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Five foreign dividends you don't have to pay tax on

by , 01 July 2015
Do you benefit from investments from companies outside of South Africa? Did you know that SARS has changed the exemption on foreign dividends? Well, this means all your foreign dividends are taxable in South Africa.
But wait there's good news.
There are five foreign dividends you can receive from investments in companies located in other countries that are tax free!
Read how you can take full advantage of these five foreign dividends.

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What is a foreign dividend and how do I identify it?

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 purposes:

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.
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Enjoy paying no tax on the following five foreign dividends:

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.

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