Category: CHAPTER II – The Taxes (ITA)

Section 64FA (ITA) – Exemption from and reduction of tax in respect of dividends in specie

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64FA.  Exemption from and reduction of tax in respect of dividends in specie

(1)     Where a company declares and pays a dividend that consists of a distribution of an asset in specie, that dividend is exempt from the dividends tax to the extent that it constitutes a distribution of an asset in specie if-

(a)     the person to whom the payment is made has, before the dividend is paid, submitted to the company-

(i)      a declaration by the beneficial owner in such form as may be prescribed by the Commissioner that the portion of the dividend that constitutes a distribution of an asset in specie would, if that portion had not constituted a distribution of an asset in specie, have been exempt from the dividends tax in terms of section 64F or an agreement for the avoidance of double taxation; and

[Subparagraph (i) substituted by section 17 of Act 20 of 2022]

(ii)     a written undertaking in such form as may be prescribed by the Commissioner to forthwith inform the company in writing should the circumstances affecting the exemption applicable to the beneficial owner referred to in subparagraph (i) change or the beneficial owner cease to be a beneficial owner;

[Paragraph (a) amended by section 87(1)(a) of Act 22 of 2012 and by section 6(1)(a) of Act 33 of 2019]

(b)     the beneficial owner forms part of the same group of companies, as defined in section 41, as that company;

(c)     the dividend constitutes a disposal as contemplated in paragraph 51A of the Eighth Schedule; or

(d)     the dividend constitutes a disposal as contemplated in paragraph 67B(2) of the Eighth Schedule.

(2)     A company that declares and pays a dividend that consists of a distribution of an asset in specie is liable for the dividends tax at a reduced rate in respect of the portion of the dividend that constitutes the distribution of an asset in specie if the person to whom the payment is made has, before the dividend is paid, submitted to the company—

(a)     a declaration by the beneficial owner in such form as may be prescribed by the Commissioner that the portion of the dividend that constitutes a distribution of an asset in specie would, if that portion had not constituted a distribution of an asset in specie, have been subject to that reduced rate as a result of the application of an agreement for the avoidance of double taxation; and

(b)     a written undertaking in such form as may be prescribed by the Commissioner to forthwith inform the company in writing should the circumstances affecting the reduced rate applicable to the beneficial owner referred to in paragraph (a) change or the beneficial owner cease to be the beneficial owner.

[Sub­section (2) amended by section 6(1)(b) of Act 33 of 2019. Paragraph (b) substituted by section 87(1)(e) of Act 22 of 2012 deemed effective on 1 April, 2012]

(3)     A declaration and written undertaking submitted in terms of subsection (1)(a) or (2) are no longer valid after a period of five years from the date of the declaration, unless the company that is making the payment is subject to the provisions of-

(a)     the Financial Intelligence Centre Act, 2001 (Act 38 of 2001);

(b)     the Agreement Between the Government of the Republic of South Africa and the Government of the United States of America to improve International Tax Compliance and to Implement the US Foreign Account Tax Compliance Act; or

(c)     the regulations for purposes of paragraph (a) of the definition of “international tax standard” in section 1 of the Tax Administration Act,

with regard to the person to whom the payment is made and takes account of these provisions in monitoring the continued validity of the declaration.

[Subsection (3) added by section 6(1)(c) of Act 33 of 2019 effective on 1 July, 2020]

Section 64G (ITA) – Withholding of dividends tax by companies declaring and paying dividends

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64G.    Withholding of dividends tax by companies declaring and paying dividends

(1)     Subject to subsections (2) and (3), a company that declares and pays a dividend must withhold an amount of dividends tax from that payment calculated as contemplated in section 64E except to the extent that the dividend consists of a distribution of an asset in specie.

