An issue that has come to the notice of ShareSoc is the problem of the Withholding Tax introduced on dividends in South Africa. Even though Pan African Resources Plc (PAF) is registered in the UK, it is dual listed on AIM and the Johannesburg Exchange (JSE). Because of the way South Africa introduced the tax change, any shareholder is going to get 15% deducted before payment (or 10% for UK residents under a dual tax treaty).
To get the lower rate, you need to submit a “Tax Resident Beneficial Owner Declaration Form” to the company’s registrar (Capita). So far, so good, if your shares are held directly (i.e. you are on the register).
However, if your shares are held in a nominee account (i.e. in an ISA or SIPP), your broker would have to submit such a claim for you (and any other clients for which they are holding the company’s shares in a pooled nominee account).
Checking with a couple of brokers, AJ Bell Youinvest and the Share Centre, they are refusing to submit such claims on the basis that they never reclaim such taxes. That’s despite the fact that they do reclaim tax deducted on UK listed REIT dividends.
This seems somewhat unreasonable even if it would be some effort to ensure the 5% of dividends were not lost. At least investors should be warned of this. Pan African is not likely to be the only company affected by this.
This is of course, yet another example of the negative aspects of nominee accounts. The fact that you are not the registered owner of the shares if you hold them in an ISA or SIPP account, or indeed in most broker accounts, undermines your legal rights including your dividend rights!
Is there any update on this article as Thungela Resources (spun off from Anglo American) is now in a similar situation, having paid its maiden dividend, and is likely to pay further, even larger dividends, due to the current extremely high coal price. So far, I have found no broker that will cooperate with reclaiming the SA withholding tax for shares held in a UK ISA.
Russel, I have also had 20% of this dividend subtracted (I hold via interactive). I will try and pursue this.
Thanks for the swift response Cliff, hopefully with many in the same boat a solution may be possible.
Like I am sure many others, I added to the small allocation of shares I got from the spin off and fortuitously the share price explosion has seen it become my biggest holding and what would normally be an insignificant amount of tax on a modest dividend, is likely to become very significant, especially as the resolution to buy back shares was voted down at the recent AGM.
This is the reply I and others received from Hargreaves Lansdown when asked to reclaim the withholding tax:
“Thank you for contacting Hargreaves Lansdown and sorry for the delay in getting back to you but we were waiting for a full answer from Computershare before we wrote out.
We are writing to you with reference to the first Thungela Resources Ltd dividend that will be paid on 09/05/2022. We are aware of the possibility of having all dividends paid at source after the deduction of 10% South African withholding tax instead of the usual 20%.
Hargreaves Lansdown holds a nominee account on behalf of numerous clients. As an investor you are still the beneficial owner of the shares, but your holding is not ‘individually identifiable’ on the Thungela Resources Ltd company register.
After various conversations with the registrar Computershare, we were able to download the tax form from their South African website. We have reviewed this form and have concluded that as Hargreaves Lansdown are simply the holder of the Nominee account, we are unable to complete this form on behalf of our clients. A view confirmed by the technical team at Computershare also.
The form is designed to be completed by the beneficial owner(s) of the share and not a Nominee company, such as Hargreaves Lansdown, which holds the stock on behalf of numerous clients. As your holding is not ‘individually identifiable’ on the Thungela Resources Ltd Company register, it is not possible for you to complete the form either, in order to benefit from the reduced rate of withholding tax.
It is regretful that we have been unable to apply for the reduced withholding tax rate for this stock, but we trust you can appreciate why this is the case.
To confirm, all dividends will be paid net of the standard 20% withholding tax going forward.
If you have any further queries in this respect, please do not hesitate to contact the Dividends Department.”