Take note of tax laws if you hold shares

Robert Laing

Robert Laing

New rules on how the taxman takes his slice of shareholder's winnings from dividends and stock trading are in the pipeline.

Bills bringing into effect Finance Minister Trevor Manuel's budget speech can be downloaded from www.treasury.gov.za. The public has been given until October 8 to comment on these.

While shareholders prefer companies which distribute their after-tax profit as dividends, South Africa's tax system has punished dividend-paying companies with secondary tax to companies. Many JSE listed companies have sidestepped this tax by paying shareholders "capital distributions" rather than dividends.

This loophole is soon to be stamped out. "Most countries have a dividend tax at the shareholder level. We have a secondary tax on companies collected directly from a few thousand companies as opposed to millions of shareholders," Manuel said.

Confusion over whether money from share trading counts as income or capital gains has also been addressed. The proposed laws say shares held for less than three years are income, and longer than that capital gains.