Secondary Tax on Companies

What is Secondary Tax on Companies (STC)?

STC is asecond-stage tax levied on the after-tax profits of a company on dividends declared by a company to its shareholders

STC is governed by sections 64B and 64C of the Income Tax Act, 1962. Section 64B deals with the levy and recovery of STC, and section 64C contains the anti-avoidance provisions which deem certain amounts  to be dividends declared by a company to its shareholders.

See the Comprehensive Guide to Secondary Tax on Companies (Issue 3) for more detail.

STC was payable by South African resident companies at a rate of 10%  on dividends declared on or before 31 March 2012  STC was replaced with dividends tax on 1 April 2012 and is levied at a rate of 15% on dividends paid by a company. The STC credits of a company can be used until 31 March 2015 to ensure that the after-tax profits of a company that were distributed to shareholders and that were subject to STC are not also subject to dividends tax when on-distributed to shareholders.

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 Top FAQs

What is Secondary Tax on Companies?
Secondary Tax on Companies is a tax on dividends declared by resident South African companies or close corporations. It was introduced in

What is a “dividend cycle”?
A dividend cycle is the time between dividend declaration dates. The first dividend cycle began on 1 September 1992 and ended on 17 March 1993.

Who must pay Secondary Tax on Companies (STC)?
STC is a tax on dividends declared by companies that are resident in South Africa. It is imposed on companies or close corporations and not on shareholders.

What is the declaration date of a dividend?
The declaration date for a dividend, in cash or otherwise, is the date of payment by a company or close corporation or the date of the prior approval of payment or distribution by the directors or people with comparable authority.

When will STC be replaced by dividends tax?
STC has been discontinued with effect from 1 April 2012 at which point the Dividends Tax comes into effect.