Refunds of dividends tax by SARS to regulated intermediaries

A company declaring and paying a dividend is required to withhold an amount of dividends tax in terms of section 64G(1) of the Income Tax Act. In the absence of the dividend declaring company being in possession of the prescribed dividend declaration reducing the dividends tax, the standard rate of dividends tax of 20% must be withheld.

The dividends tax legislation contains a refund mechanism where tax was so withheld, and it is thereafter substantiated that the beneficial owner of the dividend actually qualified for a full or partial exemption from the tax. This refund is substantiated by a prescribed declaration and written undertaking.

A refund so claimed, must be refunded by the dividend declaring company to the person to whom the dividend was paid. The company that is required to make a refund, must firstly make the refund from any amount of dividends tax withheld by that company within a period of one year after the submission of the declaration of exemption as well as the written undertaking. To the extent that the amount of dividends tax refundable by a company to any person exceeds the amount of dividends tax withheld by that company from future dividends within the one-year period, the company may recover the excess from SARS.

A refund of this nature can presently only be recovered from SARS by the company declaring and paying the dividend and therefore, regulated intermediaries were excluded from being so refunded.

It is now proposed that regulated intermediaries be allowed to recover refundable dividends tax from SARS in instances where the refundable amount exceeds the dividends tax withheld by the regulated intermediary at least one year after the amount became refundable.

This amendment is welcomed as it will remove the administration burden from the declaring company to the regulated intermediary involved. Under this proposed amendment, refunds may be claimed by the regulated intermediary that withheld the dividends tax.