The Treasury has conceded that the rise in the withholding tax on dividends might slow down the conclusion of black economic empowerment (BEE) transactions. The increase from 15% to 20% took effect on Thursday. The Black Business Council (BBC) has expressed concern about the impact the increase would have on BEE deals and said it regretted that the Treasury had not consulted it before implementing the measure. The increase will bring in an additional R6.8bn for the fiscus. BEE deals are often structured on the basis of a loan from a principal company to the BEE consortium, which allows it to buy shares in the company. The loan is repaid by means of the dividends disbursed. A higher tax on these dividends means a slower repayment period. Treasury director of personal income tax and savings Chris Axelson told MPs during a briefing on the budget last week that the Treasury acknowledged some BEE deals used dividends to pay off the loans within the BEE structure.
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