Original Research

Dividend cession – Investigating the South African tax implications

Estian Haupt, Rudie Nel
Journal of Economic and Financial Sciences | Vol 12, No 1 | a153 | DOI: https://doi.org/10.4102/jef.v12i1.153 | © 2019 Estian Haupt, Rudie Nel | This work is licensed under CC Attribution 4.0
Submitted: 08 January 2018 | Published: 11 February 2019

About the author(s)

Estian Haupt, School of Accountancy, Stellenbosch University, South Africa
Rudie Nel, School of Accountancy, Stellenbosch University, South Africa

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Orientation: The South African tax legislation in respect of dividend cession.

Research purpose: The objective of this article was to investigate the tax implications of a dividend cession for the cedent, cessionary and declaring company involved in the cession in order to provide guidance regarding the tax implications arising from such cession.

Motivation for the study: The introduction of specific anti-avoidance provisions and amendments to tax legislation complicated the tax treatment of a dividend cession. Current literature and guidance contains a brief reference to the capital gains tax implications, while other guides deal exclusively with the dividends tax implications. Based on the lack of definitive guidance of other taxes resulting from a dividend cession, this investigation is considered necessary.

Research approach/design and method: This study involved an interpretative analysis of the tax legislation and incorporates other literature on the research objective to describe the tax implications as a result of dividend cession. The mode of inquiry for this study is qualitative in nature and follows a doctrinal research method.

Main findings: Findings suggest that although the classification of a dividend cession could be a usufruct (a real right), the practical tax implications with reference to dividends could not have been the intention. The submission is therefore that the tax implications should be as a personal right. Furthermore, the introduction of specific anti-avoidance provisions resulted in an instance of possible double taxation which was noted, which is submitted as a possible unintended consequence as a result of legislation amendments.

Practical/managerial implications: The practical value of the article lies in the guidance in respect of the tax implications which taxpayers could consider in transactions pertaining to dividend cession.

Contribution/value-add: Instance of double taxation documented and submitted as possible unintended consequence which could inform further debate on the topic.


tax; dividend cession


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