The tax distinction between local and foreign dividends
Dividends from South African resident companies fall under the dividends tax regime and are subject to a 20% withholding tax in terms of section 64E of the Income Tax Act 58 of 1962 (“Act”), known as dividends tax, rather than normal income tax. In contrast, foreign dividends are included in a taxpayer’s gross income unless relief is available under section 10B of the Income Tax Act 58 of 1962, which provides a full or partial participation exemption depending on certain circumstances. In this article, we unpack the important distinction in the tax treatment of local vs foreign dividends in South Africa.
