Page 37 - Nexia Cape Town 2018 TG Digital

income of a CFC in the same ratio as the participation rights of the resident
in such a CFC, subject to a number of exclusions� Net income of the CFC is
defined as the CFC’s taxable income determined as if the CFC is a South African
taxpayer�

Foreign dividends (including deemed dividends)
Foreign Dividends received from a non–resident company are taxable�
Foreign dividends are, however, exempt as follows:
■ If received by a resident who holds at least 10% of the equity shares in the
foreign company
■ The shareholder is a company which is in the same country as the foreign
company paying the dividend
■ If declared by a company listed on the SA stock exchange
■ If paid out of the profits of a foreign company if the profits of the foreign
company have been included in the South African shareholder’s income in
terms of the CFC provisions
Where a foreign dividend is not exempt in terms of the provisions above the
following part of a foreign dividend will be exempt from tax:
■ Individuals and trusts: 25/45 or 56% of the foreign dividend received
■ Companies: 8/28 or 29% of the foreign dividend received
No deduction will be granted for any expenditure incurred in the production of
income in the form of foreign dividends�
Foreign tax credits
Residents are allowed to deduct all foreign taxes paid in respect of foreign source
income from the tax payable in South Africa on such foreign income� Any excess
credits may be carried forward�
Where foreign tax is withheld on South African source income, the taxpayer can
claim a deduction against income�

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