Dividend and Investment Tax in South Africa

South Africa taxes investment income through two distinct mechanisms: a withholding-style Dividends Tax on dividends paid by SA-resident companies, and ordinary income tax on interest and certain other investment receipts. The rules below reflect SARS guidance for the 2025/26 tax year (1 March 2025 to 28 February 2026) as published on the SARS website and confirmed by the Budget 2026 FAQ (SARS, Interest and Dividends).

What is Dividends Tax and who pays it?

Dividends Tax (DT) is imposed under Section 64E of the Income Tax Act 1962. The tax is levied on the beneficial owner of the dividend -- generally the shareholder -- at a flat rate of 20% on the full cash amount of the dividend declared. The rate was raised from 15% to 20% for any dividend paid on or after 22 February 2017. Dividends Tax replaced the older company-level Secondary Tax on Companies (STC) from 1 April 2012, shifting the liability from the distributing company to the recipient. The SA-resident company paying the dividend (or a regulated intermediary such as a stockbroker) acts as withholding agent: it deducts 20% at source and remits the amount to SARS by the last day of the month following the month of payment, using the DTR01 and DTR02 returns. For SA-resident individual investors, the 20% withheld is the final tax -- the dividend does not appear in the ITR12 income tax return and is not subject to further marginal-rate assessment (SARS, Dividends Tax).

Wholesale exemptions from Dividends Tax apply to certain categories of recipient. A beneficial owner that qualifies for exemption must submit a declaration and undertaking to the company or intermediary before the dividend is paid; failure to do so in time results in the full 20% being withheld, with recovery only via a SARS refund claim. Exempt categories under Section 64F include SA-resident companies (preventing dividend-cascade taxation within corporate groups), pension funds, provident funds, retirement annuity funds, and medical schemes (section 10(1)(d) funds), Public Benefit Organisations approved under section 30(3), government and all three spheres of state, and collective investment scheme portfolios. Natural persons holding investments via a tax-free account (see below) are also exempt on returns earned within that account (SARS, Dividends Tax exemptions FAQ).

How is interest income taxed and what exemption applies?

Interest earned by SA-resident individuals from local (South African) sources is included in gross income and taxed at marginal rates. The marginal rate scale for individuals runs from 18% at the bottom to 45% on taxable income above ZAR 1,817,000 (2025/26 brackets). A partial exemption under Section 10(1)(i) of the Income Tax Act reduces the taxable amount: for the 2025/26 year, ZAR 23,800 of interest from SA sources is exempt per year for individuals under 65, and ZAR 34,500 is exempt for individuals aged 65 and older. These amounts apply per person, not per account, and remain unchanged from the 2022 tax year through at least 2026/27 per Budget 2026 announcements. Interest earned inside a Tax-Free Savings Account is fully exempt without limit and does not reduce the Section 10(1)(i) annual exemption (SARS, Interest and Dividends).

Source: SARS, Interest and Dividends rates page, confirmed in Budget 2026 FAQ.

How are foreign dividends taxed?

Foreign dividends received by SA-resident individuals from foreign (non-SA-resident) companies are subject to ordinary income tax at marginal rates, not to the Section 64E Dividends Tax. However, Section 10B of the Income Tax Act provides a partial exemption for foreign dividends where the SA-resident individual holds less than 10% of the equity and voting rights of the foreign company. The partial exemption is calculated to limit the effective South African rate on such dividends to a maximum of approximately 20% -- matching the domestic Dividends Tax rate. This partial exemption effectively prevents SA residents holding minority stakes in foreign-listed companies from being significantly over-taxed compared with holding local shares. Where the SA-resident individual has suffered foreign withholding tax on the dividend, a credit under Section 6quat of the Income Tax Act may further reduce the SA tax payable, capped at the SA tax on that income. Holdings of 10% or more in a foreign company may qualify for a full exemption under separate Section 10B(2) rules if certain conditions are met (SARS, Interest and Dividends).

