Dividends tax, abbreviated DWT (dividends withholding tax), is a tax on dividends a company distributes to its shareholders, currently levied at 20%. Unlike CIT, which the company itself bears, dividends tax is borne by the shareholder, with the company or paying agent withholding it before the dividend reaches them.
What it means
Dividends tax replaced the older secondary tax on companies and shifted the liability from the company to the shareholder, though the company (or a regulated intermediary like a broker) is responsible for withholding and paying it over to SARS. Certain shareholders, such as other SA companies, can qualify for an exemption.
Where it fits in
Dividends tax is unrelated to payroll's PAYE withholding, though both are withholding taxes the payer deducts at source. A director who receives both a salary and a dividend is taxed under two different systems for the two income types.
Key rules
- DWT = dividends withholding tax, currently 20%.
- Borne by the shareholder, withheld by the company or paying agent.
- Some shareholders qualify for an exemption.
- A separate withholding system from PAYE.
