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Find out if you'll have to pay dividend tax at the end of 28 February 2015!

by , 25 February 2015
There's a new section in the Income Tax Act that brings along a new payment request. It affects dividend tax and how you'll need to pay it.

Take a look below...

According to the section, any South African taxpayer who made a transfer pricing adjustment in previous years of assessment will be required to pay dividend tax at the end of 28 February 2015.

In order to make this clearer, note that under the old transfer pricing rules, a primary transfer pricing adjustment triggered a secondary adjustment in terms of a deemed loan in the hands of the relevant South African taxpayer, writes Ensafrica.com. For example the amount 'over paid' or 'under charged' to the relevant non-resident connected person was deemed to be a loan to that foreign-connected person, on which arm's length interest was deemed to have accrued to the South African resident.

But that's changed...

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The new section 31 of the Income Tax Act, applicable from 1 January 2015, states that the deemed loan plus accrued interest – to the extent that these items were not 're-paid' by the non-resident before 1 January 2015 – must be deemed to be a dividend in specie that was declared and paid by that resident to that non-resident on 1 January 2015.

As a consequence, all South African companies that have such a deemed loan will now be liable to pay 15% dividends tax on the capital, plus deemed interest, by the end of February 2015.

Pay attention to this if this situation applies as you'll have to pay the specific amount by 28 February 2015.


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