dividends Archives

With the change in company tax rate from 28% to 27%, the question again arises whether to pay yourself in salary or in dividends. Salary is straightforward, but you need to bear in mind the additional cost of monthly payroll services. This totals about R14 000 per year, or R10 500 net of tax. The total annual cost in tax and payroll services for a sole director/shareholder who earns R2m gross is R760 191 and the net salary is R1 250 321 If no salary is drawn, but the R1 250 321 is lent to the director in…

What happens to the trust income when you retire? Now it’s you that needs the money. In our ideal trust structure, the trust owns the investment company, which pays 28% tax, then re-invests the 72% to build the investment portfolio. Maybe the company must declare dividends to its shareholder, the trust, and these can then flow to you as a beneficiary, like this – Let’s add up the taxes on say, R100 000 taxable income. Take off 28% Income Tax paid by the company and that leaves R72 000 available for dividends which will be taxed at 20% or R14 400.

Trade inherently holds relatively high risk compared to asset holding, so they should be in separate trust-owned companies. But how do you get the money from one to the other? Many would advise you to have them both owned by a holding company (see the article image taken from such an advisor’s website). The trading company declares its profits out via regular dividends to the holding company, which in turn lends them to the investment company. There’s no Dividends Withholding Tax when the shareholder is another company and the dividends keep the value of the trading company near nil,…

dividends

Dividends or Salary?

How to draw income from your trust when you retire

How trading and asset holding companies should be connected within a trust