The South Africa Ministry of Finance has announced that a dividend withholding tax may be introduced there in the year 2008 and that the proposed rate of tax is 10 percent.
There is an indication that foreign shareholders will also be subject to the 10 percent withholding tax, potentially reduced to 5 percent where the country has a double tax treaty with South Africa and it provides for such a reduction in withholding tax.
Based on the information from the ministry, the introduction of the new tax will occur gradually over the course of 2007 and will involve two steps. The first step will be a reduction of the secondary tax on companies (STC) from 12.5 percent to 10 percent as of 1 October; the second step will be the replacement of the STC with the dividend withholding tax.
“This would mean that companies will no longer be liable for STC,” a spokesperson for Standard Bank of South Africa said. “Shareholders receiving the dividend will however be liable for the withholding tax.”