Secondary Tax on Companies | South Africa Tax Guide 2006

A dual system for the taxation of Companies and Close Corporations exists in South Africa, one part being levied on taxable income and the other part on distributed profits. The Tax is levied as follows -

Normal income tax as per the various company classifications

A secondary tax of 12.5% on all profits distributed by companies in the form of dividends.

Important Points:

It will apply irrespective of the recipient

The dual tax systems will apply to gold mining companies which will have a choice of the old or new systems

The Act re-introduced certain deeming provisions to subject certain distributions to STC:

• Exempt income declared by Companies
• Dividends declared by fixed property Companies formed in terms of Section 11 (s)
• Liquidation dividends
• Unit portfolio dividends of interest or dividends in terms of Section 11 (s)

Value Added Tax

South African legislation provides for a 2 -tier system of VAT:

Taxable supplies are levied at a standard rate of 14% - or -

at a rate of 0%

The following are certain of the taxable supplies subject to zero rates -

• Rice
• Vegetables
• Fruit
• Vegetable Oil
• Milk
• Brown Wheat Flour
• Eggs
• Edible Legumes
• Illuminating Paraffin

Residential rentals are exempt from VAT.