Page 87 - Companies & Dividend Tax

Acquisition and Disposal of Shares

Investors

Par 19: Losses on the disposal of certain shares (SILKE 17.10.5.5)

• The capital loss on disposal is disregarded if an extraordinary
exempt dividend was distributed in term of share buy-backs,
liquidation, winding-up or deregistration of a company within 18

months of disposal of the share. This is an anti-avoidance
provision and determines the following:

• If a taxpayer buys shares in a company and within 18 months of

disposal of the share(s), an extraordinary exempt dividend is
declared by a company in liquidation (which exceeds 15% of the
proceeds received or accrued from the disposal of the shares),

the value of the share(s) could possibly decrease.

• When the shares are sold, the proceeds might be less than the

base cost and a capital loss could be incurred. If the dividends are
exempt from normal tax, it will mean that SARS is funding the
loss.

87