Abstract
M.Com.
This study investigates the current dividend withholding tax regime in South Africa. A
country’s tax regime is a crucial factor for foreign investors and potential investors.
When a South African resident company declares a dividend to a non-resident, the
dividend will be subject to a withholding tax. This study also examines the role played
by double taxation agreements in alleviating the dividend tax burden. A literature
review of the dividend withholding tax and the double taxation agreements is adopted
in this study, applying a qualitative approach. This study highlights challenges posed
by the dividend withholding tax and the non-existence of double taxation agreements.
The findings in this study create the impression that the dividend withholding tax,
especially in the light of the recent increase in the dividend tax rate, could deter current
investors or potential investors from investing in South Africa, particularly in instances
where a double taxation agreement is not in force. The findings also demonstrate that
the South African Revenue Service is exposed to challenges of treaty shopping, the
misinterpretation of dividend tax legislation and the articles of the double taxation
agreements by taxpayers, and the existence of double taxation. Notwithstanding the
challenges, double taxation agreements play a major role in providing relief from
double taxation and investors should take them into consideration when investing in
South Africa. Double taxation agreements also assist in the prevention of tax evasion
and the exchange of information between the South African Revenue Service and
other tax jurisdictions.