Dividends Tax replaces STC

Secondary Tax on Companies, known as STC in business circles, shall be replaced with Dividends Tax as from 1 April this year.

While Dividends Tax shall be levied at a rate of 15%, the new tax shall be payable by shareholders, and not by companies themselves, as was the case with STC. In practise, however, companies shall withhold the tax and pay it to the South African Revenue Service (SARS) on behalf of the shareholder. Even so, shareholders ultimately remain responsible for ensuring that the Dividends Tax has been paid.

Companies that have STC credits on 1 April 2012, will be allowed to use these credits for up to 5 years following on the effective date. Where a company does not withhold Dividends Tax, or withhold less than 15% because it is using its STC credits, it has to advise the shareholders to whom the dividend is paid how much of the STC credit has been used in that dividend. And, where a company with a STC credit pays a dividend to its shareholders after the effective date, it has to apportion the STC credit among them.

Any queries in this regard may be addressed to Boet Lubbe at boet@asl.co.za or 021 840 1600.