CIT on Dividends?

[bobsuncle]

Hi All,

I'm new to the South African business landscape and would appreciate any advice. I'm South African, but I've been in the UK for 7 years.

My wife and I are investing in a business with a 10% shareholding

On the most part we are happy to move forward with starting a company and buying shares through it, but there is 1 question I would be very grateful if anyone could help me answer as I just can't seem to find the answer online.

This is what I know, please correct me if I'm wrong on any count:

The company will need to pay CIT on it's income, but no dividend tax will be due since it's being distributed to a company. Dividend tax will only be due when distributing dividends out of our investment company into our personal names. Also no income tax will be due on this money in our personal names. If/when we sell our shares, there will be a CGT of 28% as the capital gain will form part of the income of the company. We are entitled to reinvest any money earned by the company through dividend or sale of shares without additional tax (until that investment either produces and income or is sold itself)

The only question I can't seem to find an answer to is:

The question I have is whether our investment company will also need to pay CIT on the money earned from the dividends? It doesn't make any sense that it would need to since CIT has already been paid by the company, but I just can't seem to find anything in my basic online searches and an extra 28% tax is worth worrying about!

I'd be very grateful if anyone could tell me whether we would need to repay CIT from our company and if you don't mind, show me in some literature where it makes that clarification.

Thank you so much for your help!

[bobsuncle]

Hi Everyone,

The question I have for you all today is this:

If I have a company that buys shares in another company. When my company receives dividends, does it need to pay CIT on them?

Thanks,
Bobs Uncle

[Taxforum]

Hi All,

I'm new to the South African business landscape and would appreciate any advice. I'm South African, but I've been in the UK for 7 years.

HVZ: Your company a UK or SA company?

My wife and I are investing in a business with a 10% shareholding

HVZ: Do you own 100% in your company and your COMPANY or you as a person, will hold 10%?

On the most part we are happy to move forward with starting a company and buying shares through it,

HVZ: Note that if you buy it through a company outside SA, you may be in contravention of SA exchange control rules. "LOOP"


but there is 1 question I would be very grateful if anyone could help me answer as I just can't seem to find the answer online.

This is what I know, please correct me if I'm wrong on any count:

The company will need to pay CIT on it's income, but no dividend tax will be due since it's being distributed to a company. Dividend tax will only be due when distributing dividends out of our [HVZ: South African] investment company into our personal names. Also no income tax will be due on this money in our personal names.
HVZ: This is a UK issue and answer is dependent on your domicile status and your right to claim remittance basis of taxation.

If/when we sell our shares, there will be a CGT of 28% [HVZ: UK CGT so yes if that is your UK CGT rate, if it is a SA company it may be lower or zero] as the capital gain will form part of the income of the company.

We are entitled to reinvest any money earned by the company through dividend or sale of shares without additional tax (until that investment either produces and income or is sold itself)
HVZ: Not true if aSA CO. If you paid CGT no further CIT and on dividend no further CIT but yes DWT subject to UK tax treaty rules

The only question I can't seem to find an answer to is:

The question I have is whether our investment company will also need to pay CIT on the money earned from the dividends?
HVZ: SA company on SA dividend income: NO

It doesn't make any sense that it would need to since CIT has already been paid by the company, but I just can't seem to find anything in my basic online searches and an extra 28% tax is worth worrying about!

I'd be very grateful if anyone could tell me whether we would need to repay CIT from our company and if you don't mind, show me in some literature where it makes that clarification.

Thank you so much for your help!

HVZ comment:

You overlook some interesting facts in you summary: if you are UK resident, you may indeed be UK tax resident. If you own all the shares in a SA company and your are the only directors, the SA company may indeed be UK tax resident. The the dividend whithholding tax (DWT) will apply and the exemption you seek, on dividend from SA company to SA tax resident company, will not apply

[Taxforum]

If it is an SA company receiving the dividend from a SA company, other than a REIT dividend, it is tax free no CIT