As mentioned, some dividend payments are automatically exempt from DT.
What are they?
The Practical Tax Loose Leaf Service says these taxpayers are automatically exempt from DT:
Let's take a closer look at each.
These two dividend payments are automatically exempt from DT
#1: A resident company
Any dividend payment made to a company (as the beneficial owner) that's resident in South Africa is exempt from DT.
Here's an example of a resident company: Company 1 owns all the shares in company 2. And company 2 owns all the shares in company 3.
All three companies are resident in South Africa. Nomsa owns all the shares in company 1.
Company 3 pays a dividend of R60 000 to company 2 and company 2 pays the same amount as a dividend to company 1.
Company 1 pays a dividend of R30 000 to Nomsa.
What are the DT consequences?
Company 3 has no liability to withhold DT on the R60 000 dividend payment, as the beneficial owner, Company 2, is a resident in South Africa. The dividend is exempt.
Company 2 has no liability to withhold DT on the R60 000 dividend payment as the beneficial owner, Company 1 is a resident in South Africa. The dividend is exempt.
Company 1 is liable to pay DT of R4 500 (R30 000 x 15%) on the dividend payment to Nomsa. Nomsa is ultimately liable for the DT, but the DT is withheld by Company 1 and paid over to SARS, much like employees' tax deductions. Nomsa will get R25 500 (R30 000 – R4 500) in cash.
#2: Eight institutions exempt from DT
The following eight beneficial owners of shares won't pay DT:
Important: You must ensure your company has a 'declaration' and 'undertaking' document ready for those shareholders who are exempt from DT.
A shareholder escapes the DT net only if he falls into one of the categories listed above. He must submit a declaration and undertaking document to SARS. And he'll get this from your company.
If he doesn't submit the document, he won't qualify for the exemption.
The good news is, the shareholder only needs to declare his exempt status once. It'll remain valid until his circumstances change.