01 April 2012
Saica respos to your questions.
I have a question: I am a “natural person” and do not pay income tax as my pension is too small to qualify! Nevertheless, I do have a few thousand rands invested in shares, just as a hobby. Why do I have to pay income tax on the few dividends I receive?
Just to make your day: When I retired at 60 I had been a head of department for eight years at the school where I taught.
I had 20 years of pension contribution as women were only allowed to become part of a pension scheme in 1979!! (So much for being “previously disadvantaged!”) I have a degree and two diplomas, and I know that I delivered excellent work during my teaching career. I am not bitter, just amused at what just keeps happening to us ordinary citizens. (And there are many in the same boat.)
Response Saica’s Piet Nel
The dividends tax that will apply from April 1 2012 onwards does not take the taxable income of the recipient shareholder into account. In other words, the tax is levied on the amount of the dividend, irrespective of whether or not the recipient’s taxable income is below the tax threshold or the average tax rate applicable to the individual concerned is less than the 15%. You will therefore have to pay (it will be deducted by the company paying the dividend to you) the 15% tax on any dividend declared to you after April 1 2012.
Note: There is no change in the treatment of any possible capital gain (or loss) you may make on the disposal of the shares.
As an amateur and part-time stock trader, I found your article titled: ‘Dividend taxes: A costly administrative nightmare’ rather useful.
I would just like to check with you though- should the STC cost at 10% on a declared dividend of R110 000 not be R11 000, leaving the shareholder worse off by R5 500?
Also, you mention an annual exclusion on individual capital gains from R20 000 – R30 000 p.a. Where does that leave us small time traders with less than R20 000 capital gains p.a.? Are we automatically excluded?
Response by Colin Wolfsohn of Wolfsohn & Associates and a member of Saica’s National Tax Committee
The example given shows that there is R110 000 available for distribution but only R100 000 is declared as a dividend and hence the STC is R10 000
As far as this reader goes, as stated he is a “part-time stock trader” and hence any gains he makes will be subject to NORMAL TAX and NOT CGT
Even “small time traders” will be subject to normal tax and not CGT
In the case of true capital gains, these will still need to be reflected in the annual return returns but if the gain is less than the exclusion rate, will not be taxed