Dividends Tax
Company distributions:
1. Return of capital
- Return amount previously contributed
- Contributed Tax Capital (CTC) (see below for explanation)
- CGT consequences for shareholder.
2. Dividends
- cash or in specie (trading stock or asset is given to shareholder)
- paid from profits generated from company
Income Tax Implications of dividends:
1.Dividend definition explanation:
(a) distribution
(b) share buy back
EXCLUSIONS:
CTC reductions
constitute shares (issue shares to current shareholder)
general buy back of shares listed company ito JSE listing requirements.
Shareholder perspective Company perspective
Include in GI par (k) Cash: Cannot be deducted as it is a after tax
Exempt ito s10(1)(k) deduction and goes to retained earnings which
is where dividends gets paid.
In specie:
-Trading stock = recoupment s22(8)
-Capital asset = recoupment s(8)(4) & CGT
2.Foreign Dividend definition explanation:
If the shareholder is a resident, they will be taxed on world wide income.
Excludes:
- CTC reductions
- Constitutes shares
Shareholder perspective Foreign Company perspective
Include in GI par (k) No SA tax
Exempt ito s10B
Company distributions:
1. Return of capital
- Return amount previously contributed
- Contributed Tax Capital (CTC) (see below for explanation)
- CGT consequences for shareholder.
2. Dividends
- cash or in specie (trading stock or asset is given to shareholder)
- paid from profits generated from company
Income Tax Implications of dividends:
1.Dividend definition explanation:
(a) distribution
(b) share buy back
EXCLUSIONS:
CTC reductions
constitute shares (issue shares to current shareholder)
general buy back of shares listed company ito JSE listing requirements.
Shareholder perspective Company perspective
Include in GI par (k) Cash: Cannot be deducted as it is a after tax
Exempt ito s10(1)(k) deduction and goes to retained earnings which
is where dividends gets paid.
In specie:
-Trading stock = recoupment s22(8)
-Capital asset = recoupment s(8)(4) & CGT
2.Foreign Dividend definition explanation:
If the shareholder is a resident, they will be taxed on world wide income.
Excludes:
- CTC reductions
- Constitutes shares
Shareholder perspective Foreign Company perspective
Include in GI par (k) No SA tax
Exempt ito s10B