[Sub­section (1) substituted by section 80(1) of Act 24 of 2011, by section 88(1)(a) of Act 22 of 2012, by section 106(1) of Act 31 of 2013 and by section 45 of Act 34 of 2019]

(2)     A company must not withhold any dividends tax from the payment of a dividend contemplated in subsection (1) if-

(a)     the person to whom the payment is made has, before the dividend is paid, submitted to the company-

(i)      a declaration by the beneficial owner in such form as may be prescribed by the Commissioner that the dividend is exempt from the dividends tax in terms of section 64F or an agreement for the avoidance of double taxation; and

[Subparagraph (i) substituted by section 33(1) of Act 20 of 2021 effective on 1 January, 2022 and applicable in respect of dividends paid on or after that date]

(ii)     a written undertaking in such form as may be prescribed by the Commissioner to forthwith inform the company in writing, should the circumstances affecting the exemption applicable to the beneficial owner referred to in subparagraph (i) change or the beneficial owner cease to be the beneficial owner;

[Paragraph (a) amended by section 88(1)(b) of Act 22 of 2012 and substituted by section 7(1)(a) of Act 33 of 2019]

(b)     the beneficial owner forms part of the same group of companies, as defined in section 41, as the company that paid the dividend; or

(c)     the payment is made to a regulated intermediary.

(3)     A company must withhold dividends tax from the payment of a dividend contemplated in subsection (1) at a reduced rate if the person to whom the payment is made has, before the dividend is paid, submitted to the company-

(a)     a declaration by the beneficial owner in such form as may be prescribed by the Commissioner that the dividend is subject to that reduced rate as a result of the application of an agreement for the avoidance of double taxation; and

(b)     a written undertaking in such form as may be prescribed by the Commissioner to forthwith inform the company in writing, should the circumstances affecting the reduced rate in paragraph (a) change or should the beneficial owner cease to be the beneficial owner.

[Sub­section (3) substituted by section 73(1) of Act 7 of 2010, amended by section 88(1)(c) of Act 22 of 2012 and substituted by section 7(1)(b) of Act 33 of 2019]

(4)     A declaration and written undertaking submitted in terms of subsection (2)(a) or (3) are no longer valid after a period of five years from the date of the declaration, unless the company that is making the payment is subject to the provisions of-

(a)     the Financial Intelligence Centre Act, 2001 (Act 38 of 2001);

(b)     the Agreement Between the Government of the Republic of South Africa and the Government of the United States of America to improve International Tax Compliance and to Implement the US Foreign Account Tax Compliance Act; or

(c)      the regulations for purposes of paragraph (a) of the definition of “international tax standard” in section 1 of the Tax Administration Act,

with regard to the person to whom the payment is made and takes account of these provisions in monitoring the continued validity of the declaration.

[Subsection (4) added by section 7(1)(c) of Act 33 of 2019 effective on 1 July, 2020]

Section 64H (ITA) – Withholding of dividends tax by regulated intermediaries

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64H.     Withholding of dividends tax by regulated intermediaries

 

(1)     Subject to subsections (2) and (3), a regulated intermediary that pays a dividend that was declared by any other person must withhold an amount of dividends tax from that payment calculated as contemplated in section 64E except to the extent that the dividend consists of a distribution of an asset in specie.

[Sub­section (1) substituted by section 81(1) of Act 24 of 2011, by section 89(1)(a) of Act 22 of 2012, by section 107(1) of Act 31 of 2013 and by section 46 of Act 34 of 2019]

 

(2)   A regulated intermediary must not withhold any dividends tax from the payment of a dividend contemplated in subsection (1) if-

 

(a)     the person to whom the payment is made has, before the dividend is paid, submitted to the regulated intermediary-

 

(i)      a declaration by the beneficial owner in such form as may be prescribed by the Commissioner that the dividend is exempt from the dividends tax in terms of section 64F or an agreement for the avoidance of double taxation, or that the payment is made to a vesting trust of which the sole beneficiary is another regulated intermediary; and

[Subparagraph (i) substituted by section 34(1) of Act 20 of 2021 effective on 1 January, 2022 and applicable in respect of dividends paid on or after that date]

 

(ii)     a written undertaking in such form as may be prescribed by the Commissioner to forthwith inform the regulated intermediary in writing, should the circumstances affecting the exemption applicable to the beneficial owner referred to in subparagraph (i) change or should the beneficial owner cease to be the beneficial owner;

[Paragraph (a) amended by section 89(1)(b) of Act 22 of 2012, substituted by section 8(1)(a) of Act 33 of 2019 and amended by section 8(1)(b) of Act 33 of 2019]

 

(b)     the payment is made to another regulated intermediary; or

[Paragraph (b) amended by section 8(1)(b) of Act 33 of 2019]

 

(c)     the dividend is exempt from dividends tax in terms of section 64F(1)(o).

