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Dividends tax returns

With effect from 1 April 2012, dividends tax was introduced to replace the then “secondary tax on companies” (or “STC”). The tax is currently levied at 20%. The dividends tax regime brought with it a requirement for dividends tax returns to be submitted periodically (if even no liability for dividends tax arose) and we wish to bring to our clients’ attention when this would be required.

From 1 April 2012, dividends tax returns were required for all taxpayers who paid a dividend.[1] Although not initially required, but the Income Tax Act was subsequently amended retrospectively to provide therefor. Returns were, from that date, not required for dividends received though. However, through various amendments being introduced, the scope of the dividends tax compliance regime was broadened significantly. With effect from 21 January 2015, dividends tax returns were also made compulsory for all dividends tax exempt (or partially exempt) dividends received.[2] The most significant implication flowing out of this amendment is that from this date, all South African companies receiving dividends from either South African companies, or from dual-listed foreign companies (to the extent that the dividend from the foreign company did not comprise a dividend in specie). The requirement for dividends received from dual-listed foreign companies to also carry with it the requirement for a return to be submitted was however removed a year later, with effect from 18 January 2016.

Where dividends are paid by a company, or dividends tax exempt dividends are received by any person from South African companies, the relevant returns (the DTR01 and/or DTR02 forms) must be submitted to SARS by the last day of the month following the month during which the dividends in question were received or paid. In those instances, where a dividends tax payment is also required, payment of the relevant amount of tax is to be effected by the same date too.[3]

Although the non-submission of dividends tax returns at present to not carry any administrative non-compliance penalties, we always encourage our clients to ensure that they are fully compliant with relevant requirements prescribed by tax statutes. We would therefore encourage our clients to revisit their dividends history and ensure that their records and returns are up to date and as required by the Income Tax Act.

[1] Section 64K(1)(d) of the Income Tax Act, 58 of 1962 (“the Income Tax Act”), as it read at the time.

[2] Section 64K(1A) of the Income Tax Act. Dividends received from regulated “tax free investment” accounts do not require a return to be submitted.

[3] Section 64K(1)(a) to (c)

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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