The South secondary tax on companies was reduced to 10% from the previous rate of 12.5%, effective 1 Oct.
In the past, South Africa’s tax system has been harsh on dividend-paying companies with a secondary task, but Finance Minister Trevor Manuel announced his plans to phase out this system and replace it with a dividend withholding tax earlier this year. The tax reduction is the first step.
The reduced STC rate is applicable to all cash dividends declarations by companies made on or after 1 Oct. STC has not been renamed “dividend tax” as yet and currently still is a tax that is payable by companies that declare cash dividends, according to Standard Bank, a South African financial services company.
The switch to dividend withholding tax has not been legislated as yet, and draft legislation hasn’t even been released. Standard Bank says it is premature to comment if a tax reclaim or relief at source process will be followed as detailed changes might occur before the bill is formally tabled in Parliament.