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Dividend withholding tax

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SimonPB
Valued Contributor
coming in at 15%, not the expected 10% ..
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30 REPLIES 30
superstar
Regular Contributor
That was shock for me as well
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CLS
Occasional Contributor
How does that effect the reciever of dividends!?
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Quakedog
Super Contributor
AHHHHHHHH!! What is the impact please????
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Not applicable
And CGT increasing from 25% to 33%? Did I hear that right?
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superstar
Regular Contributor
We can only hope that companies will pay out more on dividends now that they are not taxed but to answer your question dividends will be taxed on investors hand but will be withheld by the company paying such divs.
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superstar
Regular Contributor
Yes you heard perfectly Jezebel.
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SimonPB
Valued Contributor
yes, but CGT is 33.3% of your tax rate, so max CGT for individual is 13.3% ..
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SimonPB
Valued Contributor
companies stop paying STC tax (was 10%) and you now pay 15% on divs received .. effective 1 April ..
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SimonPB
Valued Contributor
but companies where planning for a 10% new div tax, not 15% .. me thinks my effective divs just went down ..
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Not applicable
Well, all I can say is that he shouldn't have said in his introduction that he wanted to encourage personal savings by 2014 when he knew he was going to slam us for the next two years. And the price of ciggies! And wine!
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G_V_V
Super Contributor
Anyone know what the interest exemption threshold amount is for 2012/2013?
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louisg
Super Contributor
As a dividend investor, this is how I see it. Under STC I got R100 and the co. paid R10 STC. Cost to co. = R110. If the co. wants to keep it's cost to co. at R110 then it pays R11 div. tax (at initial proposal of 10%) and I get R99. Now at 15% div. tax, co. pays (on my behalf)tax of R16,50 and I get R93,50. So effectively, taxes have gone from 10% (10/R100) to 11% (11/R99) to now 17.65% (16.5/R93,50). It appears that the minister has his own "invisible hand".
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louisg
Super Contributor
The less cynical will calculate it as 9,09% (R10/R110) to 10% (R11/R110) to 15% (R16.5/R110). It's still a MASSIVE 65% increase (media reporting 50%) in div. tax. OUCH!!!
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G_V_V
Super Contributor
Not good for jobs if companies have to increase the dividend to R118 so as to compete to protect share price.
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Rams
Super Contributor
so the investor who is in the lowest tax bracket benefits? And what about the Buffet Rule...is it law yet?
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louisg
Super Contributor
From 1 April 2012 co.'s will stop paying STC. What effect will this have on their HEPS as there is no longer a STC expense to deduct. How would this effect PE ratios(or earnings yields)and dividend yields? I would think that HEPS gets a "once off" kicker and therefore PE's come down. The div. yield should also get a kicker and increase. As GVV says, the co. must now pay a R118 div. to match the "clean" R100 they paid to the investor who has to pay the 15% div. tax to protect the share price. That's a 18% div. "increase" on its own. Thoughts? Are my deductions correct?
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jo_soap
Contributor
Surely there is a huge advantage to entities that are exempt from dividend withholding tax (such as pension funds) since before the company was paying STC (10%) and now nothing. (The dividend withholding tax paid over to SARS will be claimed back by the exempt pension fund). So people who invest primarily in pension funds gain 10% while individuals investing directly loose 5%? Am I right?
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SimonPB
Valued Contributor
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kwagga
Super Contributor
This is redistribution of wealth on a grand scale. I can see my standard of living in retirement 27 years from now already dwindling. I hate living in this country. They want everyone to save, but taking the power from the individual on the streets hands and forcing us to invest in more pension funds (as opposed to self-investment in dividend driven shares), thus paying exuberant performance fees to every man and his dog in investment companies. Nice going you f$%^&rs.
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