What Taxes Apply to Dividends & Co.?
When investing in South Africa, it’s important to understand the different taxes that apply to returns such as dividends, interest, or capital gains.
Dividend Tax
In South Africa, dividends are subject to a withholding tax of 20%, which has been in effect since April 1, 2012. This means that companies must pay this tax directly to SARS (South African Revenue Service) before the dividend is paid out to shareholders.
More info: SARS – Dividend Withholding Tax
Capital Gains Tax (CGT)
Capital gains from the sale of assets such as stocks or real estate are subject to Capital Gains Tax. Individuals benefit from an annual exemption (currently ZAR 40,000). The actual tax burden depends on the personal tax rate and withholding percentage.
More info: SARS – Capital Gains Tax
Interest Income
Interest from investments is considered part of taxable income and is subject to regular income tax rates. However, there are exceptions, such as certain savings accounts that may benefit from a tax-free allowance.
More info: SARS – Interest Income
Tax-Free Investment Options in South Africa
Tax-Free Savings Accounts (TFSA) are an attractive way to save and invest tax-free. You can contribute up to ZAR 36,000 annually, with a lifetime limit of ZAR 500,000. Within a TFSA, interest income, dividends, and capital gains are tax-exempt.
More info: SARS – Tax-Free Savings Account
Offshore Investments – What Should You Be Aware Of?
South African investors must comply with the foreign exchange control regulations of the South African Reserve Bank (SARB). Private investors currently have an annual foreign investment limit of ZAR 1 million and an additional capital investment limit of ZAR 10 million. Foreign income must be declared and taxed in South Africa, although double tax agreements can help avoid double taxation.
More info on foreign exchange controls: SARB – Exchange Control
More info on foreign income: SARS – Foreign Income and Assets