Page 47 - Companies & Dividend Tax

DIVIDENDS

Issue and repayment of capitalisation shares

• Do not get confused between the issue of capitalisation

shares to the holder of a share and the buy-back of

shares by the company from the holder of a share.

• The issue of capitalisation shares (no consideration involved)
and the buy-back of shares (consideration involved) are

opposite transactions.
• When capitalisation shares are issued the reserves/profits are

utilised to “fund” the issue of these shares. The appropriation
of reserves/profits for the benefit of the holder of the share/s
is a dividend. However the dividends definition excludes the

issue of capitalisation shares to the holder of the shares.

• The exclusion of a capitalisation issue of shares from the
dividend definition does not apply to the repayment/buy-
back of shares from the holder of a share. The repayment or

buy-back of capitalisation shares is a dividend.

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