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Income Tax Act, 1962 (Act 58 of 1962)

Chapter II: The Taxes

Part I: Normal Tax

22B. Dividends treated as income on disposal of certain shares

 

(1) For the purposes of this section, ‘exempt dividend’ means any dividend or foreign dividend to the extent that the dividend or foreign dividend is—
(a) not subject to tax under Part VIII of Chapter II; and
(b) exempt from normal tax in terms of section 10(1)(k)(i) or section 10B(2)(a) or (b).

 

(2) Where a taxpayer that is a company disposes of shares in any other company, the amount of any exempt dividend received by or accrued to the taxpayer in respect of any share held by the taxpayer in that other company must be included in the income of the taxpayer—
(a) to the extent that the exempt dividend is received by or accrues to the taxpayer within a period of 18 months prior to or as part of the disposal;
(b) if the taxpayer immediately before the disposal—
(i) held the shares disposed of as trading stock; and
(ii) held more than 50 per cent of the equity shares in the other company; and
(c) if the other company (or any company in which that other company directly or indirectly holds more than 50 per cent of the equity shares) has, within a period of 18 months prior to that disposal, by reason of or in consequence of that disposal, incurred any debt—
(i) owing to the person acquiring the shares or any connected person in relation to that person; or
(ii) that is guaranteed or otherwise secured by the person acquiring the shares or any connected person in relation to that person.

 

(3) For the purposes of subsection (2), the amount that must be included in the income of the taxpayer is limited to the amount of the debt contemplated in paragraph (c) of that subsection.