Page 60 - Companies & Dividend Tax
P. 60
DIVIDENDS
Normal tax consequences
• The company is distributing an asset to a holder of a
share/s. If the company had sold the asset at market
value instead, normal tax consequences would have
arisen. The company could then have used the
proceeds of the asset to pay a cash dividend (after
paying normal tax).
• Sections 8(4)(k) and 22(8) are both anti-avoidance
measures and will result in the asset (dividend in
specie) being deemed to be disposed of at the market
value of the asset. Section 22(8) applies to trading
stock and section 8(4)(k) to assets where a deduction
or allowance has been claimed. The excess will have
capital gains tax (CGT) consequences if an asset (market
value less recoupment).
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