{"id":808792,"date":"2025-01-27T14:30:00","date_gmt":"2025-01-27T12:30:00","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=808792"},"modified":"2025-01-27T15:29:33","modified_gmt":"2025-01-27T13:29:33","slug":"big-announcement-about-dividend-tax-changes-in-south-africa","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/government\/808792\/big-announcement-about-dividend-tax-changes-in-south-africa\/","title":{"rendered":"Big announcement about dividends tax changes in South Africa"},"content":{"rendered":"\n

The South African government has made some big changes to the rules about taxing dividends paid to foreign shareholders. <\/p>\n\n\n\n

These changes come from something called the 2021 dividends protocol and are meant to update how South Africa handles taxes on money earned by foreign companies from South African businesses.<\/p>\n\n\n\n

In 2012, South Africa started taxing dividends paid to foreign shareholders. However, some agreements with other countries called double tax agreements (DTAs), made exceptions. <\/p>\n\n\n\n

For example, people in Kuwait didn\u2019t have to pay this tax because of a 2004 agreement, while Dutch and Swedish shareholders benefited from exemptions tied to most-favoured-nation (MFN) clauses. <\/p>\n\n\n\n

Legal rulings, including decisions from the Dutch Hoge Raad and a Cape Town Tax Court cemented these exemptions.<\/p>\n\n\n\n

Things changed with the 2021 protocol. This new agreement was signed by South Africa and Kuwait in 2019 and 2021 and was approved by Kuwait on 18 September 2024. <\/p>\n\n\n\n

Now, companies in Kuwait, the Netherlands, and Sweden that own South African businesses will have to pay dividends tax.<\/strong><\/p>\n\n\n\n

Companies holding at least 10% of the capital of a South African subsidiary are taxed at 5%, while those with smaller stakes are taxed at 10%. <\/p>\n\n\n\n

These rates took effect on 2 October 2024, following their publication by the South African Revenue Service on 22 November 2024.<\/p>\n\n\n\n

One big issue is that South Africa wants to make these rules apply all the way back to 1 April 2012.<\/p>\n\n\n\n

This retrospective application challenges established legal principles against backdated tax amendments and contradicts prior court rulings upholding the exemptions. <\/p>\n\n\n\n

Legal experts believe this aspect of the protocol will face legal challenges, especially since previous court cases supported the old exemptions.<\/p>\n\n\n

\n
\"\"<\/a>
Ralph Wichtmann, Managing Director at Sovereign Trust.<\/em><\/figcaption><\/figure><\/div>\n\n\n

Ralph Wichtmann, Managing Director at Sovereign Trust, highlights the dual implications of these changes. <\/p>\n\n\n\n

On the positive side, the revised tax framework is expected to boost South Africa\u2019s revenue by capturing taxes previously lost due to exemptions. <\/p>\n\n\n\n

However, he warns that increased tax liabilities for Kuwaiti, Dutch, and Swedish shareholders could dampen South Africa\u2019s appeal as an investment destination. <\/p>\n\n\n\n

\u201cWith the introduction of these new dividends tax rates, Kuwaiti, Dutch, and Swedish shareholders face higher costs on dividends from South African subsidiaries. <\/p>\n\n\n\n

“Businesses and investors affected by these changes should reassess their tax positions and investment structures to ensure compliance,\u201d he said.<\/p>\n\n\n\n

While the protocol aims to create a fairer tax environment, its potential to discourage cross-border investments and the contentious retrospective enforcement raise important questions about South Africa\u2019s balancing act between economic growth and fiscal policy. <\/p>\n\n\n\n

\n","protected":false},"excerpt":{"rendered":"

The South African government has made some big changes to the rules about taxing dividends paid to foreign shareholders. <\/p>\n","protected":false},"author":92,"featured_media":786422,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[23],"tags":[3246,853,13235,2887],"class_list":["post-808792","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-government","tag-sars","tag-south-africa","tag-sovereign-trust","tag-tax"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/808792","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/92"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=808792"}],"version-history":[{"count":7,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/808792\/revisions"}],"predecessor-version":[{"id":808903,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/808792\/revisions\/808903"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/786422"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=808792"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=808792"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=808792"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}