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, says the Practical Tax Loose Leaf Service.
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.
So how do you get the treatment of Dividends Tax (DT) right to avoid an audit?
To avoid an audit of your dividends, your company must withhold and pay the DT to SARS on behalf of your shareholder. DT is a tax imposed on shareholders when they get the dividend.
So when your company pays out a dividend, you must withhold the DT from the payment to your shareholder. You must then pay this over to SARS (in much the same way you deduct PAYE from your employee's salary and pay it over to SARS on his behalf).
It's your company's responsibility to complete and submit a DTR02 form to SARS.
Remember, if your company fails to pay up, SARS can hold your company director personally liable for the DT, as well as any additional taxes, penalties or interest that might be linked to your dividends.
Don't take this risk. Get the treatment of dividends tax right and you'll be sure to avoid a SARS audit of your dividends.