Liquidating dividend and tax effect
Liquidating dividend and tax effect - Free Online
To ensure that the dividend tax is paid, the declaring company must with hold the equivalent tax from the dividend paid, and in turn pay this over to SARS.
It is in this mechanism that companies will find the additional disclosure and administration burden.2012 will be a challenging year that will be dominated by significant changes.The enforcement of the Tax Administration Bill, scheduled to be approved and promulgated during November, will be rolled out early next year.Also, the shift from STC (Secondary Tax on Companies) to a Dividend Tax will be effective from 1 April 2012.The dividend tax regime, effective from 1 April 2012, will shift the tax liability from the company that declared the dividend in the form of STC, to a tax liability for the dividends paid to the beneficial owner of the dividend.The new dividend tax has been progressively developed and implemented over the past four years, starting with the reduction of the STC rate from 12,5% to 10% with effect from 1 October 2007.
The exemption with regards to dividends declared in anticipation of liquidation or deregistration of a company was withdrawn with effect from 1 January 2011 (originally intended to be withdrawn from 1 January 2009).
The ‘dividend’ definition was amended with effect from 1 October 2007 to include both realised and unrealised profits of the company.
The withholding dividend taxis with held from each beneficial owner of the dividend, and not merely an STC calculation and payment based on the total dividenddeclared.
Also, the law provides a number of exemptions regarding withholding dividend tax, and some non-resident beneficiaries are entitled to a reduced dividend tax rate.
Companies will be required to issue a certificate to each beneficial owner of the dividend declared, the value of with holding tax paidto SARS, and reasons for not withholding tax or applying a reduced tax rate.
Considering the number of shareholders, frequency of changes in shareholders, and regularity of dividends declared could prove to be a very arduous administrative burden on companies.