How are investments taxed — dividends, interest, REITs?
Investment income arrives in three differently-taxed streams: dividends lose 20% before they reach you, interest is taxed as income once it clears an annual exemption (R23,800, or R34,500 from age 65), and REIT distributions are taxed as ordinary income at your marginal rate.
Capital growth is the patient fourth stream — it owes nothing until the year you sell. And inside a tax-free savings account, all four switches are off.
Dividends: 20%, taken before you see it
Dividends from ordinary South African shares carry a 20% dividends tax, withheld at source — the company or platform pays it over before the money lands in your account. A R1,000 dividend arrives as R800.
Because it is withheld at a flat rate, it works the same at every income level, and there is nothing further to pay on it at assessment.
Interest: an exemption first, then your marginal rate
Interest — from savings accounts, fixed deposits, money-market funds and bonds — gets an annual exemption: the first R23,800 is tax-free (R34,500 from age 65).
Interest above the exemption is simply added to your taxable income and taxed at your marginal rate, alongside salary. Unlike dividends, nothing is withheld along the way — the tax arrives at assessment.
REITs: rent, passed straight through
Distributions from a REIT look like dividends but are taxed like rent. The 20% dividends tax does not apply to them; instead the full distribution is added to your taxable income and taxed at your marginal rate.
The logic: a REIT pays no tax on the rental profit it distributes, so the tax happens in the investor's hands instead. The property income effectively flows through the company to you, tax treatment intact.
Capital growth: taxed only on disposal
The fourth stream is the growth in the value of the investment itself — and it is the only one that waits. No tax accrues while the value climbs; the reckoning comes in the year of sale, with its own exclusions and a 40% inclusion rate. The full mechanics are in "How does capital gains tax work in South Africa?".
The wrapper that switches everything off
Inside a tax-free savings account, none of the above applies: no dividends tax, no tax on interest, no tax on REIT distributions, no capital gains tax on disposal. The same four streams, all at 0% — within the contribution limits and rules covered in "TFSA rules — the limits, and the 40% over-contribution penalty".
Terms used on this page
- marginal rate
- The tax rate on your next rand of income — the bracket the top slice of your income falls into.
- taxable income
- The income tax is calculated on, after allowed deductions. For most salaried people it is roughly gross salary minus retirement contributions.
- REIT
- A real estate investment trust — a listed company that owns income-producing property and pays most of its rental profit out to investors as distributions.
Reviewed July 2026 · 2026/27 tax year figures