Come 1 April 2015, whilst most people will be contemplating the best possible prank to play on unsuspecting parties, the Income Tax Act No.58 of 1962 (Act) will provide a significant event of its own. All South African companies that had Secondary Tax on Companies (STC) credits as at 31 March 2015 (arising as a result of taxable dividends under the STC regime), will awaken to the reality that those credits have disappeared. In particular, section 64J(5) of the Act provides that the STC credit of a company shall be deemed to be nil on or after 1 April 2015. All STC credits will therefore terminate automatically on this date.
Companies with STC credits are therefore advised to declare and pay dividends before the end of the day on 31 March 2015, in order to utilise the credits against dividends tax and thereby avoid the disappointment of losing their STC credits. Companies with STC credits trapped lower down in the corporate structure should commence planning as soon as possible, in order to move the STC credits to the top of the corporate structure for utilisation.