Relief at source - eligibility, documentation, deadlines - Equities in South Africa
Who can obtain relief at source?
South African Equities
Exemption or relief at source from withholding tax on dividends from South African Equities is available when paid to:
- aAny non-resident beneficial owner (including those eligible to claim exemption under exemption code Y) that:
- Is resident in a country that has signed a Double Taxation Treaty (DTT) with South Africa that provides for a reduced tax rate lower than 20%; and
- Meets the conditions laid down by the applicable DTT to obtain the benefit of the reduced withholding tax rate. For a large majority of the tax treaties in force with South Africa, such a condition is to have a minimum holding of the capital of the distributing company;
- Supranational entities (subject to pre-validation) recognised by the South African authorities as exempt under exemption code Z;
- Foreign entities (subject to pre-validation) exempted from worldwide taxation by virtue of the Diplomatic Immunities and Privileges Act (Act 37/2001) schedules 3 and 4 on the United Nations and its specialised agencies (exemption code Z);
- South African residents that are eligible to claim exemption under exemption codes A-H.
| Eligible beneficial owners | Rate applicable at source |
Residents of Double Taxation Treaty (DTT) countries | Tax treaty rate or 20%, whichever is lower |
Supranational entities | 0% |
Foreign entities exempted (Act 37/2001) | 0% |
South African residents as per the exemption codes list | 0% |
Inward Listed Securities
Exemption or relief at source from withholding tax on dividends from Inward Listed Securities is available when paid to:
- Any non-resident beneficial owners under exemption code J;
- South African residents eligible to claim exemption as per section 64E of the South African Income Tax Act (exemption codes A-H).
| Eligible beneficial owners | Rate applicable at source |
Non-resident beneficial owners under exemption code J | 0% |
South African residents as per the exemption codes list | 0% |
Beneficial owners who do not disclose themselves will be considered as non-exempt South African residents and tax will be withheld at the maximum corresponding rate.
Documentation requirements
The documentation requirements vary according to the type of equity and the status of the beneficial owner, as follows:
South African Equities
Residents of Double Taxation Treaty (DTT) countries eligible for exemption from withholding tax according to its specific status and provided that this is specified within the DTT:
- One-Time Certificate for South African Equities and Inward Listed Securities;
- Declaration of Exemption from Dividend Withholding Tax DTD(EX), exemption code Y;
- Per-payment instruction
- Power of Attorney, when applicable.
Residents of DTT countries eligible for a reduced rate of withholding tax as provided by the relevant article in the DTT:
- One-Time Certificate for South African Equities and Inward Listed Securities;
- Declaration for Reduced Rate of Dividend Withholding Tax DTD(RR);
- Per-payment instruction
- Power of Attorney, when applicable.
Supranational entities recognised by the South African authorities and foreign entities exempted from worldwide tax by virtue of the Diplomatic Immunities and Privileges Act (Act 37/2001) schedules 3 and 4 on the United Nations and its specialised agencies:
- One-Time Certificate for South African Equities and Inward Listed Securities;
- Declaration of Exemption from Dividend Withholding Tax DTD(EX) accompanied by the validating supportive documentation, exemption code Z;
- Per-payment instruction
- Power of Attorney, when applicable.
South African residents eligible to claim exemption according to section 64E of the South African Income Tax Act:
- One-Time Certificate for South African Equities and Inward Listed Securities;
- Declaration of Exemption from Dividend Withholding Tax DTD(EX) exemption codes A-H;
- Per-payment instruction
- Power of Attorney, when applicable.
Inward Listed Securities
Non-residents of South Africa:
- One-Time Certificate for South African Equities and Inward Listed Securities;
- Declaration of Exemption from Dividend Withholding Tax DTD(EX) claiming under exemption code J;
- Per-payment instruction
- Power of Attorney, when applicable.
South African residents that are eligible to claim exemption according to section 64E of the South African Income Tax Act:
- One-Time Certificate for South African Equities and Inward Listed Securities;
- Declaration of Exemption from Dividend Withholding Tax DTD(EX) claiming under exemption codes A-H;
- Per-payment instruction
- Power of Attorney, when applicable.
N.B.: Eligible beneficial owners for whom the customer does not provide the required documentation will not be able to obtain relief but will be recorded as "undisclosed" and will consequently be subject to withholding tax at the maximum applicable rate.
Form descriptions are presented according to the procedures available for reclaim of withholding tax on income from South African equities.
Deadlines for receipt of documents
Eligible beneficial owners can benefit from relief at source from withholding tax on dividends from equities issued in South Africa by providing the following:
- The required documentation, in original form, before the first dividend payment date to which it should be applied and no later than 10:00 CET two business days before record date;
- The per payment instruction for each dividend payment, via SWIFT (formatted MT565), or Xact web portal message no later than 10:00 CET two business days before record date;
For full formatting requirements of the instruction, customers should refer to:
- The MT564 event notification;
- Tax instruction formats in the CBL Customer Handbook; and
- The Xact via SWIFT User Guide.
The per-payment instruction is a breakdown, per beneficial owner, that must contain all mandatory information as required by the South African Revenue Service (SARS).