General information - types of securities, deadlines, other market specifics - South Africa
Types of securities
The eligible securities issued in South Africa are as follows:
Debt securities:
- Government bonds;
- Semi-government bonds;
- Corporate bonds.
Equities:
- South African Equities - all equities issued by South African corporations, listed and unlisted;
- Inward Listed Securities - issued by a foreign corporation and held secondarily on the Johannesburg Stock Exchange (JSE).
Inward Listed Securities may be subject to South African withholding tax in addition to the foreign tax withheld at source by the issuer, as follows:
- If the standard rate of the foreign withholding tax is lower than the South African standard rate of withholding, South African tax will be applied at a rate equal to the difference between the South African standard rate and the foreign standard tax rate.
- If the standard rate of the foreign withholding tax is equal to or higher than the South African standard rate of withholding, South African withholding tax will not apply.
Types of beneficial owner
The types of eligible beneficial owner recognised for tax purposes in South Africa vary according to the security type, as follows:
For South African Equities:
- Residents of a Double Taxation Treaty (DTT) country as per the exemption codes list;
- Supranational entities;
- Foreign entities exempted (Act 37/2001);
- South African residents as per the exemption codes list.
For Inward Listed Securities:
- Non-resident beneficial owners as per exemption code J;
- South African residents as per the exemption codes list.
Secondary Tax on Companies credits (STC)
Under the STC regime, a South African company earns STC credits from their own investments and may use these credits as an offset to reduce the tax that is payable by the company to the South African Revenue Service (SARS) when they declare their own dividend.
Dividend withholding tax on shareholders will eventually replace the STC and, during the transition period up to 1 April 2015, dividend paying companies will be able to use their STC credits to offset the withholding tax that will be imposed on shareholders.
As a consequence, if the company paying the dividend is using its STC credits on the distribution of a dividend, the manufactured standard withholding tax rate for that payment will be reduced. Effectively, depending on the amount of STC credit used, all or part of the dividend distributed will be tax-exempt, with any remaining portion not covered by the STC credits subject to the standard withholding tax rate (currently 15%). In such cases, customers may therefore receive two payments, one reflecting the tax-free portion and the other reflecting the portion (if any) subject to South African withholding tax.
Example:
A company in South Africa declares a dividend of ZAR 1.00 per share. The company has STC credits amounting to ZAR 0.05 per share. The STC credit will be deducted from the taxable dividend rate:
Total Dividend Rate: | ZAR 1.00 per share |
STC Credit Rate: | ZAR 0.05 (not taxable fraction per share) |
Gross Taxable Dividend Rate: | ZAR 0.95 (ZAR 1.00 minus ZAR 0.05 per share) |
Tax rate to apply on taxable fraction: | 20% default rate (assuming no exemption applicable) |
In principle, assuming no exemptions are applicable, a shareholder of one share in the company will ultimately receive ZAR 0.81 (ZAR 0.05 + ZAR 0.76). An amount of ZAR 0.19 (ZAR 0.95 @ 20%) will be the tax withheld by the regulated intermediary.
Statutory deadline for reclaiming withholding tax
The statutory deadline for reclaiming withholding tax on dividends from equities issued in South Africa is three years after the date of the dividend payment for which tax reclaim is to be made.
Clearstream deadlines
For exemption/relief at source requests:
Eligible beneficial owners can benefit from exemption/relief at source from withholding tax on dividends by submitting the following no later than 10:00 CET two business days before record date:
- The required documentation, in original form, before the first dividend payment date.
- A corporate action instruction, either via Swift (for example, MT599 free-format message) or Xact Web Portal, for each dividend payment, providing a breakdown, per beneficial owner, of all mandatory information as required by the South African Revenue Service (SARS).
For quick refund applications:
Eligible beneficial owners can benefit from a quick refund of withholding tax on dividends by submitting the following:
- The required documentation, in original form, no later than 10:00 CET three business days before the last day of the month following the payment date.
- A corporate action instruction, either via Swift (for example, MT599 free-format message), for each dividend payment, no later than 10:00 CET three business days before the first day of the month following the payment date, providing a breakdown, per beneficial owner, of all mandatory information as required by SARS.
For standard refund applications:
Eligible beneficial owners can benefit from a standard refund of withholding tax on dividends by submitting the required documentation, in original form, at the latest two months before statutory deadline.
Notes on tax reclaims
Customers warrant the completeness and accuracy of the information they supply to Clearstream Banking.
It is the customer’s responsibility to determine any entitlement to a refund of tax withheld, to complete the forms required correctly and to calculate the amount due. Clearstream Banking is under no obligation to carry out any investigation in respect of such information.
With respect to tax reclaims in general, customers are reminded that Clearstream Banking accepts no responsibility for their acceptance or non-acceptance by the tax authorities of the respective country. It is the customer’s responsibility to determine any entitlement to a refund of tax withheld, to complete the forms required correctly and to calculate the amount due.
When are refunds received?
The estimated time for receiving a refund is one month (for a quick refund) or three months (for a standard refund) from the date of submission of the reclaim request. These times can vary depending on when the application is filed and the complexity of the information supplied in the reclaim form.
Clearstream Banking has collected information from sources considered reliable but does not guarantee the accuracy of the timings presented.