Tax on dividends

Secondary Tax on Companies (STC) is a tax currently paid by companies on the dividends they distribute.  STC will be phased out and replaced with a new tax on dividends on 1 April 2012.  From that date, the tax on declared dividends will no longer be levied at company level, but will become an income tax collected by way of a withholding tax.

Tax on dividends is only applicable to discretionary savings products, which include Investment Plans, as well as Endowment and Sinking Fund policies.  Dividends tax is required to be withheld by the company declaring the dividends on payment thereof.  If the dividend is paid to a regulated intermediary (such as Glacier), the liability to withhold the tax shifts to the regulated intermediary, who will pay the tax over to SARS on your behalf.

The rate of tax will be 15% for all South African residents.  Certain companies and institutions invested in an Investment Plan may, however, apply for exemption.  A dividend is exempt from the dividends tax if the beneficial owner is one of the following:

• a local company;
• the government, a provincial administrator or municipality of the Republic of South Africa;
• a public benefit organisation approved in terms of section 30(3) of the Income Tax Act;
• a mining rehabilitations trust;
• an institution, body, or board referred to in section 10(1)(cA) of the Income Tax Act;
• a pension, provident, preservation, retirement annuity, beneficiary or benefit fund;
• a person contemplated in section 10(1)(t) of the Income Tax Act (CSIR, SANRAL, etc.);
• a shareholder in a registered micro business (as defined in the Sixth Schedule to the Income Tax Act);
• a non-resident beneficial owner of dividends received from a foreign company listed in South Africa.

Certain foreign investors in South African funds may also qualify for a reduced tax rate (as a result of the application of a Double Taxation Agreement between South Africa and foreign countries).  In order to qualify for a reduced rate, foreign investors may need to own a minimum percentage of shares in the underlying funds.

Please note that no exemptions or reduced rates are applicable to investors in the Glacier Vantage Life Plan (Endowment policy) or the Glacier Vantage Plan (Sinking Fund policy).

Where clients qualify for an exemption or a reduced rate according to the above-mentioned criteria, they are obliged to provide Glacier with a completed and signed declaration form before 1 April 2012.  This form will allow us to apply the exemption or reduced rate to a client’s portfolio.  The standard rate of 15% will be applied until such time as a declaration form is received.

The declaration form for exemption is available here, while the declaration form for a reduced rate is available here.  You may also obtain a form from our communication centre on +27 21 917 9002 / 0860 GLA ENG.

The dividends tax withheld and paid to SARS on your behalf will be reflected on your tax certificate issued by Glacier.

For further information on Dividends Tax, please visit the SARS website at www.sars.gov.za.  Click on “Tax Types” in the top menu, and select “Dividends Tax” from the drop-down menu.