Application Of Capital Gain Taxation Cgt Provisions
In both the situations described above, the share repurchase proceeds would not be subject to dividends taxand additionally, the proceeds were also exempt from income tax in the hands of the Corporate Shareholders. For CGT purposes, the share repurchase proceeds were not taken into account by the Corporate Shareholder for purposes of calculating its capital gain or loss resulting from the share repurchase transaction.
The anti-dividend stripping provisions were introduced in order to curb the above described practice.
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In its current form, these provisions only apply if the Corporate Shareholder actually disposes of its shares in the Target and receives a dividend either as part of the sale i. Corporate Shareholders sought to avoid these provisions by receiving large dividends, with new shareholders subscribing for shares in the Target, and the Corporate Shareholders being significantly diluted. Then, after the lapsing of 18 months, they Prpvisions sell the shares for the then value, which would likely be low.
In this way the CGT was not payable. In the Budget Speechit was proposed that the anti-dividend stripping provisions be expanded to deal with this scenario.
Introduction to Capital Gains and Losses
This deemed disposal takes place immediately after the new shares are issued by the Target to the third party. Upon this deemed disposal, the Corporate Shareholder will be required to take any extraordinary dividend into account as a capital gain, despite the fact that read more has not actually disposed of its shares in the Target. The TLAB introduces a relief measure to the Corporate Shareholder by effectively providing the extraordinary dividend in respect of this deemed disposal as a credit against any future extraordinary dividends derived by such company from the actual disposal of its shares in the Target. The TLAB proposes that the new provision be introduced with retrospective effect from 20 February and that it applies in respect of a reduction in the effective interest in a Target on or after 20 February Needless to say, there are numerous problems and difficulties Application Of Capital Gain Taxation Cgt Provisions the proposal, and numerous parties, including Werksmans, have commented to the South African National Treasury and SARS thereon.
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Capital Gains Tax in Nigeria
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