Draft IN: Extraordinary dividends treated as income or proceeds on disposal of shares
This draft interpretation note provides guidance on the interpretation and application of section 22B and paragraph 43A relating to the income tax treatment of extraordinary dividends on certain disposals and deemed disposals of shares by a company to prevent so-called “dividend stripping”. Comments may be emailed to policycomments@sars.gov.za before 14 January 2022.
The current section 22B and paragraph 43A came into operation on 19 July 2017 and apply to any disposal of shares on or after that date.
These provisions are anti-avoidance provisions aimed at “dividend-stripping” when a shareholder reduces the value of a shareholding through extracting exempt dividends so that, upon the subsequent disposal, the taxable disposal proceeds are lower than would have been the case if all the reserves had still been retained in the company
Section 22B applies to the disposal of shares held by a company as trading stock, while paragraph 43A applies to the disposal of shares held by a company as capital assets.
The draft interpretation note aims to clarify how the provisions are to be interpreted and applied, as well as provide practical examples thereof.
The public is invited to provide comment on the document before 14 January 2022, via email at policycomments@sars.gov.za.
Find the draft interpretation note here.
12/11/2021
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