Dividends tax is a withholding tax that came into effect on the 01st of April 2012 and replaces Secondary Tax on Companies (STC). Dividends tax is levied on the beneficial owner at 15 per cent. The beneficial owner need not be a registered owner of the share. A registered owner could be for an example an agent or a nominee holding the share on behalf of the beneficial owner. Section 1 of the Income Tax makes it clear that as from the 1st of April 2012 the dividend does not have to be paid to a shareholder; it merely has to be paid in respect of a share in the company.
Difference between Dividends Tax and Secondary Tax on Companies (STC)
Dividends tax is the tax imposed on the beneficial owner, exempts residents companies and levied at 15 per cent whereas STC was imposed on the company paying dividends and was levied at 10 per cent, this tax is aimed at encouraging companies and close corporation to retain profits instead of declaring dividends because if the company declares more dividend they will be liable for more tax. The introduction of Dividends tax gives relief to the companies as the tax on it is borne by the beneficial owner.