I am uncertain on the interpretation of dividends tax for private companies/directors of private companies, the act and relevant "notes" from interpretations are quite ambiguous. First, it says that all Resident Companies are liable for dividends tax, the
Important:
This answer is based on tax law for the tax year ending 28 February 2020.
Answer:
You are correct, the company declaring (and paying) the dividend has a withholding obligation. It is the beneficial owner of the dividend who is liable to pay the tax. Where the beneficial owner is a RSA (tax) resident company, the dividend is exempt from the dividends tax – see section 64F.
The SARS guide on the dividends actually explains this well.
The reference to ‘constitutes income’ (or “the dividend constitutes income of that person” as it reads in the Act) only applies to a dividend that doesn’t qualify for the section 10(1)(k) of the Income Tax Act exemption. Typically, in respect of services rendered (and in the employee share space). A dividend that qualifies for the section 10(1)(k) exemption will not constitute income.