FOREIGN DIVIDENDS DEF OF FOREIGN DIVIDENDS GROSS INCOME – para (k) EXEMPT DIVIDENDS Section 10(1)(k)(ii) PROFITS TAXED IN SA
- (aa)(A)
-EXCEPTION
FROM DIV DEC BY RESIDENT(aa)(B) >10%25 IN A DUAL LISTEDCO– (bb)
CFCs
– (cc)
20%25 SHAREHOLDING
– (dd)
FOREIGN DIVIDENDS RESIDENT HOLDS 50%25 OF A CFC. 2007
2008
R
R
CFC NET INC before tax TAX @ 30%25 PROFIT after tax
3 000 (900) 2 100
2 000 (600) 1 400
DIVIDEND PAID
1 000
3 000
1 500
1 000
500
1 500
RESIDENT s9D 50%25 OF Net Income DIVIDEND RECEIVED EXEMPTION Computed as follows: s9D INCLUSION LESS: FOR TAX DIVIDENDS
(500) (1 250) 1 500 (450)
2 500 (750) (500)
EXEMPTION
1 050
1 250
LIMITED TO DIV REC
(500) (1 250)
-
FOREIGN DIVIDENDS S23(f) – NO DEDUCTIONUNLESS AMT COSTITUTES INCOME S11CInterest Incurred on ‘ForeignDividends’
S11C(1) –allows a deduction of interest actually incurred in the production of ‘foreign dividends’
S11C(2) -the interest deduction is limited to the amount of ‘foreign dividends’ that are included in the income of the TP S11C(3) - excess interest must be reduced by the exempt ‘foreign dividends’ - balance must be carried forward to the immediately succeeding year of assessment.
FOREIGN DIVIDENDS
Q 9.21
EXAMPLE
The following amounts accrued to a resident: Taxable foreign dividends (own funds) Exempt foreign dividends (own funds) Taxableforeign dividends (borrowed funds) Exempt foreign dividends (borrowed funds)
4 1 30 3
500 500 000 000
Incurred incurred on borrowed funds R54 000. Own Borrowed funds funds Foreign dividends Less exempt foreign dividends (s10(1)(k)(ii)) Taxable foreign dividends Less ‘basic’ foreign dividend exemption (s 10(1)(i)(xv)))
Total
6 000 1 500
33 000 3 000
39 000 4 500
4 500
30 000
34 500
417
2 783
3 200
4 083
27 217
31 300
Less ‘deductible’ interest of R44 537 (R27 217/R33 000 X R54 000) ( s23(f )) - Limited to s11C(2) Carried forward to the next y o a ‘Deductible’ interest incurred Less foreign div included in income Less ‘exempt’ for div (R4 500 + R3 200) Deemed int incurred in the next y o a
(31 300)
44 31 13 7
537 300 237 700
5 537