[Paragraph (c) inserted by section 8(1)(c) of Act 33 of 2019]

 

(3)     A regulated intermediary must withhold dividends tax from the payment of a dividend contemplated in subsection (1) at a reduced rate if the person to whom the payment is made has, before the dividend is paid, submitted to the regulated intermediary—

 

(a)     a declaration by the beneficial owner in such form as may be prescribed by the Commissioner that the dividend is subject to that reduced rate as a result of the application of an agreement for the avoidance of double taxation; and

 

(b)     a written undertaking in such form as may be prescribed by the Commissioner to forthwith inform the regulated intermediary in writing should the circumstances affecting the reduced rate applicable to the beneficial owner referred to in paragraph (a) change or should the beneficial owner cease to be the beneficial owner.

[Subsection (3) substituted by section 74(1) of Act 7 of 2010, amended by section 89(1)(c) of Act 22 of 2012 and substituted by section 8(1)(d) of Act 33 of 2019]

 

(4)     A declaration and written undertaking submitted in terms of subsection (2)(a) or (3) are no longer valid after a period of five years from the date of the declaration, unless the regulated intermediary is subject to the provisions of-

 

(a)     the Financial Intelligence Centre Act, 2001 (Act 38 of 2001);

 

(b)     the Agreement Between the Government of the Republic of South Africa and the Government of the United States of America to improve International Tax Compliance and to Implement the US Foreign Account Tax Compliance Act; or

 

(c)     the regulations for purposes of paragraph (a) of the definition of “international tax standard” in section 1 of the Tax Administration Act,

 

with regard to the person to whom the payment is made and takes account of these provisions in monitoring the continued validity of the declaration.

[Subsection (4) added by section 8(1)(e) of Act 33 of 2019 effective on 1 July, 2020]

Section 64I (ITA) – Withholding of dividends tax by insurers

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64I.      Withholding of dividends tax by insurers

 

If a dividend, to the extent that the dividend does not consist of a distribution of an asset in specie, is paid to an insurer as defined in section 29A, the insurer must be deemed to be a regulated intermediary and the dividend must, to the extent that the dividend is allocated to a fund contemplated in section 29A(4)(b), be deemed to be paid to a natural person that is a resident by the regulated intermediary on the date that the dividend is paid to the insurer.

Section 64K (ITA) – Payment and recovery of tax

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64K.    Payment and recovery of tax

(1)

(a)     If, in terms of section 64EA(a), a beneficial owner is liable for any amount of dividends tax in respect of a dividend, that beneficial owner must pay that amount to the Commissioner by the last day of the month following the month during which that dividend is paid by the company that declared the dividend, unless the tax has been paid by any other person.

(b)     If, in terms of section 64EA(b), a company is liable for any amount of dividends tax in respect of a dividend, that company must pay that amount to the Commissioner by the last day of the month following the month during which that dividend is paid by the company.

(c)     If, in terms of this Part, a person is required to withhold any amount of dividends tax in respect of a dividend, that person must pay that amount, less any amount refundable in terms of section 64L or 64M, to the Commissioner by the last day of the month following the month during which that dividend is paid by that person as contemplated in section 64G or 64H.

(d)     ……….

[Paragraph (d) deleted by section 5 of Act 44 of 2014 effective on 20 January 2015]

(1A)   If, in terms of this Part a person has paid a dividend, that person must submit a return in respect of that dividend to the Commissioner by the last day of the month following the month during which the dividend is paid.

[Subsection (1A) inserted by section 5 of Act 44 of 2014, amended by section 4 of Act 23 of 2015 and section 3 of Act 16 of 2016 and substituted by section 4 of Act 13 of 2017 and section 1 of Act 22 of 2018 effective on 17 January 2019]

(2)     ………..

