Tax and SARS knowledge base
How are foreign dividends taxed in South Africa?
How are foreign dividends taxed in South Africa?
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Direct answer
Foreign dividends can be taxable for a South African tax resident. SARS says that most foreign dividends received by individuals from foreign companies where the shareholding is below 10% are taxable at a maximum effective rate of 20%, but the exact result still depends on the relevant return year, the shareholding, the source documents and whether an exemption or foreign-tax relief is relevant. Do not rely on a foreign broker's description of a payment as the final South African tax classification. Start with the gross dividend, foreign tax withheld, currency and holding facts, then complete the applicable ITR12 investment-income fields.
What this means in practice
The key distinction is between local and foreign dividend income. A South African company dividend can generally have a normal-tax exemption for an individual, but foreign dividends are not automatically treated the same way. The ITR12 guide has separate taxable and exempt foreign-dividend information. Choosing the wrong field can create an incorrect assessment or a verification query. Shareholding matters. The SARS summary statement about most portfolio foreign dividends addresses a foreign-company shareholding below 10%. It is not a substitute for advice if you hold a significant stake, have rights through an entity, acquired shares through employment or receive a distribution from a controlled foreign company. Foreign withholding tax can make the net payment smaller, but net cash is not the complete reporting picture. Preserve the gross amount and withholding separately. Currency conversion also needs a supportable approach. Keep the rate or method used for the relevant period, rather than translating every historical item using a current exchange rate.
Step-by-step
- Obtain the annual broker report.
Download the report showing each foreign dividend, payment date, gross amount, currency and withholding tax. Keep issuer-level details where available.
- Identify the investment correctly.
Confirm whether the payer is a foreign company and whether you held the shares directly, through a platform, a trust or another arrangement. Do not assume an overseas listing means every payment is foreign dividend income.
- Separate income types.
Keep local dividends, foreign dividends, REIT distributions, interest and share-sale gains in different lines of a schedule. Do not deduct a share purchase cost from dividend income.
- Convert consistently.
Record the rand value and your conversion support. If statements use several currencies, retain the underlying statements and calculation.
- Review the current ITR12 questions.
Follow the current SARS guide for taxable and exempt dividend data. The return may show different fields or source codes from older tax years.
- Retain foreign-tax evidence.
Keep withholding certificates or broker reporting even if you are not immediately claiming relief. They may be important for review and for a future correction.
Documents and records to keep
- Annual broker reports and foreign dividend vouchers.
- Shareholding records, contract notes and corporate-action notices.
- Foreign withholding-tax evidence.
- Currency-conversion schedule and supporting rates.
- Filed ITR12, assessment and relevant correspondence.
Important limits and exceptions
This guide is for ordinary individual reporting and does not decide tax residence, treaty entitlement or the treatment of a significant foreign-company holding. Do not state a maximum effective rate without checking the applicable tax year and facts. A foreign dividend can be exempt in particular circumstances, but that is not a reason to label every foreign payment exempt. The dividend question is separate from foreign-tax credit relief. A foreign country may have withheld tax at a rate affected by its domestic law or a treaty. Keep the certificate and seek advice instead of assuming that every withheld amount can be claimed in full.
When to get tailored advice
Get advice if your foreign shareholding may be 10% or more, the payment comes from an employment share plan, the issuer is a fund or trust, tax was withheld in several countries, or residence changed during the year. TaxProof can prepare the evidence schedule for a professional review.