The recently published draft Revenue Laws Amendment Bill, 2008 proposes an entirely new tax on dividends, innovatively named the “dividend tax”. This dividend tax is intended to replace the Secondary Tax on Companies (“STC”) which has been in place for some years now. Most importantly, the dividend tax is intended to be a tax on the shareholder, whereas the STC was a tax on the company.
The proposals in the draft Revenue Laws Amendment Bill require that the taxpayer (i.e. the shareholder) must pay the dividend tax to the South African Revenue Service (“SARS”) by the end of the month following the month in which the dividend is paid. These same proposals require that the company paying the dividend must withhold tax against that dividend, and that payment of this withholding tax must also be made by the end of the month following the month in which the dividend was paid. Thus, both payments must be made on exactly same day.
The taxpayer now has a dilemma. In order to fulfil his obligations in terms of the draft law the taxpayer must make payment by a certain date. However, he is aware that someone else has withheld the tax and should pay that tax over on his behalf. But the taxpayer has no proof that this payment has actually been made by the time he becomes liable to pay.
So what is the taxpayer to do to ensure that his liability is paid on time and, perhaps more importantly, to ensure that he incurs no interest on the liability?
There seems to be nothing in the draft law that relieves the taxpayer from any obligation for the dividend tax, or for that matter, interest on the dividend tax in the event that tax was withheld by the company paying the dividend, but not actually paid over to the SARS.
Surely it would be appropriate to provide that where the taxpayer can prove that the company withheld the tax, then that taxpayer can escape liability, particularly for interest, if the amount withheld was not actually paid over the SARS by the due date?
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