SOUTH AFRICA INTRODUCES DIVIDENDS TAX FROM 1 APRIL 2012

On 23 February 2011, South Africa’s Minister of Finance presented the Budget for 2011- 2012, which contains a broad range of proposed changes to the corporate and personal income tax rules, social contributions and
indirect taxes.

According to the Budget, the corporate tax rate will
remain unchanged at 28% and the secondary tax
imposed on companies rate will remain at 10%.

Dividends tax of 10%
However, a dividends tax will be introduced with effect from 1 April 2012. From that date the secondary tax on companies will be repealed and replaced with a final withholding of 10% imposed on the shareholder rather than the company.

Prior to the Budget being presented, there was much uncertainty regarding the effective date of the new
dividend tax. This has been dependent upon the
renegotiation of a number of double tax treaties which provided for a zero withholding tax in respect of dividends flowing from South Africa. The renegotiation was aimed at ensuring that South Africa will in future be entitled to a 5% withholding tax on dividends flowing offshore.


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