FAQ – Why is STC being replaced?

The main objectives behind the change to Dividends Tax are:

To align the level of the taxation of dividends in South Africa with the international norm where the recipient of the dividend, not the company paying it, is liable for the tax (South Africa was one of a few countries with a corporate level tax on dividends).
 
To make South Africa a more attractive destination for international investment by eliminating the perception of a higher corporate tax rate (STC is an additional corporate tax) coupled with lower accounting profits (STC had to be accounted for in the Statement of Comprehensive Income (Income Statement)).
 
Some beneficial owners of dividends are entitled to tax exemption under the Dividends Tax system, whereas dividends received by them under the STC system were taxed in full in the hands of the declaring company.
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