The experts at the Practical Tax Loose Leaf
explain everything you need to know.
First, take note that when your company pays out a dividend, it'll withhold the Dividends Tax (DT
) from the payment to the shareholder. It then pays this over to SARS (in much the same way that you deduct PAYE from your employee's salary and pay it over to SARS on his behalf). Your company must complete and submit a DTR02 form to SARS to do this.
The beneficial owner (being the shareholder) ultimately pays the DT to SARS from his dividend payout.
Whoever withholds the tax and pays the dividend to the shareholder, must
pay the tax over to SARS. If your company fails to pay up, SARS can hold the director personally liable for the DT, as well as any additional taxes, penalties or interest that might be linked to your dividends.
Here's how SARS checks out your dividends
Now, take note of the checks SARS carries out to verify your DT: When you complete your Statement of Assets and Liabilities, SARS performs a reconciliation exercise between your net assets this year and those of last year.
This enables SARS to detect any undeclared income on your part.
If there's an unexplained growth in your assets, and the growth isn't substantiated by income that you've declared, SARS will assume you've failed to declare all your income. It'll launch an investigation.
If your taxable income is low, but you received a substantial amount of income in the form of dividends you didn't declare, you could end up being audited by SARS unnecessarily.
Non-declaration of taxable dividends is regarded as tax evasion. SARS is entitled to invoke the appropriate penalties and press criminal charges if they discover you haven't declared foreign dividends.
These penalties can be as much as 200% of the tax payable, in addition to the actual tax due. Also, SARS will levy interest from the time the tax was due to the time it's actually paid.