Income Tax

[Bondizzo]

I'll be investing in shares soon, and would like to know the tax implications of the following situation. I want to trade in my home countries stock exchange, theres no capital gains tax and no tax on dividends for individuals. If I make money and keep it in a bank account in my home country would I have to pay Tax to SARS as I'll be reporting all my income to the tax authority in that country.

 

[blunomore]

Which country?

SA has double taxation agreements with a lot of other countries.

 

[guest2013-1]

Which country?

SA has double taxation agreements with a lot of other countries.

That's true. Only if you live in that country for longer than 6 months do the tax laws of only that country fall on you.

FYI, in South Africa you only pay tax on dividends earned and not on the stock itself or the amount invested. If you keep a bank account there I think the tax would apply to the dividends earned and the amount of money you bring into the country.

If you keep on re-investing this amount there shouldn't be any tax (I think). I'd also say to rather re-invest any earnings into the same stock for as long as possible. And because your country doesn't tax on payable dividends its fine.

i think the problem comes in when you bring money into the country earned elsewhere

 

[blunomore]

That's true. Only if you live in that country for longer than 6 months do the tax laws of only that country fall on you.

FYI, in South Africa you only pay tax on dividends earned and not on the stock itself or the amount invested.

Acid, I stand corrected (my tax knowledge is dangerous) but AFAIK one currently does NOT pay tax on dividends.

The government plans to phase out secondary tax on companies, which is the tax companies pay on dividends paid to you - and to replace it with a lower tax on dividends for shareholders.

Again, AFAIK, secondary tax on companies is 12.5 percent of the dividends they distribute to you. The new dividend tax will be 10 percent.

 

[Bondizzo]

That's true. Only if you live in that country for longer than 6 months do the tax laws of only that country fall on you.

FYI, in South Africa you only pay tax on dividends earned and not on the stock itself or the amount invested. If you keep a bank account there I think the tax would apply to the dividends earned and the amount of money you bring into the country.

If you keep on re-investing this amount there shouldn't be any tax (I think). I'd also say to rather re-invest any earnings into the same stock for as long as possible. And because your country doesn't tax on payable dividends its fine.

i think the problem comes in when you bring money into the country earned elsewhere

k my main concern is that if I invest say R50 000, and my shares double to R100 000, I would have made a profit of R50 000 and I wont pay capital gains tax as it doesn't apply. Can bring the money back with no problem ?

 

[guest2013-1]

k my main concern is that if I invest say R50 000, and my shares double to R100 000, I would have made a profit of R50 000 and I wont pay capital gains tax as it doesn't apply. Can bring the money back with no problem ?

You could but then normal tax applies. So it's your profit + your salary = new tax bracket and taxed.

Acid, I stand corrected (my tax knowledge is dangerous) but AFAIK one currently does NOT pay tax on dividends.

I haven't actively traded on the JSE since 2003 and I myself isn't clued up on it. But as far as I know you don't pay tax on the shares you buy, but you pay tax on the dividends they pay out to you. It's seen as income. That is why shares are tax-free I think.

If you'd like I can email my accountant to confirm this?

 

[AirWolf]

http://www.moneyweb.co.za/mw/view/mw/en/page55?oid=268384&sn=Detail

ALEC HOGG: A warm welcome to Deborah Tickle. She's a director at KPMG. Deborah. A few people are confused, not least one of us in the studio her, about the whole dividend tax for companies. At the moment, if you get a dividend from a company listed on the JSE, it's tax-free. From 2010 is that going to change?

DEBORAH TICKLE: Evening, Alec. Not at all. In essence, the dividend will appear to be tax-free in people's hands because it won't be subject to income tax in the normal course of events through the tax return - it will be subject to a withholding tax. At the moment what happens is when a dividend is distributed, the company actually is subject to a tax on distribution. In 2010, when the new tax comes in, there will be a withholding tax which is a tax on the taxpayer, in other words the person receiving the dividend, but they will receive the net amount.

ALEC HOGG: All right. So the company, say, would declare a 2c/share dividend, but in fact 1.5c, for argument's sake, after taxes.

DEBORAH TICKLE: That's exactly right, and the other 0.5c will go off to the government.

 

[zamrg]

If you're a South African Tax Resident, you pay income taxes on your world-wide earnings, regardless of where that income was earned. This isn't applicable if SA has a double tax agreement with that country though, so you'll need to check that out or even speak to an accountant.

check out the S10 exceptions in the Income Tax Act, http://www.sars.gov.za/lnb/mylnb.asp?/jilc/kilc/alrg/ulrg/vlrg/u0k0a#2no

S10(k)(i) - excemption dealing with local dividends
S10(k)(ii) - excemption dealing with foreign dividends

Whether you're taxed on the gain or not will depend on if you're holding the shares as capital, in order to earn future revenue such as in the form of dividends, or as stock, in which case you'll profit off regularly selling/buying shares. If you regularly buy/sell shares and hold them as stock, it will constitute gross income and you'll be taxed at your current bracket income tax rate, but if you're merely holding them to earn dividends and without the intention of profitting off selling shares, you'll be taxed at the Capital Gains Tax rate when you sell them.

This obviously depends on whether you're a South African Tax Resident or a non-resident, whether you're holding the shares as capital or as trade stock, and whether South Africa has a Double Tax Agreement with the country in which you hold those shares. - but it's still probably best to speak to an accountant as you don't wanna evade paying tax or suddenly get nailed by SARS on your profit

 

[guest2013-1]

Ah I mustve been thinking the 2010 bit then