Tax and SARS knowledge base
Are local dividends taxable after dividends tax?
Are local dividends taxable on my ITR12 after dividends tax was withheld?
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Direct answer
For an individual, a dividend from a South African company is generally exempt from normal income tax, while dividends tax is normally withheld by the company or a regulated intermediary. That does not necessarily mean you ignore the dividend on your annual ITR12. SARS says the individual recipient must declare the dividend received or receivable in the annual return. The return entry and the withholding are different parts of the tax system. Do not add the withheld dividends tax to your normal-tax liability a second time, but do not assume that a prepopulated return needs no review either.
What this means in practice
Your broker, platform or company should normally produce a tax certificate or dividend advice. That record may show the gross dividend, dividends tax withheld and net cash received. The net cash is not always the figure that answers every ITR12 question. Reconcile the certificate to your return rather than guessing from the cash paid into your account. The word dividend is used broadly in everyday conversation. Tax reporting needs more precision. A local ordinary dividend, a taxable REIT distribution, a foreign dividend, a return of capital and proceeds from selling shares are not interchangeable. The fact that your broker describes several entries in one annual summary does not make them one category for an ITR12. SARS has updated its ITR12 wording and source-code display for exempt local dividends. Use the return applicable to the year you are filing. A historical return, trust distribution, non-resident status or unusual share arrangement may require a different approach.
Step-by-step
- Download every dividend record.
Obtain IT3(b) certificates, broker tax reports and dividend advices before filing. Check that the certificate covers the correct tax year.
- Reconcile gross and net amounts.
List the gross dividend, dividends tax withheld and net payment. The three figures should make sense against the certificate. Investigate a missing or duplicated payment before submitting the return.
- Separate other investment entries.
Put foreign dividends, REIT distributions, interest and share-sale proceeds into separate columns. This avoids putting a taxable distribution in an exempt-local-dividend field.
- Review SARS prepopulation.
Prepopulated information can be useful but should be checked against your own third-party certificate. If a certificate is wrong, ask the payer or broker to correct and resubmit the source data rather than inventing a replacement figure.
- Complete the current ITR12.
Follow the investment-income questions and make the declaration required by the current return. Preserve the source records used for each entry.
- Save the final record.
Keep the submitted ITR12, ITA34, certificates and any correction correspondence together. This makes a verification response much easier.
Documents and records to keep
- IT3(b) certificates and annual broker tax reports.
- Individual dividend advices showing gross and net amounts.
- Evidence of dividends tax withheld where supplied.
- Records of shares held and corporate actions where relevant.
- Filed ITR12, assessment and SARS correspondence.
Important limits and exceptions
General exemption language is not a substitute for classification. REIT distributions can be presented with taxable local dividends in the ITR12 investment-income flow. Foreign dividends have separate rules. Non-residents can have treaty or declaration issues. Dividends received through a trust, company or estate should not be copied mechanically into an individual investor's workflow. Do not treat a share sale as a dividend just because it generated a cash receipt. Likewise, a return of contributed tax capital or a special corporate action can need separate analysis. Ask for advice where the certificate is unclear.
When to get tailored advice
Obtain advice where you are a non-resident, receive distributions from trusts or REITs, have an unusual corporate action, have records from multiple brokers or discover a mismatch between SARS prepopulation and certificates. TaxProof can help reconcile your investment records before filing.