Section 64EB(2) applies in respect of, inter alia, stock loans over listed shares which are entered into after the date that a dividend is either announced or declared in respect of such shares.
Section 64EB(2) previously provided that should the requirements of section 64EB(2) be met (i.e. where a person that is, inter alia, a company which is a resident or any person to the extent that the dividend constitutes income of that person, borrows a listed share as described above), then the dividend in respect of the listed share is deemed to have been paid by the borrower to the lender, and the lender is deemed to have received a dividend equal to the amount paid by the borrower to the lender.
The Taxation Laws Amendment Act No. 43 of 2014 ("TLAA”) has amended section 64EB(2). In particular, where the requirements of section 64EB(2) are now met, any amount paid by the borrower to the lender in respect of that borrowed share is deemed to be a dividend paid for the benefit of the lender.
The provision now effectively deems manufactured dividend payments made by the borrower to the lender to be a dividend paid by the borrower to the lender (as opposed to deeming the actual dividend in respect of the listed share to be paid by the borrower). These amendments apply retrospectively from 4 July 2013. These amendments may affect the tax position of the parties to stock loan transactions which fall within the scope of section 64EB(2).
Other changes to Dividends Tax
Two new exemptions have been introduced to section 64F(1) of the Act. These exemptions apply to beneficial owners that constitute a small business funding entity as contemplated in section 10(1)(cQ) or a natural person in respect of a dividend paid on or after 1 March 2015 in respect of a tax free investment as contemplated in section 12T(1).
Section 64K was amended by the Tax Administration Laws Amendment Act No. 44 of 2014 ("TALAA”). This section previously required a person that had paid or received an exempt dividend other than a dividend in specie to submit a tax return. Section 64K now provides that a person that has paid a dividend or received a dividend that is exempt or partially exempt from the dividends tax in terms of section 64F or section 64FA (dividends in specie) must submit a dividends tax return.
SARS has recently released the Comprehensive Guide to Dividends Tax, as well as the latest version of the Business Requirements Specification for the administration of Dividends Tax. The Dividends Tax return has recently been updated and now provides for the two new exemptions. It is interesting to note that if the option "Other” is selected to claim an exemption in the Dividends Tax return, the recipient will automatically be audited. It also appears that when submitting a dividends tax return, the South African income tax number of the recipient of the dividend is not required. This means that dividends tax returns can be submitted by the payor of the dividend without, for example, a non-resident recipient having to register as a taxpayer in order to provide a registration number to the payor.
Click here to view the Comprehensive Guide to Dividends Tax.
Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.