Page 32 - Nexia SAB&T Business in South Africa Guide 2024

Foreign dividends (including deemed dividends)
Foreign Dividends received from a non–resident company are taxable.
Foreign dividends are, however, exempt as follows:
■ If received by a resident who holds at least 10% of the equity shares in the
foreign company.
■ The shareholder is a company which is in the same country as the foreign
company paying the dividend.
■ If declared by a company listed on the SA stock exchange.
■ If paid out of the profits of a foreign company if the profits of the foreign
company have been included in the South African shareholder’s income in
terms of the CFC provisions.
Where a foreign dividend is not exempt in terms of the provisions above the
following part of a foreign dividend will be exempt from tax:
■ Individuals and trusts: subject to a maximum effective tax rate of 20%.
■ Companies: subject to an effective tax rate of 20%.
No deduction will be granted for any expenditure incurred in the production of
income in the form of foreign dividends.
Foreign tax credits
Residents are allowed to deduct all foreign taxes paid in respect of foreign source
income from the tax payable in SA on such foreign income. Any excess credits
may be carried forward. Where foreign tax is withheld on South African source
income, the taxpayer can claim a deduction against income.
Non-Residents
Non-residents are taxed on all income from a South African source. In other
words, tax on the income of non-South African resident’s is source-based,
meaning that any income from a source within (or deemed to be within) SA is
taxed, irrespective of the residence of the recipient of the income. Non-residents
may invest in the Republic, provided that suitable documentary evidence is
received in order to ensure that such transactions are concluded at arms-length,
at fair market-related prices, and are financed in an approved manner subject to
exchange control approval.
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