ARTICLE · 29 FEBRUARY 2012

Budget 2012 – Tax Proposals

Bell Dewar

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The Minister of Finance Mr Pravin Gordhan delivered South Africa’s much anticipated 2012 Budget speech to Parliament this afternoon.

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Conor McFadden

The Minister of Finance Mr Pravin Gordhan delivered South Africa's much anticipated 2012 Budget speech to Parliament this afternoon. This year's budget has introduced some interesting and surprising tax amendments. The main tax proposals specifically relevant to the corporate sector are discussed briefly below.

Dividends Tax/ Foreign Companies/ STC Credits

From 1 April 2012 Secondary Tax on Companies ("STC") will be replaced by a new withholding Dividends Tax regime. The Budget proposes an unexpected increase in the withholding Dividends Tax rate due to equity reasons from the original 10% to a 15% rate. The increased withholding tax rate has led to collateral amendments. Foreign companies that have South African sourced income are subject to tax at a 33% rate and it is proposed that the rate will be reduced to 28%. As such foreign companies and domestic companies will be subject to the same corporate tax rate of 28% but no dividend tax will arise for the foreign

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