The beneficial owner of dividend income received by a discretionary trust

• Main Author: Waldette Engelbrecht
• Format: Article
• Language: English
• Published: AOSIS 2015-04-01
• Series: Journal of Economic and Financial Sciences
• Subjects: discretionary trust; beneficial owner; dividends tax; ownership attributes
• Online Access: https://jefjournal.org.za/index.php/jef/article/view/95

In terms of the new Dividends Tax, which came into effect on 1 April 2012, Dividends Tax may be the liability of the beneficial owner of the dividend. This makes it important to correctly identify the beneficial owner. The term beneficial owner is specifically defined in section 64D of the Income Tax Act No. 58 of 1962 as ‘the person entitled to the benefit of the dividend attaching to the share’, yet a distinct difference remains between the legal ownership and economic ownership of the share. Within a South African context, determining the beneficial owner within a discretionary trust might be problematic. The trustees are the legal owners of the shares, whilst the beneficiaries might be the economic owners of the shares. Further, consideration has to be given to the timing of the dividend distribution. This article formulates steps to determine which person is entitled to the benefit of the dividend attached to the share.