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Dividends Tax: Are you at risk of being audited?

by , 31 October 2013
Dividends Tax (DT) is a tax charged when a dividend is paid out. While the liability for tax falls on the shareholder, the company paying the dividend must withhold the tax and pay it to SARS on behalf of the shareholder. As the company paying the dividend, it's crucial that you get this right. If you don't, you'll expose your company to a SARS audit. Use this checklist to ensure you're not at risk of an audit.

According to Natalie Cousens Product Manager for How to survive a SARS tax audit , 'DT is a major focus area for the SARS auditors and a potential minefield for penalties and interest.'

That's why she recommends you use this handy checklist to get an idea of your exposure to audit in this area.

She adds 'if your exposure is highly rated, please get professional advice'

Discover if you're at risk of being audited for dividends tax

#1: Specific task: Examine the minutes of directors' meetings

Purpose of Investigation:

  • To determine the date on which a dividend was declared.
  • To determine whether any dividends were received from a related entity that elected not to pay DT.

Is this a potential danger area for you? (Answer 'Yes' or 'No' to this question).

#2: Specific task: Check the correctness of the dividend cycle and the net amount paid

Purpose of Investigation:

  • To ascertain whether you've paid the full and correct amount of what's due to SARS, or whether there are mistakes in your calculations (intended or unintended).

#3: Specific task: Investigate all transactions that can be deemed to be a dividend, for example, certain payments to defined recipients.

Purpose of Investigation:

  • Can theses be deemed to be dividend payments?
  • Are they taxable?
  • If so, have you paid the tax?

#4: Specific task: Investigate whether the DT payment has been made in the correct period

Purpose of Investigation: To avoid errors as these can be penalised.

As mentioned, if your exposure is highly rated, you must correct this to avoid SARS penalties.

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