Taxation of Foreign Dividends - The SA Institute of Tax Professionals. July 2. 01. 3. (0 Comments). Posted by: Author: Tarryn Spearman. Author: Tarryn Spearman(Grant Thornton)Significant changes were introduced to the way foreign dividends, received by South African residents, are treated for tax purposes.

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The purpose of these changes is to eliminate the disparity between the tax treatment of domestic and foreign dividends. Before delving into the changes, it is important to note two points: Foreign dividends are not subject to the new dividends tax (DWT) regime (with the exception of dividends paid by dual listed companies) and therefore, with certain exceptions, foreign dividends are included in the recipient’s gross income and taxed at the marginal income tax rates. In terms of section 2. Acessar Windows 7 Com Senha Do Celular. Income Tax Act, deductions in respect of expenditure incurred in the production of income from foreign dividends are no longer allowed. This is because there is no comparable deduction that is allowed for expenses associated with domestic shares.

What has changed? Section 1. 0B was introduced to clarify the extent to which foreign dividends will be exempt from tax. Section 1. 0B (1) states that, for the purposes of the section, .

In other words, dividends received by a CFC of a South African resident company, from a company that is resident of the same country as the CFC, will be exempt. The dual- listing exemption contained in sections 1. This section only applies to foreign dividends which are not exempt from tax in terms of section 1. B(2). This exemption is calculated in terms of a formula (A = B x C)A = the amount to be exempted for a year of assessment. B = the ratio 2. 5/4. ORThe ratio 1. 3/2. C = the aggregate of any foreign dividends received by or accrued to a person during a year of assessment, that is not exempt under the provisions of section 1.

B(2). The section 1. B(3) exemption is best explained by means of examples: Example one: Foreign dividend received by a natural person, deceased estate, insolvent estate, or special trust: Mr Z, a South African resident, pays taxes at a marginal rate of 4. Mr Z holds 3% of the total equity shares and voting rights in a Foreign Company. He receives a foreign dividend of R1. Mr Z incurred an interest expenditure of R 2 0. Gross income. R 1.

Expenditure in the production of income . The rebate is limited to the amount of foreign tax levied on the transaction. Example 2: Foreign dividend received by companies, trusts, and persons other than those referred to in the example above: ABC Ltd, a South African resident company, holds 3% of the total equity shares and voting rights in a Foreign Company. ABC Ltd receives a foreign dividend of R1.

GROSS INCOMER 1 2. Expenditure in the production of income.