South Africa: Government increased the rate of dividends withholding tax (DWT) from 15% to 20%

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The 2017 Budget Speech delivered by Minister Gordhan on 22 February 2017 increased the rate of Dividends Withholding Tax (DWT) from 15% to 20%. To reduce the difference between the combined statutory tax rate on dividends and the top marginal personal income tax rate, government increased the dividend withholding tax rate to 20%, effective from February 22 2017.

In the case of a listed company, a dividend will only be ‘paid’ once actual payment of the dividend occurs. Dividends which have been declared to shareholders but were not settled prior to 22 February 2017 will therefore attract DWT at 20%. This is regardless of whether the ‘last day to register’ was prior to this date. In the case of an unlisted company, dividends are regarded as having been ‘paid’ on the earlier that actual payment occurs or the dividend becomes ‘due and payable’. Whether a dividend declared prior to 22 February 2017 became due and payable before that date will depend on the wording of the resolution in respect of the dividend.

The exemption and rates for inbound foreign dividends will also be adjusted in line with the new rate, effective for years of assessment commencing on or after March 1 2017. To align with the increased effective capital gains tax rate, government also proposes to increase the withholding tax on immovable property sales by non-residents. Rates will be increased from 5% to 7.5% for individuals, 7.5% to 10% for companies and 10% to 15% for trusts.

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