Dividends tax question

[Roger15]

Good day,

I have a vesting Trust which received Old Mutual Share dividends. According to OM, they have deducted 15%withholding tax.
The Trust receiving the dividends is not going to make any distribution of income to any of the beneficiaries for the 2013 tax year.

Will this dividend then be declared for tax purposes as income and based on 40% or will it in fact be exempt per prior years and not included in taxable income?

Thanks

[Mynhardt]

Assuming that all the dividends received by the trust immediately vests in its beneficiaries, although it might only be paid out later, the dividends are to be included in the taxable income of the beneficiaries on the date when the trusts receives it. The dividends will not be included in the taxable income of the trust.
The dividends that vest to the beneficiaries (assumed to be SA residents) will be exempt in terms of S10(1)(k) (local dividend exemption).
So no, nothing changes. The dividends will still effectively be exempt and not included in taxable income.

Any income received by a trust which vests or is distributed during the year it was received, retains its nature (conduit principal). Therefore interest received by the trust and which vests or is distributed to the beneficiary during the same year, will be seen as interest in the hand of the beneficiary as well. This principals would, in this example, also allow the beneficiary to claim a S10(1)(i) interest exemption.

Please note, that even though it might be exempt dividends which vest to the beneficiaries, that if these dividends are distributed by way of an annuity it will then lose its exemption and become taxable [S10(2)(b)]. So be careful that your don't distribute such exempt income in the form of an annuity.

[Roger15]

Thank you