Dividends tax in South Africa: the 20% on local dividends

Dividends tax in South Africa is a 20% tax on the shareholder, withheld from the dividend before you are paid. For dividends from a South African resident company, you receive the amount net of the 20%, and you owe no further normal income tax on it because local dividends are exempt from normal tax in your hands. The rate is 20% for any dividend paid on or after 22 February 2017, unless an exemption or a reduced rate applies.

This article is for the individual investor holding shares in South African companies, whether directly on the JSE or through a broker or platform. Tax on dividends from foreign companies works differently, and the contrast is covered briefly below.

Who pays the tax, and who withholds it

Dividends tax is a tax on the beneficial owner of the dividend, which is the person entitled to the benefit of it. You are the taxpayer, but you do not pay it over to SARS yourself. It is withheld at source by a withholding agent: the company paying the dividend, or a regulated intermediary such as your broker or investment platform.

The agent deducts the tax and pays it to SARS by the last day of the month following the month in which the dividend was paid. By the time the cash reaches your account, the 20% has already been taken off.

The tax applies to dividends declared and paid from 1 April 2012 by any South African resident company, or by a foreign company whose shares are listed on a South African exchange. It replaced Secondary Tax on Companies (STC), which was a tax on the company rather than on the shareholder. Headquarter-company dividends are not subject to dividends tax.

The rate, and how it interacts with normal tax

The rate is 20%. A dividend from a South African company is generally exempt from normal income tax in the hands of an individual, so you are not taxed twice on the same amount. The 20% dividends tax is the final tax on that local dividend, withheld before payment.

This is different from interest, which is taxed under the normal rules subject to the annual interest exemption. If you also earn interest, the treatment is covered in our note on how interest income is taxed in South Africa.

A worked example

Take an individual who is paid a R10,000 dividend by a JSE-listed South African company.

Dividend declared: R10,000

Dividends tax at 20%: R10,000 x 20% = R2,000

Amount withheld by the company or the broker: R2,000

Net amount you receive: R10,000 - R2,000 = R8,000

You receive R8,000, and you owe no further normal income tax on the dividend because local dividends are exempt from normal tax in your hands. There is nothing more to declare and pay on that R10,000 beyond the R2,000 already withheld.

Exemptions and reduced rates

The 20% rate is the default. Two points matter for most investors.

First, certain beneficial owners are exempt from dividends tax. South African resident companies are among the exempt beneficial owners, so a dividend paid to a local company is not subject to the 20% withholding. This is one reason group structures can pass dividends up without the tax biting at each step.

Second, a non-resident beneficial owner may qualify for a reduced rate under a double taxation agreement (DTA) between South Africa and their country of residence. The reduced rate depends on the specific treaty and on meeting its conditions, so the figure is not fixed at a single number across all cases.

If you are a South African resident individual holding shares in your own name, neither point changes the basic position: 20% is withheld, and you receive the dividend net.

Foreign dividends are taxed differently

Dividends from a foreign company are not the same as local dividends. For an individual holding under 10% of the foreign company, foreign dividends are taxable at a maximum effective rate of 20%, with no deductions allowed for the expenditure incurred to produce them. The mechanism is normal income tax with a partial exemption that produces that maximum effective rate, not a withholding at source by a South African agent. Keep the two streams separate when you complete your return.

How this fits the rest of your investment tax

Dividends tax sits alongside the other taxes an investor meets. When you sell the underlying shares, capital gains tax can apply, which is set out in our guide to the tax on selling property or shares in South Africa. If you hold crypto assets as well, the rules there differ again and are covered in our note on the tax on cryptocurrency in South Africa. To estimate your overall income tax position for a year, you can use our basic income tax calculator.