Print Page   |   Report Abuse
News & Press: Technical & tax law questions

Tax consequence on the disposal of one spouse’s interest in a company to the other spouse

06 November 2014   (0 Comments)
Posted by: Author: SAIT Technical
Share |

Author: SAIT Technical

Q: A manufacturing company that commenced business in 1998 was formed by a husband and wife as members. Since it was a start-up business, there was no goodwill. In 2014 the spouses decided to divorce, resulting in the wife relinquishing her 50% membership to the husband. This 50% equated to R2m where R50 000 per month is to be paid to the wife until fully settled.

How would she be taxed on this amount? In my opinion she will be subject to capital gain tax annually on the R50 000 payment.

A: Based on the facts our guidance assumes that payment of R50 000 per month does not constitute an annuity.  It is therefore merely a repayment of the debt.  

We are not sure why you believe that the capital gain in this instance is not rolled over in terms of paragraph 67 of the Eighth Schedule.  For the purposes of paragraph 67(1) a person must be treated as having disposed of an asset to his or her spouse, if that asset is transferred to that spouse in consequence of a divorce order or, in the case of a union contemplated in paragraph (b) or (c) of the definition of ‘spouse’ in section 1 of this Act, an agreement of division of assets which has been made an order of court.  Paragraph 67(3) provides an exception to the rule.  

If the capital gain does not roll over we submit that the full amount accrued on disposal and not when the R50 000 payments are made.  It is therefore ‘taxed in full’ in the year of disposal.  

Disclaimer: Nothing in this query and answer should be construed as constituting tax advice or a tax opinion. An expert should be consulted for advice based on the facts and circumstances of each transaction/case. Even though great care has been taken to ensure the accuracy of the answer, SAIT do not accept any responsibility for consequences of decisions taken based on this query and answer. It remains your own responsibility to consult the relevant primary resources when taking a decision.


Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.


The Act requires that a minimum academic and practical requirments be set to register with a controlling body. Click here for the minimum requirements of SAIT.

Membership Management Software Powered by YourMembership  ::  Legal