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CGT & Dividends

10 February 2012   (0 Comments)
Posted by: SAIT Technical
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CGT & Dividends
by Michael Stein


One of the amendments effected by the Taxation Laws Amendment Act 24 of 2012 affects the determination of the capital gain made by a company on the disposal of shares in another company.

Paragraph 43A of the Eighth Schedule to the Income Tax Act, which was inserted in the Act in 2009 but is one of the scores of amendmens that are still to be made effective by the Minister of Finance, has been amended.

Paragraph 43A(2)(b) provides that the proceeds from the disposal of shares by a taxpayer that is a company of shares in another company must be increased by an amount equal to the amount of any dividend or foreign dividend that is exempt from income tax in terms of s 10B(2)(a) received by or accrued to that taxpayer in respect of any share held by the taxpayer in that other company if the share in which the dividend or foreign dividend is received or accrues is disposed of by that company within a period of forty-five days after the date of accrual of the dividend or foreign dividend. (Paragraph 43A(2)(a) deals with the situation when there is a special relationship between the two companies, but para 43A(2)(b) is much wider.)

An ‘exempt dividend’ is defined in para 43A(1) as any dividend or foreign dividend to the extent that it is not subject to the withholding tax on dividends under Part VIII of Chapter II and is exempt from normal tax under s 10(1)(k)(i) or s10B(2)(a) or (b).


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