A spokesman from the fiscus this morning declared that the DWT is very much in line with international trends, stating that 15% is measured against the "average" from abroad. He failed to say which countries were part of the averageing calculation. (No one on the discussion panel questioned him on that either!) This is such an unfulfilling point of reference - like: the petrol price in Indonesia has gone up by 12%, the RSA settles in on 11,5% - be happy! Fact is that the tax has increased by 50%. If companies play a fair game, they would now declare the full cost of the former dividend dispensation to shareholders, (110) and after the DWT a shareholder will be worse off by 6,5%, IF the dividend is maintained unaltered at the former 100. Those with calculaters in the brain would be in a better position to extrapolate at which rate a company should develop its dividend policy to remain attractive in the field. Another perpective: the normal reaction to an increase in taxes is to say: now the gross figure must be increased (= salaries should go up to cover for the increased onslaught from this and that.) Sometimes the fiscus NEEDS to decrease the money in the hands of those blessed with earnings of some variety and pass it on to all those sacred projects. Now, what realistic justification exists to just increase the individual's income to counter the effect taxes have on disposable income?
Private companies with fairly large amounts of retained earnings can still pay the 10% STC end March(stc due month after div declared), meaning a book entry leaving the dividends in the form of loan accounts for working capital.Does that now mean that dividends declared in march attract 15% and terms of payment same as previous, ie 30days after declaration?
Following on... In a modified fashion: those using the eToll has to cough up a fee for SANRAL expenditure (those who do not use eToll coughs up anyway through the allocation of some 5 plus 12 zeroes in the budget). Cosatu does not like it - the man in the street suffers enough. Nobody likes it, even though regular traveller's monthly contribution is capped at R550. BUT, no-one takes into account that the regular user save R700 in monthly fuel expenses (not to mention the savings on wear and tear of a vehicle) BECAUSE of the upgraded Gauteng roads network. Catch 22 - and something not to be assessed without having regard for the various views on this matter... Regards
I think depending on your circumstances it may be better to transfer your shares to your own cc creating a loan account and possible capital gains?? and divs into cc will be tax free until you distribute.Of course cc will need to have expenses too offset div income-could be an option worth investigating with a professional tax advisor.I am sure each individual will be different.It does suggest cc should set up it's own pension or provident fund and take advantage of tax free divs in there as well-just some quick thoughts
So will they declare before or after 1 April. Who do they accommodate? The private investor so he only pays 10% or those shareholders who would not have to pay the div. tax after 1 April . Perhaps they will be able to accommodate both. Time will tell.
My understanding is that one can then distribute dividends tax free against the loan account. Once the loan account is zero one starts paying the 15 % DWT. The downside of a cc is that CGT is much higher and no CGT exemption. One also has to consider the costs of selling the shares and buying them back into the cc. These costs will include CGT, transactional and a possible unfavorable timing issue. Any other issues to be considered?
you coudl transfer teh shares into cc and just pay STT at 0.25% .. an the cc effectively gets a tax free loan fromn SARS as long as yu don;t with draw, tax only paid when the money leaves the cc .. notwithstanding I just a tax payer, not a tax expert ..
Your calcs are correct, and as a company as we are sitting with a fairly large amount in retained earnings,.What it means for every R1m dividend declared the cost to the company is R1.1, under DWT at the same cost to the company I'd be R65000 (taxfee) out of pocket.To recoup that amount I'd have to invest R1mil at 6.5% to compensate for the saving in early declaration of the dividend under the old law. The decision we therefore are taking is declaring a dividend equal to what we would normally have paid for a two year period, but will retain this in a loan account and paid out quarterly over the next two years. I think many smaller companies will adopt this approach if their cash flow and retained earnings allow it.