Provisional tax season is upon us. What does this mean for investors who buy shares of international companies? What taxes do you pay, how and where? The good news is that if you use an app like Shyft, the bank will take care of most of the tax administration for you. “From a tax point of view, there is nothing to declare when you start to invest,” explains Jeanne Stegmann, head of tax advice and CRM at Standard Bank.

It makes sense: you haven’t made any money yet, so there is no tax to pay. Instead, the bank will ask for your ID number, tax residency, and tax number. “We’re asking these questions because we are required to report certain activities to SARS, so SARS can pre-complete your tax return,” Stegmann explains. With the bank taking care of this behind-the-scenes paperwork, you’re free to focus on the big decisions, like buying stock in Nike or Netflix… or both.

The three most common taxes that you and your accountant will need to know about include:

1. Capital gains tax

“A typical retail investor will be taxed on their capital gains and losses, not trading gains and losses,” Stegmann explains. Capital gains tax only applies to the sale of an investment, and it works both ways: if you made a profit, you will be taxed on it; if you have incurred a loss, you can claim that loss on your income tax return.

2. Withholding tax on dividends

DWT is a tax on the dividends you earn on your investments in local stocks. “For a private or private customer, the rate is 20%,” says Stegmann. “If you have invested in a South African company and it declares a dividend of 100 rand, there will be a 20% withholding and you will receive a net amount of 80 rand. You don’t have to do anything here: the bank is responsible for administering the DWT – that’s why it’s called a “withholding tax”. No other income tax is due on the balance.

3. Tourist tax

Situs is a tax that most people don’t have to worry about, but it’s still worth knowing. “South Africa has an inheritance tax, so if you are sitting on SA shares when you die, they will become part of your estate and can be taxed,” Stegmann explains. But what happens to your offshore actions? “If they come from the United States, for example, the United States will also want to tax you on the wealth that you have accumulated there. It is the situs tax.

But as your tax advisor will tell you, there are exemptions on all taxes (and, as Stegmann points out, the thresholds are quite high)… so don’t let situs fear stop you from investing in US stocks.

Where do I pay taxes on offshore investments?

Let’s say you are a South African tax resident, based in Johannesburg or Durban, happily investing in global companies… Where do you pay tax on your income?

“As soon as a South African tax resident invests in an offshore market, two taxes come into play,” says Stegmann. “South African taxes still apply, but you are also taxed on your worldwide income. So if you earn a dividend from Apple, Amazon, Pfizer, or Pinterest, you will be taxed here in South Africa; and because these shares belong to companies registered in the United States, the American tax authorities would consider them to be of American source.

To protect you from this double taxation, the South African government has an extensive network of tax treaties that ensure that you will not be affected by both SARS (in your home) and the IRS (in the US). . “South Africa has an extensive network of tax treaties that determine which country has taxing rights,” says Stegmann. “Depending on the jurisdiction, the treaty may say that one country has taxing rights and the other does not; or both countries have taxing rights, but one must give a tax credit for the amount taxed in the other; or there might be a maximum tax that a country can impose. Again, the good news is that the bank, as the custodian, takes care of all of these documents for you.

So go ahead and invest where, when and how you want *. Download Standard Bank’s Shyft app to easily buy, sell and manage stocks of specific companies or indices like the S&P 500 or the Nasdaq-100. Remember to pay these taxes.

* Subject to exchange control requirements. The limit for the One-Time Discretionary Allowance (SDA) is R 1 million per calendar year for a South African resident aged 18 and over.

This article was sponsored by Shift, the global money app, powered by Standard Bank. With Shyft, you can buy currencies instantly anytime, anywhere, at the best rates, and invest in the best US stocks and ETFs. Shyft was named best financial solution at the MTN Business App of the Year Awards 2021. Visit Shiftto download it now no matter where you do your banking. Shyft operates under license from The Standard Bank of South Africa Limited, a licensed financial services provider (FSP number 11287).

This article and its content are sponsored, written and provided by Standard Bank.