Withholding and paying dividends tax
How a South African company withholds dividends tax at 20%, pays it to SARS with the DTR01 and DTR02 by month-end, and records each step in its books.
By Achekam · · 4 min read · For Running a business businesses in South Africa
For an owner-managed company, a dividend often feels like moving money from one pocket to another. The directors resolve to pay it, the bank transfer goes out, and the job seems done. But a cash dividend in South Africa usually carries a tax that the company must take off before paying, send to SARS by a fixed date, and report on two returns.
Getting that wrong is easy and expensive: pay the shareholder in full, and the company still owes the tax; pay SARS a day late, and penalties and interest may follow. This guide sets out the rate, who carries the tax, the special case of dividends in specie, the deadline and returns, and how to record each step.
The rate, and when it changes
SARS says dividends tax is charged at 20% on dividends paid on or after 22 February 2017, unless an exemption or a reduced treaty rate applies. That is the rate at the time of writing.
Whether an exemption or treaty rate applies depends on the shareholder, and on the company holding the shareholder's declaration before it pays. Paying a dividend without dividends tax covers those declarations. For every shareholder without one, the company works at 20%.
The beneficial owner pays, the company withholds
SARS says dividends tax is payable by the beneficial owner of the dividend, but withheld by the company or a regulated intermediary. For a private company paying its own shareholders directly, that means the company itself is the withholding agent.
The practical effect is that the shareholder receives the dividend net of tax. A worked example in words: the directors declare a dividend to a shareholder who has no exemption. The company calculates 20% of the dividend, pays the shareholder the remainder, and holds the 20% as an amount owed to SARS until it is paid over. The shareholder has borne the tax; the company has collected it.
SARS's dividends tax page explains who bears the tax, how it is withheld, the exemptions and reduced treaty rates, and the returns involved.
Dividends in specie
A dividend need not be paid in cash. A company may distribute an asset instead, such as a vehicle, shares in another company or property. SARS says that for a dividend in specie, the company itself is liable for the dividends tax, rather than withholding it from the shareholder.
That changes who bears the cost. With a cash dividend, the tax comes out of the shareholder's payment. With a dividend in specie, there is no cash to withhold from, and the company pays the tax from its own resources. Plan for that cash before resolving to distribute an asset.
Paying by the end of the following month, with the DTR01 and DTR02
SARS says the withholding agent must pay dividends tax withheld to SARS by the last day of the month following the month in which the dividend was paid, together with the DTR01 and DTR02 returns. SARS adds that penalties and interest may apply for late payment or late returns.
Two details deserve attention. The clock runs from the month the dividend was paid, not the month it was declared. A dividend declared in February and paid in March is due to SARS by the end of April.
And "by the last day" means received by SARS by then. SARS's payment rules say it only recognises a payment once it is received into the SARS bank account, and a payment received after the due date is a late payment, so taxpayers must pay before their bank's cut-off time. Paying on the last afternoon of the month is a risk; pay a few days early.
Journals for the dividend, the tax and the payment
The dividend should be clear in the books from declaration to payment. In Achekam, a business can post manual journals for each step. An unbalanced journal, or one dated in a closed month, is refused, and a posted journal is corrected only by a reversal, so each step stays on the record as it happened. Agree the accounts with your accountant; a common pattern is:
- On declaration: record the dividend declared against retained earnings, with the gross amount owed to shareholders.
- On payment: clear the amount owed to the shareholder, recording the net cash paid from the bank and the tax withheld as owed to SARS.
- On payment to SARS: clear the dividends tax owed from the bank.
- For a dividend in specie: record the asset distributed, and the dividends tax as the company's own cost owed to SARS.
The general ledger lists every posted line, and the trial balance shows each account for a period or at a date and says whether debits equal credits. After the SARS payment, the dividends tax account should be back to nil; if it is not, something was missed. The directors' resolution and the dividend records also belong in the company's statutory records; see records a company must keep.
Dividend checklist
- Board resolution recording the dividend and the payment date.
- Status of each shareholder checked; declarations on file where an exemption or reduced rate is claimed.
- Tax at 20% worked out for every shareholder without a declaration.
- Shareholders paid net; tax recorded as owed to SARS.
- DTR01 and DTR02 completed, and tax paid, by the last day of the following month, ahead of the bank's cut-off.
- Dividends tax account cleared to nil in the trial balance.
A dividend is a decision of the directors; the tax that goes with it is a deadline for the bookkeeper. Put both on the same page when the resolution is signed.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
