from his investment account.
His taxable amount:
| Tax year ended | 2013 # |
| Gross income (local interest source code 4201) | R50 000 |
| Less: Exemption | (R22 800) |
| Taxable income (amount to be taxed on assessment) | R27 200 |
| The taxpayer must report the full gross interest received. The exemption will be calculated by SARS on assessment | |
| From 1 March 2013, the interest exemption will increase from R22 800 to R23 800 | |
Local dividend received:
If an SA resident receives a cash dividend from a local company, the dividend will attract Dividend Tax (DT) at 15% subject to exemptions and the relevant declarations and undertakings being submitted in terms of the Income Tax Act.
Example:
Taxpayer receives a dividend of R50 000 from a South African company during the tax year ended Feb 2013.
| Cash dividend accrued | R50 000 |
| DT withheld | (R7 500) |
| Net dividend paid | R42 500 |
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