Page 113 - P6 Slide Taxation - Lecture Day 7 - Various Topics
P. 113
Foreign dividends
• Foreign dividends that are partially taxable in South Africa (s 10B(3) – see chapter
5) may result in the foreign tax rebate not being available in respect of the full
amount of foreign tax imposed on these dividends, but only on the part of the
dividend that is included in the recipient’s taxable income.
• A resident may find itself in a position where the foreign taxes do not exceed the
effective rate at which the dividends are taxed in South Africa, yet it may not be
able to claim a rebate for the full amount of the foreign tax. This problem arises as
a result of the partial exemption method used to align the tax rate applicable to
the foreign dividends with the rate applicable to local dividends.
• In order to prevent this unjust outcome, it is deemed that the full dividend was
subject to tax in South Africa for purposes of determining the foreign tax rebate
(proviso (ii) to s 6 quat (1A)).
• As a result, the full foreign tax payable regarding such dividends can be included in
the rebate amount to which the overall limitation is applied despite the fact that
the foreign dividend was only partially taxed in South Africa.
113