(3)     ……….

(4)     Where a person-

(a)     has, in terms of section 64G(2)(a) or 64H(2)(a), withheld no dividends tax in respect of the payment of any dividend, or in terms of section 64G(3) or 64H(3), withheld dividends tax in accordance with a reduced rate in respect of the payment of any dividend; or

[Paragraph (a) substituted by section 18(a) of Act 20 of 2022]

(b)     that is a company which was, in terms of section 64FA(1)(a), not liable for dividends tax, or in terms of section 64FA(2), liable for dividends tax at a reduced rate in respect of the declaration and payment of any dividend,

[Paragraph (b) substituted by section 18(b) of Act 20 of 2022]

that person must submit to the Commissioner any declaration-

(i)      submitted to the person by or on behalf of a beneficial owner; and

(ii)     relied upon by the person in determining the amount of dividends tax so withheld,

at the time and in the manner prescribed by the Commissioner.

(5)     ……….

(6)     If a person fails to pay any dividends tax within the required period, interest must be paid by that person on the balance of the tax outstanding at the prescribed rate reckoned from the end of that period.

Section 64L (ITA) – Refund of tax in respect of dividends declared and paid by companies

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64L.     Refund of tax in respect of dividends declared and paid by companies

 

(1)     Notwithstanding the provisions of Chapter 13 of the Tax Administration Act, if-

 

(a)     an amount is withheld by a company from the payment of a dividend in terms of section 64G(1);

 

(b)     a declaration contemplated in subsection (2)(a) or (3) of that section in respect of that dividend is not submitted to the company by the date contemplated in the relevant subsection; and

 

(c)     both the declaration and the written undertaking contemplated in section 64G(2)(a) or (3) are submitted to the company within three years after the date of payment of the dividend in respect of which they are made,

[Paragraph (c) substituted by section 15 of Act 21 of 2012 and section 5 of Act 13 of 2017 effective on 18 December 2017]

so much of that amount as would not have been withheld had that declaration been submitted by the date contemplated in the relevant subsection is refundable to the person to whom the dividend was paid.

 

(1A)    If-

 

(a)     an amount is withheld by a company from the payment of a dividend in terms of section 64G(1); and

 

(b)     a rebate in respect of foreign taxes paid on that dividend should have been deducted from that amount in terms of section 64N,

 

so much of that amount as would not have been withheld had that rebate been deducted from the amount, is refundable to the person to whom the dividend was paid: Provided such rebate is claimed within three years after the date of payment of the relevant dividend.

[Words following paragraph (b) substituted by section 5 of Act 13 of 2017 effective on 18 December 2017]

 

(2)     Any amount that is refundable in terms of subsection (1) or (1A) must be refunded by the company that withheld that amount to the person to whom the dividend was paid-

 

(a)     from any amount of dividends tax withheld by that company within a period of one year after the submission of the declaration contemplated in subsection (1)(c) or the claim of a rebate contemplated in subsection (1A); or

 

(b)     to the extent that the amount that is refundable exceeds the amount of dividends tax withheld as contemplated in paragraph (a), from an amount recovered by the company from the Commissioner in terms of subsection (3).

 

(3)     Subject to subsection (4), if any amount is refundable to any person by a company in terms of subsection (1) or (1A) and that amount exceeds the amount of dividends tax withheld as contemplated in subsection (2)(a), the company contemplated in subsection (2) may recover the excess from the Commissioner.

 

(4)     No amount may be recovered in terms of subsection (3) if the company submits the claim for recovery to the Commissioner after the expiry of a period of four years reckoned from the date of the payment contemplated in subsection (1)(a) or (1A)(a).

