What is a foreign dividend and how do I identify it?
11 Law changes every financial manager must know
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It's a dividend you receive from investments from companies outside of South Africa. There are four criteria your income must meet to be a foreign dividend.
If your income meets the following criteria, it will be a foreign dividend for tax
1. You must be entitled to the income already;
2. Your income must source from a foreign company;
3. The income is for a share in the foreign company; and
4. The income is seen as a dividend in that foreign country you own.
Now you know how to clearly identify a foreign dividend, let's see what tax
free dividends you can benefit from.
31 Business Boosting Tax Breaks
Enjoy paying no tax on the following five foreign dividends:
We know that paying taxes is, well, taxing. And we know how you rely on tax
breaks to shrink your tax
bill legitimately and get the most of your business transactions. And that's precisely why we pressed our tax
experts for all 31 breaks. And then we pressed them for the checklists and tips you'll need to qualify for the breaks.
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1. If you hold at least 10% of equity shares and voting rights of the foreign company who is paying foreign dividend
2. If your business is a foreign company. And the foreign company pays the foreign dividend is resident for tax
in the same country as you are.
3. If you receive the foreign dividend from a controlled foreign company. The exempt portion is the foreign dividend amount that won't exceed the amount you include in your income.
4. If the foreign dividend arises from a JSE listed share, but excludes a distribution of an asset in specie (in its present form). So it must be a cash dividend.
5. If the foreign dividend arises from a JSE listed share and it's a distribution of an asset in specie. But as long as the recipient is a local company.
But if your foreign dividend isn't fully exempt, a partial exemption will apply. Stay tuned for when I explain how you can qualify for partial exemption.
P.S. If you need more information on dividends tax
, get your hands on the Practical Tax Loose Leaf.
In the Practical Tax Loose Leaf
we've got a dedicated chapter on dividends tax.