Dividends are exempt from income tax even if a person receives the dividend by virtue of a cession to that person of the right to receive the dividend. In a notable exception to this principle, if a shareholder cedes the right only to receive dividends (ie, without transferring the other rights attaching to the underlying shares) to a company, the dividend accruing to the company is subject to income tax.
In 2016 the Davis Tax Committee (DTC) formed a corporate income tax (CIT) sub-committee to prepare a CIT report setting out the DTC's position. To ensure that the recommendations made in the report were practical, the DTC took into consideration South Africa's present economic position as well as its outlook. The DTC recognises that in the context of low economic growth, taxes must be raised in a manner that causes as little disruption to economic growth and employment as possible.
In recent years, taxpayers have frequently been unsuccessful in their disputes with the South African Revenue Service, especially where the dispute has involved the interpretation or application of the substantive provisions of tax legislation. However, where disputes have involved compliance with the procedural requirements of tax legislation, taxpayers have generally had greater success.
The Davis Tax Committee (DTC) recently issued a media statement announcing the publication of four additional final reports and the conclusion of its work based on its terms of reference. The closing report on the work done by the DTC states that the 12 sub-committees consulted widely and that a number of themes emerged from the consultations with various stakeholders. The closing report also mentions some of the challenges faced by the DTC.
The focus of a recent Supreme Court of Appeal case was not the merits of the dispute between the parties, but rather the correctness of the procedure that the taxpayer had followed in its appeal to the Tax Court. The Supreme Court of Appeal held that determining whether the Tax Court's decision was appealable was contingent on whether the decision was one contemplated in the Tax Administration Act.