Page 20 - Companies & Dividend Tax

COMPANIES & CLOSE CORPORATIONS

Foreign company with a South African branch

or agency

• Refer to SILKE chapter 19.5.2

• Foreign company that carries on a trade within the Republic via a
branch or agency.

• A South African branch or agency of a foreign company does not
pay tax in South Africa in its own name as the foreign company
(being the legal person) is subject to tax.

• Compare this situation with a subsidiary of a foreign company in
South Africa, which is a separate legal person.

• The foreign company, being a non-resident as defined, will be
subject to tax in South Africa on a source basis. The branch or
agency largely represents the foreign company’s South African
source income. The Income Tax Act provides that the foreign

company’s South African source income (which is represented by
the branch or agency) be taxed at a rate of 28%, but dividends

paid are not subject to dividends tax.

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