Dividend or donation?

If a company makes payments to a related party of its shareholder, the question arises whether this is a dividend, or perhaps rather a donation? This affects the taxes to be declared to SARS. It may also affect whether an exemption applies. SARS recently issued Binding Private Ruling 423 on a set of facts involving this question.

A key distinction between a dividend and a donation lies in the linkage between the payment and shareholding in the company in the case of a dividend. A donation, on the other hand, is a gratuitous payment.

In this podcast episode, I discuss this issue with reference to a recent SARS ruling – Binding Private Ruling 423. You can listen to the episode by clicking on the link below.

Sign up to receive new articles by email

Stay up to date with our latest articles.

Articles

What is your South African tax residence status?

Sep 7, 2021 | Individuals and wealth planning

Many South Africans leave the country. Some do so permanently, while others temporarily work and gain experience abroad. These persons often grapple with the question whether they are still considered to be South African tax residents. SARS recently added guidance on...

What is section 42 not?

Jul 16, 2026 | Corporate and business tax, Individuals and wealth planning

Section 42 of the Income Tax Act often features in restructuring discussions or proposals. When considering transactions or restructurings involving section 42 of the Income Tax, it is important to understand the provision's boundaries. In other words, when it may not...

What is section 42?

Jul 7, 2026 | Corporate and business tax, General tax matters

Taxpayers and their advisors employ section 42 of the Income Tax Act in various types of transactions. When encountering this provision, it is important to understand its mechanics but also its broader context. In this article, I discuss the some of the background to...

To charge interest or not?

Jun 22, 2026 | Corporate and business tax, General tax matters, Individuals and wealth planning

The question often arises whether the tax law obliges certain lenders to charge interest on loans to connected parties. This includes loans between natural persons and a family trust or a company and its shareholders. The answer is arguably that the tax law never...

The timing of tax deductions matters

Jun 9, 2026 | Corporate and business tax, General tax matters

One often encounters arguments that the year in which something is taxed or deducted does not really matter: as long as SARS taxes the amount or a deduction is claimed only once, the fiscus suffers no real loss. This position is, of course, not correct. A recent...

Partnership tax

May 25, 2026 | Uncategorized

On 19 May 2026, SARS published guidance on the new Beneficial Owner Register for Partnerships (IT3(BO)). This process involves a designated partnership representative submitting a single annual declaration of the partnership and partner information. This replaces the...

The ABSA case: “Party” and “Tax Benefit” under the GAAR

May 20, 2026 | Corporate and business tax, General tax matters, Uncategorized

The general anti-avoidance rules (GAAR) in sections 80A to 80L of the Income Tax Act 58 of 1962 (the Income Tax Act) have featured in several recent judgments. The Constitutional Court has now delivered its judgment on two legal questions raised in the ABSA case....

« Older Entries

Show All Articles

Need Advice?

We regularly advise and assist clients with South African tax matters. Do you need an opinion on the South African tax implications of a transaction or arrangement? Do you require assistance to resolve a tax dispute?

Contact Us



+27 (083) 417 5904



pieter@pvdz.co.za

