Dividends tax is levied at 20% on dividends paid by South African companies. The company withholds it and pays it to SARS by the last day of the month following the month in which the dividend was paid, together with a DTR01 and DTR02 return. The shareholder receives 80% of the declared amount.
Combined with company tax at 27%, the effective rate on distributed profit is 41.6% — which is the number that should drive how you take money out of your own business.
The basic mechanics
| Step | What happens |
|---|---|
| 1. Company declares a dividend | Board resolution, after satisfying the solvency and liquidity test |
| 2. Company withholds 20% | The tax is a withholding, not a charge on the company |
| 3. Shareholder receives 80% | R100,000 declared means R80,000 received |
| 4. Company files DTR01 and DTR02 | By the last day of the month following payment |
| 5. Company pays SARS | Same deadline |
The liability is the shareholder's, but the company is responsible for withholding and paying it over. Get that wrong and the company carries the consequence.
The 41.6% arithmetic
This is the calculation that matters most for owner-managed companies.
| Amount | |
|---|---|
| Company profit | R1,000,000 |
| Company tax at 27% | (R270,000) |
| Available to distribute | R730,000 |
| Dividends tax at 20% | (R146,000) |
| In the shareholder's hands | R584,000 |
| Total tax | R416,000 = 41.6% |
Compare that against your personal marginal rate. Salary is deductible in the company and taxed at personal rates, so it is cheaper than a dividend while your marginal rate sits below 41.6% — which, on the 2026/27 tables, means up to the 41% bracket beginning at R887,001.
For a Small Business Corporation the arithmetic changes materially, because the first R550,000 of company profit is taxed at 0%, 7% and 21% rather than 27%.
Worked example — SBC with R500,000 of profit:
| Amount | |
|---|---|
| Profit | R500,000 |
| SBC tax | (R46,970) |
| Available to distribute | R453,030 |
| Dividends tax at 20% | (R90,606) |
| In hand | R362,424 |
| Combined effective rate | 27.5% |
That drops the combined cost well below 41.6% and makes dividends competitive far earlier. See salary or dividends.
Before you can declare: the solvency and liquidity test
A dividend is a distribution, and the Companies Act requires the board to be satisfied — before the distribution — that:
Immediately after it, the company's assets will fairly exceed its liabilities, and
The company will be able to pay its debts as they fall due for the following 12 months
This is not a formality. Directors who authorise a distribution without a reasonable basis for satisfying the test can be held personally liable.
Practical consequences:
A company with accumulated losses may not be able to declare a dividend even where it has cash
A company with cash but large upcoming obligations may fail the liquidity limb
The test should be documented in the board resolution, not merely assumed
The returns and the deadline
DTR01 — the declaration containing the details of the dividend and the beneficial owners.
DTR02 — the return on which the dividends tax is declared and paid.
Deadline: the last day of the month following the month in which the dividend was paid.
So a dividend paid on 12 September is declared and paid by 31 October.
Both are submitted through eFiling, and the dividends tax type must be activated on your organisation profile. See how to set up SARS eFiling for a company.
Late payment attracts interest at 10.25% per annum, plus penalties.
The exemptions
Not every dividend attracts the tax, and the exemptions matter more than most owners realise.
Dividends paid to a South African resident company are generally exempt. This is why a holding company structure can receive dividends from a subsidiary without a 20% deduction at each layer — the tax is designed to be levied once, when it reaches a natural person.
Also generally exempt or subject to relief:
Certain retirement funds and approved public benefit organisations
The government and certain public entities
Dividends paid to a non-resident, potentially at a reduced treaty rate under a double tax agreement
The declaration requirement is the catch. An exemption or reduced rate generally applies only where the beneficial owner has submitted the prescribed declaration and undertaking to the company before the dividend is paid.
No declaration, no exemption. The company must withhold the full 20%, and the shareholder then has to claim it back — which is slower and considerably more work than getting the paperwork right beforehand.
If you pay dividends to a corporate shareholder or a non-resident, get those declarations on file before the payment, not afterwards.
Dividends in specie
Where the company distributes an asset rather than cash — property, a vehicle, shares in another company — it is a dividend in specie.
