When a South African company pays a dividend, the tax is taken off before the money reaches you. Here's how it works.
Dividends tax: 20%
Dividends tax is charged at 20% of the dividend. The company paying the dividend (or a regulated intermediary such as a broker) withholds it and pays it to SARS, so a R10,000 dividend reaches you as R8,000. The person who owns the shares, the beneficial owner, is the one liable for the tax; the company just collects it.
Not taxed twice as income
Dividends that individuals receive from South African companies are generally exempt from income tax, so you don't pay PAYE-style income tax on them as well. The 20% withheld is the end of it.
Company tax comes first
A dividend is paid from profit that the company has already been taxed on at 27%. So profit that reaches a shareholder as a dividend has borne tax twice: 27% in the company, then 20% of what's left, about 41.6% in all. That's why owner-directors often compare dividends with a salary, which is taxed only once, in their own hands. Our salary or dividends calculator does the comparison.
The main exemptions
Some shareholders don't pay dividends tax at all, under section 64F of the Income Tax Act. The most common:
- South African companies. A dividend paid to a resident company is exempt, once that company has given the payer a declaration.
- Micro businesses on turnover tax, on dividends of up to R200,000 a year in total.
Exemptions only apply when the right declaration has been given to the company or intermediary before the dividend is paid; the forms come from them, not from SARS.
Non-residents
Dividends tax also applies to non-resident shareholders at 20%, though a tax treaty between South Africa and their country may reduce it.
A worked example
Your company has R100,000 of profit before tax. It pays company tax of 27%, R27,000, leaving R73,000. It declares all of it as a dividend and withholds 20% dividends tax, R14,600, which it pays to SARS. You receive R58,400, and you don't pay income tax on it again. Of the original R100,000, R41,600 has gone in tax: R27,000 in the company and R14,600 on the dividend.
Sources
- SARS: Interest and dividends
- SARS: Interpretation Note 64 (exemptions for resident companies)
- SARS: Tax Guide for Micro Businesses
- SARS: Budget 2026 frequently asked questions
This is general information, not tax, legal or financial advice.