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Increase in the Dividend Withholding Tax: Will dividends already declared be affected?

Dividend Withholding Tax

The 2017 Budget Speech delivered by Minister Gordhan on 22 February 2017 increased the rate of Dividends Withholding Tax (DWT) from 15% to 20%.


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The 2017 Budget Speech delivered by Minister Gordhan on 22 February 2017 increased the rate of Dividends Withholding Tax (DWT) from 15% to 20%.

The Draft Rates and Monetary Amounts and Amendment of Revenue Bill that was published on the same day confirms that the new rate will be deemed to have come into operation on 22 February 2017 and will apply in respect of any dividend ‘paid’ on or after that date. The 22 February 2017 effective date is also contained in Chapter 4 of the supporting documents that accompanied the 2017 Budget Speech.
The pressing question for a number of taxpayers is whether dividends which were declared prior to 22 February 2017 but have not yet been paid to shareholders will attract DWT at the higher rate. The answer to this question rests on the meaning of ‘paid’ in the context of the DWT provisions. 

When is a dividend ‘paid’ for DWT purposes?

The DWT provisions distinguish between dividends paid by listed and unlisted companies.

  • In the case of a listed company, a dividend will only be ‘paid’ once actual payment of the dividend occurs. Dividends which have been declared to shareholders but were not settled prior to 22 February 2017 will therefore attract DWT at 20%. This is regardless of whether the ‘last day to register’ was prior to this date. 
  • In the case of an unlisted company, dividends are regarded as having been ‘paid’ on the earlier that actual payment occurs or the dividend becomes ‘due and payable’. Whether a dividend declared prior to 22 February 2017 became due and payable before that date will depend on the wording of the resolution in respect of the dividend. 
    • Clearly, if the payment of the dividend is conditional on, for example, an interrelated transaction becoming unconditional, there is no unconditional entitlement to the dividend and thus no doubt that the dividend has not become due and payable. 
    • If there is no conditionality attaching to the declaration of the dividend but, for example, the resolution states that the dividend will be paid on a particular date, the dividend will only become due and payable on the date stated on in the resolution. If this date is after 22 February 2017, 20% DWT will be triggered. 
    • Where the resolution is silent on the date of payment, the dividend should have become due and payable immediately upon declaration, and the timing of the resolution will determine the rate at which DWT must be paid.

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