Dividends to be taxed ?

[pg]

IF I am reading correctly (moneyweb) both pref and ord share divs will now be taxed in our hands ?

[pg]

It appears it will be a 10% tax in the hands of the shareholders , but then STC from a company point of view will be done away with .

[SimonPB]

link please. This is almost 100% unlikely, he has more money then he can spend, so why tax even more?

[#4]

doesnt look like an increase in tax its just instead of the company paying the tax on the div declared it will be paid to the shareholder who will pay the tax. effectivly there will be a drop as instead of a 12.5% STC there will be a 10% capital gain...

[SimonPB]

hmmm, so a small cut BUT shifting the burden to me.

[#6]

will it still work in a cycle... so divs rec vs divs paid netted on taxed on diff ???

[john_1]

This is very bad news, bad for many reasons but will mean that as a share houlder I will expect less divs and more capital growth from the share I invest in. This will cause an outflow of ( retired money which was up till now tax free. I expect the market to reflect this negativity.

[SimonPB]

John, I don't agree. The net effect is actually less tax for the share holder and that has to be positive. Sure it does add to my paper workl, but SFM gives me a nice orint out of div income so actually no real sweat.

Last point, to my mind this is the beginning of the end for tax on divs, in a decade or so it'll be zero. So another positive.

[john_1]

Or in a decade from now it will be higher than the current rate. wealth tax is a favourite political tool.

[john_1]

The other major implication is that Income from DIV's will now be added to your over all income moving us into higher tax brackets., The implication of this is greater than the 2% saving in secondry tax. If you have no income other than divs you currently pay no tax ( other than the secondry tax of 12% now you go to paying 40% or more, where is the good in that.

[Maddog]

If you dont need the divs to survive you can always pump it into a additional RA and then use it as a tax deduction

[vusi_1]

Just to clear a few things ... Main reason for getting rid of STC is so that we are comparable to overseas countries ,who do not levy STC , but tax individuals on div received .(Effectively company tax will be much less as there will be no STC in the near future)... However the Individual will now carry the tax on the Div...Remember that as an Individual you will have NO tax credits(ie pay no div so cant reduce tax on div that need to pay)like Co were able at the momment... This is actually a method of collecting more Tax .. Only thing that will change for the following year is that companies will pay 10% STC instead of 12.5% ..Individuals will not be taxed as yet ...So we can expect higher Dividends for the following year or two ... Rules on calculating STC will remain the same , ie Div Cycles , paid less received etc ...

[john_1]

If I wanted to waste my money I would do that thanks, How many RA companies do you know are stuggling.. now how many of there clients retire rich.... you do the maths. Why give your money to sombody else who is goiung to charge a fee to do what I already do which is activly manage my wealth in the JSE>

[john_1]

This is how I see it now ; Profits less 29% less 12.5 % = tax free to me which has no bearing on my other income or tax rate. good In the future" profit less 29% = increase of 2% div is now tax at 40% plus.. = less money in hand = less money to compound very very bad.

[vusi_1]

Yes the individual will be Skrewed once again ... But if Co are smart , they should pay very little in Div are share price will rise rapidly in terms of Capital Gain ... Only problem is that a lot of pension fund require such div for there members ... So for a Investment Co it is worse ...Reason .. They would need to pay tax on div ... and Members would also be require to pay Tax on Div ... If this is the case many of these Pension Houses are going to be in the Brown stuff ...

[john_1]

The key here is this if you own 100 shares and pay little or no tax, no problem, but if you have no income other than that from divs you now will have 40% less income after tax. That is very bad for the markets and for business owners . I have had a chat with a mate worth over 100 million he was thinking of coming to live here, a great business mind ..now will NOT be coming. SA is going to be poorer for it.

[john_1]

Sorry to be going on but... This will now make our Markets more speculative and the use of futures much more prevelent,( Buy JSE and Brokerage firms ) as the div is priced in and it now makes no diffrence if you hold out for a div or not... no tax benifits to holding the underlying share.

[#18]

Secondary tax on companies has been reduced from 12,5% to 10%. Eventually this will be replaced by a tax on dividends in the hands of the shareholders at the same 10% rate. Trevor did not say that dividends would be added to income.So the way i see it is that right now you will be 2.5% better off and in the furure there will be little difference apart from paperwork.

[john_1]

Did he say div's will be taxed or did he say they will be taxed at 10% I think that will make a huge diffrence?

[#20]

Here is a copy of the relevant part of the speech Most countries have a dividend tax at the shareholder level. We have a secondary tax on companies collected directly from a few thousand companies as opposed to millions of shareholders. To further improve the transparency and equity of the tax system, we are proposing that it be phased out and replaced with a dividend tax at shareholder level. This reform would consist of two phases. We propose reducing the rate from 12,5 per cent to 10 per cent and that the base be redefined to apply to all distributions. This will come into effect on 1 October 2007, except for standard anti-avoidance measures that will commence on conclusion of this speech. The conversion to a dividend tax collected at the shareholder level will be completed by the end of 2008 subject to the renegotiation of a number of international tax treaties. The taxation of gains realised from the sale of shares is presently subject to ambiguous procedural treatment. In order to provide equitable treatment and certainty for both taxpayers and SARS, all shares disposed of after three years will trigger a capital gains tax event.