Further details have just been released regarding the
revised anti-dividend stripping tax avoidance
provisions, which were announced by Finance
Minister Tito Mboweni on 20 February 2019.
These rules are intended to expand the scope of the dividend
stripping provisions in the
Income Tax Act, 1962 (the ITA), to also apply
to 'disguised sales'. Importantly, it is proposed that the
new rules will have retrospective effect, applying with effect from
20 February 2019.
As explained in our Newsflash issued earlier this year after the
Budget Speech, the 'abusive arrangements' were described to
involve a target company distributing a substantial dividend to its
current company shareholder and subsequently issuing shares to a
third party. This is in contrast to the previous version of the
anti-dividend stripping provisions which did not apply in case of a
dilution, but only where the current shareholder disposed of shares
in the target company.
