DWT and its implications for the hedge fund industry

1st April 2012 saw the implementation of the 15% Dividend Withholding Tax (DWT). The new methodology replaces the 10% Secondary Tax on Companies (STC) which was in effect until 31 March 2012. The essential difference between the two methodologies is that STC was a fixed 10% tax on all dividends, with the tax paid directly to SARS and no exemption applicable.  DWT on the other hand looks to the status of the shareholder and if the shareholder is exempt (various definitions in this regard are set out in the legislation), then the gross dividend is paid across.  However, if the shareholder is not exempt, the “regulated intermediary” deducts the applicable tax which is paid directly to SARS, and the net dividend is paid to the shareholder.

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