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South Africa Investment Income Tax Guide

Investment income in South Africa is taxed differently depending on the type. Dividends are subject to 20% Dividends Withholding Tax (DWT). Interest income benefits from an annual exemption of ZAR 23,800 (under 65) or ZAR 34,500 (65+). Foreign dividends may be exempt under section 10B or taxed at 20%. REIT distributions are subject to 20% DWT. All amounts in ZAR.

South Africa taxes investment income under the Income Tax Act, administered by SARS. Different rules apply to dividends, interest, foreign dividends, and real estate investment trust (REIT) distributions. For related guidance, see our Personal Tax Guide →, Capital Gains Guide →, and Corporate Tax Guide →.

Dividends Tax (DWT)

  • Rate — 20%: A final Dividends Withholding Tax (DWT) of 20% is withheld by the company (or the regulated intermediary) on dividends paid to shareholders. This is a final tax — it is not included in the shareholder's gross income.
  • Exempt shareholders: South African resident companies are exempt from DWT (dividends received are generally tax-free). Other exempt entities include pension funds, retirement annuities, public benefit organisations, and the Government.
  • Foreign shareholders: DWT at 20% applies, unless reduced by a double taxation agreement (DTA) between South Africa and the shareholder's country of residence. Most DTAs reduce the rate to 5%, 10%, or 15%.
  • DWT was introduced in 2012, replacing the Secondary Tax on Companies (STC). The company declaring the dividend is responsible for withholding and paying the tax to SARS.

Interest Income

  • Interest exemption — ZAR 23,800: For taxpayers under 65, the first ZAR 23,800 of interest income is exempt from income tax.
  • Interest exemption — ZAR 34,500: For taxpayers aged 65 and older, the first ZAR 34,500 of interest income is exempt.
  • Interest above the exemption threshold is included in gross income and taxed at the individual's marginal IIT rate (up to 45%).
  • Interest from tax-free savings accounts (TFSA) is entirely tax-free within the annual contribution limit of ZAR 36,000 (lifetime limit ZAR 500,000).

Foreign Dividends

  • Section 10B exemption: Foreign dividends received by South African residents may qualify for exemption if the resident holds at least 10% of the equity shares in the foreign company and meets the participation exemption requirements.
  • Taxable foreign dividends: Foreign dividends not qualifying for the s10B exemption are included in gross income. The first ZAR 200,000 of foreign dividends (per year) is exempt for individuals. Above that, foreign dividends are subject to tax at a flat rate of 20% (with a formula based on the South African corporate tax rate) or the individual's marginal rate, whichever is lower.
  • Foreign tax credits: Withholding tax paid in the foreign country may be claimed as a foreign tax credit against South African tax on the same dividend, subject to the limits in the relevant DTA or domestic law.

REIT Distributions

  • Distributions — 20% DWT: Real Estate Investment Trusts (REITs) in South Africa must distribute at least 75% of their rental income to shareholders. These distributions are subject to 20% Dividends Withholding Tax.
  • Part of the distribution may be treated as a return of capital (not subject to DWT). The REIT will provide a tax certificate indicating the portion that is a dividend and the portion that is a capital distribution.
  • REITs are exempt from corporate income tax on qualifying rental income, provided they distribute the required minimum to shareholders.

Tax-Free Savings Accounts (TFSA)

  • Annual limit: ZAR 36,000 per year.
  • Lifetime limit: ZAR 500,000 total contributions.
  • Tax treatment: All investment returns — interest, dividends, and capital gains — within a TFSA are entirely tax-free. No tax is payable on withdrawals.
  • Excess contributions are taxed at 40% of the excess amount (penalty).