Page 18 - Chapters 17 & 18 - Dividends & Dividend Tax
P. 18
Excluded From Definition Of
Dividend – (2)
O Transfer of shares in company making the transfer
(Capitalisation issue)
• Effectively means that retained earnings/share premium
are capitalised.
• Example: “each shareholder will receive one capitalisation
share for every 5 ordinary shares held”
How is retained earnings capitalised?
Dr. Retained earnings / Share premium
Cr. Share capital
O Result:
The capitalisation shares received by the holder of shares =
a distribution made by the company, but does not qualify as
a dividend, because any distribution that constitutes shares
is specifically excluded from the definition of a dividend.
Note: A capitalisation issue does not increase Contributed Tax Capital. The holders
of shares does not pay anything for a capitalisation issue.
