Dividends and foreign dividends
Dividends received by or accrued to a person, whether the person is a resident or a non resident, from South African resident companies are generally exempt from normal tax under
section 10(1)(k)(i). A dividend which is subject to normal tax because of its inclusion in income
is exempt from dividends tax under section 64F(1)(l). A dividend paid by a resident company
is subject to dividends tax under section 64E(1). A dividend may be exempt from dividends
tax under sections 64F or 64FA(1).
Foreign dividends may be exempt from normal tax under section 10B(2) or partially exempt
under section 10B(3). A cash foreign dividend paid by a foreign company in respect of a listed
share is subject to dividends tax under section 64E(1). The foreign dividend may be exempt
from dividends tax under section 64F.
A resident may claim a rebate for foreign tax paid on foreign dividends against South African
normal tax, if the dividend is subject to normal tax, or dividends tax if the dividend is subject
to dividends tax.
Interest [section 10(1)(h) and (i)]
The Act makes provision for the exemption of interest received by or accrued to any nonresident from a source within South Africa [section 10(1)(h)]. The full amount of the interest is
exempt from normal tax. This exemption does not apply if –
• that person is a natural person who was physically present in South Africa for a period
exceeding 183 days in aggregate during the twelve-month period preceding the date
on which the interest is received by or accrues to that person; or
the debt from which the interest arises is effectively connected to a permanent
establishment of that person in South Africa.
For the 2021 year of assessment interest from a source in South Africa up to R23 800, (if the
person is below the age of 65 years) or up to R34 500, (if the person is 65 years of age or
older) is exempt from normal tax [section 10(1)(i)]. This exemption does not apply to interest
from a source outside South Africa.
(c) Amounts received from tax-free investments (section 12T)
Section 12T provides for an exemption from normal tax for natural persons (or the deceased
or insolvent estate of such persons) of all amounts received from a “tax free investment” as
defined in that section. The capital gain or capital loss from the disposal of the investment is
disregarded for CGT purposes. A dividend that is paid to a natural person relating to a tax free
investment is exempt from dividends tax.
Under section 12T(4), contributions to a tax-free investment are limited to –
• an amount of R36 00046 during a year of assessment; and
• a lifetime contribution limitation of R500 000.