What is the Tax-Free Savings Account and what are its limits?

The Tax-Free Savings Account (TFSA) was introduced under Section 12T of the Income Tax Act with effect from 1 March 2015. It is available to any SA-resident individual, including minors where a parent or guardian invests on the child's behalf using the child's own limits. All income, dividends, and capital gains earned within a TFSA are fully exempt from income tax, Dividends Tax, and capital gains tax. Withdrawals are also entirely tax-free. Two contribution limits apply: an annual limit and a lifetime limit. For the 2025/26 tax year (1 March 2025 to 28 February 2026) the annual limit is ZAR 36,000 per individual across all TFSAs combined. From 1 March 2026 (the 2026/27 tax year) the annual limit increases to ZAR 46,000, the largest single-year increase since TFSAs were introduced. The lifetime limit is ZAR 500,000 per individual; once reached, no further contributions can be made without incurring a 40% penalty tax on the excess amount. Unused annual allowance does not carry forward: any portion of the ZAR 36,000 (or ZAR 46,000 from March 2026) not used by 28/29 February is forfeited permanently. Withdrawals do not restore the lifetime contribution cap -- a material design feature that distinguishes the TFSA from some other jurisdictions' tax-free wrappers (SARS, Tax-Free Investments).

Eligible investment types include fixed deposits, unit trusts, exchange-traded funds (ETFs), linked investment products, and certain endowment policies offered by FSCA-licensed providers.

How are REIT distributions taxed?

Real Estate Investment Trusts (REITs) listed on the Johannesburg Stock Exchange operate under a conduit tax regime governed by Section 25BB of the Income Tax Act. A qualifying REIT is entitled to deduct distributions made to unitholders from its own taxable income, eliminating tax at the REIT level. The consequence is that distributions received by a resident individual investor are taxed as ordinary income in the investor's hands at marginal rates (up to 45%), not as exempt dividends under Section 10(1)(k). This treatment is explicitly confirmed in the SARS Interpretation Note 97 on the taxation of REITs (Issue 3, 5 July 2022). Dividends paid by REITs to residents are carved out of the standard Dividends Tax exemption applicable to SA company dividends -- the proviso to Section 10(1)(k)(i) makes REIT distributions fully taxable as income. An investor receiving a ZAR 100,000 distribution from a JSE-listed REIT who is in the 45% marginal bracket therefore owes up to ZAR 45,000 in income tax, not the ZAR 20,000 that Dividends Tax would have produced on an equivalent share dividend (SARS, IN97 -- Taxation of REITs).

When does investment income trigger provisional taxpayer status?

Provisional tax requires eligible taxpayers to make two advance payments of estimated income tax during the tax year (typically by 31 August and the last day of February), with a third voluntary payment permitted after year-end. A natural person whose only source of income outside formal employment is investment income (interest, dividends from foreign companies, rental) is a provisional taxpayer if that non-employment income exceeds ZAR 30,000 in a year of assessment. The threshold of ZAR 30,000 is confirmed for the 2026 tax year in the Budget 2026 FAQ. Below that threshold, and where the taxpayer carries on no business, provisional registration is not required. An individual whose interest income stays within the Section 10(1)(i) annual exemption (ZAR 23,800 under 65, ZAR 34,500 aged 65+) is similarly not required to register as a provisional taxpayer on that income alone. Locally-sourced SA company dividends subject to the 20% final-withholding Dividends Tax are not included in this calculation because that withholding discharges the tax liability in full; no ITR12 reporting or provisional payment arises (SARS, Provisional Tax).

For the broader South African tax picture, see the South Africa country overview. The rules summarised here reflect SARS guidance current as of June 2026 and cover the general position for individual investors. Individual circumstances -- including trust structures, corporate holdings, offshore portfolios, and the interaction of retirement fund deductions with investment income -- vary considerably. A registered tax practitioner (a SAIT member or CA(SA)) can apply these rules accurately to a specific situation.