If a gross dividend is declared of say R100000 per share, assuming 1 share, what would the dividend tax amount be? The understanding being that the tax is the responsibility of the recipient thus the 20% is already included in the declared amount. SARS wh
Important:
This answer is based on tax law for the tax year ending 28 February 2020.
Answer:
The principle, see section 64EA(a) of the Income Tax Act, is that “to the extent that the dividend does not consist of a distribution of an asset in specie” the “beneficial owner of a dividend … is liable for the dividends tax in respect of that dividend.”
Because of section 64G, “a company that declares and pays a dividend must withhold an amount of dividends tax from that payment” at the rate of 20%. In terms of section 64E(6)(a), where “a company that makes payment of a dividend to any person withholds an amount of dividends tax from that payment in terms of section 64G (1) … that company or regulated intermediary must, for the purposes of this Part, be deemed to have paid the amount so withheld to that person.”
In terms of section 64K(1)(a), if, in terms of section 64EA(a), “a beneficial owner is liable for any amount of dividends tax in respect of a dividend, that beneficial owner must pay that amount to the Commissioner … unless the tax has been paid by any other person.” It would then only be where section 64K(1)(a) applies that the tax can be seen as ‘being included in the amount’.
We see, in the SARS guide to the declaration of dividends tax via efiling that the ‘dividend value’ will be auto calculated once the number of shares and dividend per share has been completed. This should not result in the amount of withheld, and payable, by the company being more than 20% of the gross amount of the dividend. You are welcome to send us detail, by way of screen shots, if it does. We can then look into the matter.