Beneficial owner exemption status - South Africa
South African resident and non-resident beneficial owners are categorised by exemption code, as follows:
| Code | Description |
| A | A resident company |
| B | The government, a provincial administration or a municipality |
| C | A public benefit organisation approved by the Commissioner in terms of section 30(3) (could be local or foreign but must be approved) |
| D | A trust contemplated in section 37A (that is, a rehabilitation trust) |
| E | An institution, board or body contemplated in section 10(1)(cA) (Water Board, Tribal Authority etc.) |
| F | A fund contemplated in section 10(1)(d)(i) or (ii) (that is, Pension/Provident/RA/Benefit Fund) |
| G | A person contemplated in section 10(1)(t) (CSIR, SANRAL, ARMSCOR, Development Bank of South Africa etc.) |
| H | A shareholder in a registered micro business, as defined in the Sixth Schedule, paying that dividend, to the extent that the aggregate amount of dividends paid by that registered micro business to its shareholders during the year of assessment in which that dividend is paid does not exceed the amount of ZAR 200,000 |
| J | A person that is not a resident and the dividend is as contemplated in paragraph (b) of the definition of "dividend" in section 64D (that is, a non-resident company listed on the JSE) |
| Y | Exemption according to status as defined in a Double Taxation Treaty (DTT) |
| Z | Exemption related to another international agreement |
Beneficial owners who decide not to disclose themselves will be deemed non-exempt South African residents and the maximum withholding tax rate will be applied.
Exemption status pre-validation
The South African Revenue Service (SARS) requires that the exemption status of non-resident beneficial owner should be validated, either by them or by an external tax advisor, before the submission of the exemption request for an actual dividend payment of a South African equity.
This exemption status only concerns foreign entities exempt from worldwide tax by way of the Diplomatic Immunities and Privileges Act (Act 37/2001) and Supranational entities.
SARS offers a service whereby entitled beneficial shareholders can obtain a tax exemption response directly from SARS via one of the following options:
- Option 1:
The beneficial shareholder applies to SARS directly by completing a form and supplying the necessary documentation for onward submission to the Tax Exempt Unit of SARS.
This application process is a non-binding private opinion that entails no cost implications and the opinion on the applicant’s tax-exemption status is not binding on SARS. The final form with the relevant documentation should be submitted to the following SARS Unit:The Head: Tax Exemption Unit
Box 11955
Hatfield
0028
South Africa
- Option 2:
The beneficial shareholder can obtain an Advance Tax Ruling (ATR) from SARS that will be binding on SARS.
This service entails cost implications that depend on the nature and complexity of the query. All details related to this service and process can be found on the SARS website.
Customers who submit a request for exemption to Clearstream Banking (that is, at source or via quick or standard refund) on behalf of a beneficial shareholder with regard to dividends from equities issued in South Africa must ensure that the supportive documentation provided has been validated either by SARS or by an external tax advisor.