An international comparative study of dividend withholding taxes

M.Com.Abstract: This study investigates the current dividend withholding tax regime in South Africa. A country’s tax regime is a crucial factor for foreign investors and potential investors. When a South African resident company declares a dividend to a non-resident, the dividend will be subject to a withholding tax. This study also examines the role played by double taxation agreements in alleviating the dividend tax burden. A literature review of the dividend withholding tax and the double taxation agreements is adopted in this study, applying a qualitative approach. This study highlights challenges posed by the dividend withholding tax and the non-existence of double taxation agreements. The findings in this study create the impression that the dividend withholding tax, especially in the light of the recent increase in the dividend tax rate, could deter current investors or potential investors from investing in South Africa, particularly in instances where a double taxation agreement is not in force. The findings also demonstrate that the South African Revenue Service is exposed to challenges of treaty shopping, the misinterpretation of dividend tax legislation and the articles of the double taxation agreements by taxpayers, and the existence of double taxation. Notwithstanding the challenges, double taxation agreements play a major role in providing relief from double taxation and investors should take them into consideration when investing in South Africa. Double taxation agreements also assist in the prevention of tax evasion and the exchange of information between the South African Revenue Service and other tax jurisdictions