The important difference: for a dividend in specie, the company is liable for the dividends tax rather than the shareholder, and it is calculated on the market value of the asset distributed.
This arises more often than people expect, particularly when a company is being wound down and assets are moved to the owners. See how to close down a business properly.
The deemed dividend nobody plans for
The most common dividends tax problem in small companies has nothing to do with declared dividends.
Where a company provides a loan or advance to a shareholder or connected person at no interest or below the official rate — 7.75% per annum from 1 December 2025 — the shortfall can be treated as a deemed dividend in specie, attracting 20% dividends tax payable by the company.
In plain terms: taking money out as drawings, without payroll and without a declared dividend, builds a debit loan account that can generate dividends tax annually without anyone declaring anything.
See what is a director's loan account.
Getting it right, step by step
1. Confirm there are distributable profits. Check retained earnings, not the bank balance.
2. Apply the solvency and liquidity test, and record the basis in the resolution.
3. Pass a written board resolution specifying the amount and the declaration date.
4. Obtain declarations and undertakings from any shareholder claiming an exemption or reduced rate, before payment.
5. Withhold 20% and pay the shareholder 80%.
6. File the DTR01 and DTR02 and pay SARS by the last day of the following month.
7. Record it properly in the accounting records, and file the resolution with your company records.
The whole process takes about an hour. Doing it badly — transferring money and calling it a dividend at year-end — is what creates the loan account and deemed dividend problems this article describes.
Frequently asked questions
How much tax do I pay on dividends from my own company? Dividends tax is 20%, withheld by the company. Combined with company tax at 27%, the effective rate on distributed profit is 41.6%. For a qualifying Small Business Corporation the combined rate is considerably lower because the first R550,000 of profit is taxed at 0%, 7% and 21%.
When must dividends tax be paid to SARS? By the last day of the month following the month in which the dividend was paid, together with the DTR01 and DTR02 returns submitted through eFiling. A dividend paid on 12 September is therefore due by 31 October.
Who is liable for dividends tax? The shareholder bears the liability on a cash dividend, but the company is responsible for withholding and paying it over. For a dividend in specie, where an asset is distributed rather than cash, the company itself is liable.
Are any dividends exempt from dividends tax? Yes. Dividends paid to South African resident companies are generally exempt, as are certain retirement funds, approved public benefit organisations and government entities. Non-residents may qualify for a reduced rate under a double tax agreement. The exemption or reduced rate generally requires the prescribed declaration and undertaking to be submitted to the company before payment.
Can my company pay a dividend if it has accumulated losses? Generally no. Dividends must come from profits, and the board must be satisfied that immediately after the distribution the company's assets fairly exceed its liabilities and it can pay its debts as they fall due for the next 12 months.
What is a dividend in specie? A distribution of an asset rather than cash — property, a vehicle or shares in another company. Dividends tax is calculated on the market value of the asset, and the company rather than the shareholder is liable for it.
Does taking drawings from my company attract dividends tax? It can. Where a company advances money to a shareholder at no interest or below the official rate of 7.75% per annum, the shortfall can be treated as a deemed dividend in specie attracting 20% dividends tax payable by the company.
Do I need to file a return if no dividends were declared? The DTR01 and DTR02 relate to dividends actually paid. If the dividends tax type is activated on your eFiling profile and no dividend was paid, confirm with your practitioner whether a nil return is expected for your circumstances.
Declare it properly, once a year
Dividends are a legitimate and often efficient way to take money out of a company. What causes problems is not declaring them at all — moving money informally and discovering a loan account, a deemed dividend and an unfiled DTR02 at year-end.
Smartbook models the salary and dividend split against your actual profit and SBC status, handles the board resolution and solvency and liquidity documentation, and files the DTR01 and DTR02.
Last reviewed: 26 July 2026. Written by the Smartbook team — SAIPA and SAICA accredited, SARS registered tax practitioners. Figures are for the 2026/27 tax year. Exemptions, treaty relief and deemed dividend provisions are technical and fact-specific — take advice before relying on them. Worked examples are illustrative.
Primary sources: SARS — Comprehensive Guide to Dividends Tax · SARS — Budget 2026 Frequently Asked Questions · SARS — Tax Rates · Companies Act 71 of 2008