Tax provisions in South Africa provide that any adjusted amount for transfer pricing and thin capitalisation purposes, made prior to 1 January 2015, constitutes a “deemed loan.”
If this amount, plus interest deemed to have accrued, was not repaid to the taxpayer by the non-resident “connected person” by 31 December 2014, the outstanding “deemed loan” is then “…deemed to be a dividend consisting of a distribution of an asset in specie, that was declared and paid by that resident to that other person on 1 January 2015.”
As such, this deemed dividend will be subject to dividends withholding tax at a rate of 15% for which the South African resident taxpayer will be liable.
The dividends withholding tax must be remitted to the South Africa tax administration (SARS) by last day of the month, following the month during which the dividend is paid—in other words, by the end of February 2015 for deemed dividends arising from deemed loans in place as of 31 December 2014.
Read a February 2015 report prepared by the KPMG member firm in South Africa: Transfer pricing adjustments leading to withholding tax obligations