reit dividend tax south africa
A reduced dividend withholding rate in terms of the. In South Africa a REIT receives special tax considerations and offers investors exposure to real estate through shares listed on the Johannesburg Stock Exchange JSE.
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This is a listed property investment vehicle.
. Submit your tax return right here. The impact is such that both realised and unrealised. Real Estate Investment Trust REIT.
The REIT regime in South Africa aims to create a flow though vehicle for income tax purposes. The REIT can then deduct all of those dividends that it paid to shareholders from its corporate taxable income. Foreign shareholders of SA REITs are levied a dividend withholding post tax at the current rate of 20 but this can be reduced in terms of the rates set by the applicable double tax agreement between South Africa and the domiciled country of the investor.
INTRODUCTION On 13 May 2016 the South African Revenue Service SARS released a draft interpretation note on the taxation of REITs and controlled companies. Apart from the fact that a REIT is not subject to capital gains tax in respect of properties that it disposed of an additional consequence is that dividends declared by a REIT to South African shareholders are not exempt but are in fact part of taxable income. TaxTim will help you.
Interest distributions by a REIT or a controlled property company payable to South African resident investors are recharacterised as taxable dividends ie the normal tax exemption for dividends does not apply but dividends withholding taxes will not apply. To qualify as a REIT the company must have at least 90 of its taxable income distributed to shareholders annually in the form of dividends. Distributions from REITs must be included in the taxpayers taxable income and will be taxed per their marginal tax rate.
An understanding of the REIT structure is necessary. Annexure C also referred to the implementation of the Financial Sector Regulation Act No 9 of 2017 and the establishment of the Financial Sector Conduct Authority FSCA which provide for the regulation of unlisted REITs as it is proposed that. Dividends received from REITs are not exempt from income tax and will be subject to income tax in the hands of the recipient taxpayer.
Recharacterisation of interest distributions. As of 1 January 2014 the SA dividend withholding tax at 15 or the treaty governed rate where the investor is resident in a treaty country will apply to nonresident investors. This means that most REITs pay out at least 100 of their taxable income to shareholders.
Property owning subsidiaries of REITs also benefit from the section 25BB tax dispensation. A Real Estate Investment Trust REIT is a company that derives income from the ownership trading and development of income producing real estate assets. A REIT stands for Real Estate Investment Trust.
Received by a non-resident from a REIT will be subject to dividend withholding tax at 15 unless the rate is reduced in terms of any applicable agreement for the avoidance of double taxation DTA between South Africa and the country of residence of the unitholder. A REIT and a controlled company must also consider dividends tax transfer duty securities transfer tax and VAT. Such person will however be exempt from dividends tax in respect of such dividend.
A South African tax resident natural person investing in a REIT will be subject to income tax on dividends received by or accrued from a REIT at a maximum rate of 40. For listed property companies to maintain their REIT status they must pay a minimum of 75 of their taxable earnings available for distribution as a REIT dividend each year within a period of four months after its year-end. This creates an issue that individual investors in REITs are not able to receive the benefit of the reduction in the corporate income tax rate due to the type of company they are invested in.
REIT Dividends received by South African tax residents must be included in their gross income and will not be exempt from income tax in terms of the exclusion to the general dividend exemption contained in paragraph aa of section 101ki of the Income Tax Act because they are dividends. A fundamental part of the regime relates to the ability of the REIT and its subsidiaries to deduct for income tax purposes dividends declared and paid to their immediate shareholders. Dividends received by a South African taxpayer are generally exempt from income tax.
Investing in SA REITs. In order to be tax deductible any such dividend must meet the. Section 25BB is quoted in the.
One of the four elements to ensure the efficacy of a tax according to Adam Smith is certainty meaning a taxpayer can. Do Your Tax Return Easily. Refer section 101ki of.
The Real Estate Investment Trust REIT tax regime in South Africa was addressed for general review in Annexure C. Albeit that the REIT is a SA tax resident company and JSE listed it may also raise funds abroad as tradable units as explained later. South African REITs own several kindof commercial s such asproperty shopping centres office buildings factories warehouses hotels hospitals and residential.
The recent significant volatility in the Rand may result in REITs or CCs having large forex gains. Be subject to a 20 dividends tax which is in fact a tax on the investor. Ignoring commercial considerations in relation to this fairly common occurrence often the shareholders of the target company in these circumstances would be motivated for income tax reasons to rather sell the shares in the target company to the REIT as opposed to a sale by the target company of each of the immovable properties which may inter alia attract.
REIT Dividends - South African tax resident shareholders. Forex gains that do not fall within the rental income definition recently amended in the 2019 Taxation Laws Amendment Act may have a negative impact on the 75 qualifying dividend assessment.
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