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Dividends to be taxed ?

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Not applicable
Trader, does the last sentence means that shares held for shorter periods than three years will not attract capital gains tax but just normal tax and after 3 years not normal tax but capital gains tax only?
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vusi_1
Contributor
Before the Budget SEC 9B of the 8th Schedule says that all share held longer than 5 years are deemed to be Capital in nature at hence you pay CGT .If dispose less before 5 years , taxed under income tax act hence normal tax .. So in budget , period has been reduced to 3 yrs ..
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Not applicable
It is now quite clear how a disposal of a share will be treated after three years. Before three years is another story and it does not follow that normal tax is a certainty.This still remains a grey area with primary intent deciding how a disposal of a share will be treated. To me primary intent = grey area
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barry_1
Super Contributor
John i agree entirely,i'll be selling a great number of my shares before LDT and expect the capital gains to make up the amount which now every body is going to be taxed as a TRADER unless they keep an individual share for three years.What a calamity!This will have a negative effect all round.
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Buck
Occasional Contributor
The way I understand this is that the Divs will be taxed at source, thus the company concerned will deduct 10% of the dividend value and remit to SARS. Maybe I'm wrong, so appreciate clarification. But what of Preffies, do they fall under the same ambit as dividends on Ordinary shares? If so, there goes the widows and orphans fund that conservatively return 7 to 8% tax free.
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Not applicable
I think a most preference shares have cluases such as this one I found on the IPLP placement: "Change in Tax Clause: If there is any amendment or amendments to the Income Tax Act that results in the Preference Dividends becoming a deductible expense for the Issuer and taxable in the hands of any Preference Shareholders, then, in respect of the Preference Dividend Period commencing after the introduction of such change and thereafter, the Preference Dividend Rate will be increased by the Issuer."
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Buck
Occasional Contributor
Tks Mboy, so in effect, preffies will remain status quo returning the 70%, or whatever, of prime. Maybe there's an opportunity here, I see many of the prefs are trading behind their original listing price all of a sudden. Possibly holders of preffies are expecting 10% less on their divvies and are thus getting out.
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Runbird
Contributor
Div's are currently taxed via STC at 12.5%. This will reduce in October to 10%, meaning larger dividends will probably be declared. That's good news! After that, it will eventually be replaced by a withholding tax at shareholder level, also at the STC rate (10%). This means it will not form part of income, but it will be paid to the shareholders after tax, as the company will retain the tax and remit to SARS. So, in effect all companies will act as SARS agents, collecting tax for them. This is still good news as the overall tax will be less, and it makes it clearer to foreign investors, many of who did not understand STC (I think Hong Kong is the only other country in the world with STC). So we should see more foreign investment and that should push the market up. So, it's all good news, John...
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john_1
Super Contributor
Thank you Runbird, I thank you for clearing that up. Lets see how this works out.
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Shamus
Occasional Contributor
See SARS web site www.sars.gov.za for STC explanatory note (link on home page). It seems Runbird is correct and that companies will deduct a 10% withholding tax on dividends on behalf of shareholders from 2008 effectively acting as collection agent for SARS. Will have to wait until next years budget for more clarification?
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SimonPB
Valued Contributor
so net result is STC will be easier for co's and cheaper for us.
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vusi_1
Contributor
I dont agree ...In future position overall will be Higher tax collection for SARS ...Rules when cal STC (Paid by Co to SARS)Is Div Paid out to Shareholder less Div Rec in The same cycle(Period) multiple by 12.5% =STC due to SARS ... So if you receive div from investments you can deduct it from div paying ...Means lower STC Due to SARS ... This will ALL BE GONE ONCE STC DISAPPEARS .... IT WILL BE A FLAT 10% (OR WHAT EVER RATE) ALL ROUND ====THIS IS NOT GOOD OVERALL....................... DO YOU GUYS UNDERSTAND ?????????????????? IF NOT MAIL ME ON [email protected] ...
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