ARTICLE · 05 FEBRUARY 2018

The Fine Line Between Dividends And Income

Pieter van der Zwan & Associates

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Dividends are payments received by a person in respect of shareholding in a company. In the recent case of C:SARS v Reunert Ltd the SCA was required to consider an arrangement...

South AfricaTax

Pieter Van Der Zwan

Dividends are payments received by a person in respect of shareholding in a company. In the recent case of C:SARS v Reunert Ltd the SCA was required to consider an arrangement that involved commission to top up dividends received by a shareholder. The case shows that taxpayers have to be careful when negotiating commercial deals involving dividend payments as consideration.

Dividends are generally not subject to normal tax in the hands of the recipient. The profits from which such dividends have been paid would already have been taxed in the company where it arose. Depending on the recipient, the dividend may be subject to an additional layer of tax in the form of dividends tax. In C:SARS v Reunert Ltd ((971/2016) [2017] ZASCA 153) the court had to consider an arrangement that involved commission closely linked to dividends received.

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