Section 64M (ITA) – Refund of tax in respect of dividends paid by regulated intermediaries

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64M.    Refund of tax in respect of dividends paid by regulated intermediaries

(1)     Notwithstanding the provisions of Chapter 13 of the Tax Administration Act, if-

(a)     an amount is withheld by a regulated intermediary from the payment of a dividend in terms of section 64H(1);

(b)     a declaration contemplated in subsection (2)(a) or (3) of that section in respect of that dividend is not submitted to the regulated intermediary by the date contemplated in the relevant subsection; and

(c)     both the declaration and the written undertaking contemplated in section 64H (2)(a) or (3) are submitted to the regulated intermediary within three years after the date of payment of the dividend in respect of which they are made,

[Paragraph (c) substituted by section 16 of Act 21 of 2012 and section 7 of Act 13 of 2017 effective on 18 December 2017]

so much of that amount as would not have been withheld had that declaration been submitted by the date contemplated in the relevant subsection is refundable to the person to whom the dividend was paid.

(1A)  If-

(a)     an amount is withheld by a regulated intermediary from the payment of a dividend in terms of section 64H(1); and

(b)     a rebate in respect of foreign taxes paid on that dividend should have been deducted from that amount in terms of section 64N,

so much of that amount as would not have been withheld had that rebate been deducted from the amount, is refundable to the person to whom the dividend was paid: Provided such rebate is claimed within three years after the date of payment of the relevant dividend.

[Words following paragraph (b) substituted by section 7 of Act 13 of 2017 effective on 18 December 2017]

(2)     Any amount that is refundable in terms of subsection (1) or (1A) to the person to whom the dividend was paid must be refunded by the regulated intermediary that withheld the amount contemplated in subsection (1)(a) or (1A)(a)-

(a)     from any amount of dividends tax withheld by the regulated intermediary within a period of one year after the submission of the declaration as contemplated in subsection (1)(c) or the claim of a rebate contemplated in subsection (1A) or

(b)     to the extent that the amount that is refundable exceeds the amount of dividends tax withheld as contemplated in paragraph (a), from an amount recovered by the regulated intermediary from the Commissioner in terms of subsection (3).

[Subsection (2) substituted by section 16(1)(c) of Act 21 of 2012 and by section 4(a) of Act 16 of 2022]

(3)     Subject to subsection (4), if any amount is refundable to any person by a regulated intermediary in terms of subsection (1) or (1A) and that amount exceeds the amount of dividends tax withheld as contemplated in subsection (2)(a), the regulated intermediary contemplated in subsection (2) may recover the excess from the Commissioner.

[Subsection (3) added by section 4(b) of Act 16 of 2022]

(4)     No amount may be recovered in terms of subsection (3) if the regulated intermediary submits the claim for recovery to the Commissioner after the expiry of a period of four years reckoned from the date of the payment contemplated in subsection (1)(a) or (1A)(a).

[Subsection (4) added by section 4(b) of Act 16 of 2022]

[Section 64M inserted by section 53(1) of Act 17 of 2009 effective on 1 April, 2012: Government Notice No. 1073 in Government Gazette 34873 of 20 December, 2011 and applicable in respect of any dividend declared and paid on or after that date (effective date in section 53(2) of Act 17 of 2009 as substituted by section 148 of Act 7 of 2010)]

Section 64N – Rebate in respect of foreign taxes on dividends

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64N.    Rebate in respect of foreign taxes on dividends

 

(1)     A rebate determined in accordance with this section must be deducted from the dividends tax payable in respect of a dividend contemplated in paragraph (b) of the definition of ‘dividend’ in section 64D.

 

(2)     The amount of the rebate contemplated in subsection (1) is equal to the amount of any tax paid to any sphere of government of any country other than the Republic, without any right of recovery by any person, on a dividend contemplated in subsection (1).

 

(3)     The amount of the rebate contemplated in subsection (2) must not exceed the amount of the dividends tax imposed in respect of the dividend contemplated in subsection (1).

 

(4)     For the purposes of this section, the amount of any tax paid as contemplated in subsection (2) must be translated to the currency of the Republic by applying the exchange rate used to convert the amount of the dividend in respect of which that tax is paid to the currency of the Republic.

 

(5)     A company or regulated intermediary must obtain proof of any tax paid to any sphere of government of any country other than the Republic and deducted from the dividends tax payable in terms of this section, in the form and manner prescribed by the Commissioner.