Foreign Dividends

Page 1

FOREIGN DIVIDENDS DEF OF FOREIGN DIVIDENDS GROSS INCOME – para (k) EXEMPT DIVIDENDS Section 10(1)(k)(ii) PROFITS TAXED IN SA

- (aa)(A)

-EXCEPTION

FROM DIV DEC BY RESIDENT(aa)(B) >10%25 IN A DUAL LISTEDCO– (bb)

CFCs

– (cc)

20%25 SHAREHOLDING

– (dd)

FOREIGN DIVIDENDS RESIDENT HOLDS 50%25 OF A CFC. 2007

2008

R

R


CFC NET INC before tax TAX @ 30%25 PROFIT after tax

3 000 (900) 2 100

2 000 (600) 1 400

DIVIDEND PAID

1 000

3 000

1 500

1 000

500

1 500

RESIDENT s9D 50%25 OF Net Income DIVIDEND RECEIVED EXEMPTION Computed as follows: s9D INCLUSION LESS: FOR TAX DIVIDENDS

(500) (1 250) 1 500 (450)

2 500 (750) (500)

EXEMPTION

1 050

1 250

LIMITED TO DIV REC

(500) (1 250)

-

FOREIGN DIVIDENDS S23(f) – NO DEDUCTIONUNLESS AMT COSTITUTES INCOME S11CInterest Incurred on ‘ForeignDividends’

S11C(1) –allows a deduction of interest actually incurred in the production of ‘foreign dividends’


S11C(2) -the interest deduction is limited to the amount of ‘foreign dividends’ that are included in the income of the TP S11C(3) - excess interest must be reduced by the exempt ‘foreign dividends’ - balance must be carried forward to the immediately succeeding year of assessment.

FOREIGN DIVIDENDS

Q 9.21

EXAMPLE

The following amounts accrued to a resident: Taxable foreign dividends (own funds) Exempt foreign dividends (own funds) Taxableforeign dividends (borrowed funds) Exempt foreign dividends (borrowed funds)

4 1 30 3

500 500 000 000

Incurred incurred on borrowed funds R54 000. Own Borrowed funds funds Foreign dividends Less exempt foreign dividends (s10(1)(k)(ii)) Taxable foreign dividends Less ‘basic’ foreign dividend exemption (s 10(1)(i)(xv)))

Total

6 000 1 500

33 000 3 000

39 000 4 500

4 500

30 000

34 500

417

2 783

3 200

4 083

27 217

31 300


Less ‘deductible’ interest of R44 537 (R27 217/R33 000 X R54 000) ( s23(f )) - Limited to s11C(2) Carried forward to the next y o a ‘Deductible’ interest incurred Less foreign div included in income Less ‘exempt’ for div (R4 500 + R3 200) Deemed int incurred in the next y o a

(31 300)

44 31 13 7

537 300 237 700

5 537


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