Original Research

Dividend cession and dividend distribution: The South African VAT implications

Estian Haupt, Rudie Nel
Journal of Economic and Financial Sciences | Vol 10, No 1 | a2 | DOI: https://doi.org/10.4102/jef.v10i1.2 | © 2017 Estian Haupt, Rudie Nel | This work is licensed under CC Attribution 4.0
Submitted: 06 December 2017 | Published: 06 June 2017

About the author(s)

Estian Haupt, Stellenbosch University, South Africa
Rudie Nel, Stellenbosch University, South Africa

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An intuitive approach when considering the VAT implications of a dividend cession, which relates to a share, could be to classify it as a financial service and thus exempt from VAT. The fact that debt factoring, another cession transaction, has been noted as an exempt supply could support the intuitive approach in favour of a financial service. Pursuant to different interpretations and in an attempt to triangulate evidence, the meaning of ‘equity security’, ‘equity share’ and ‘security’ from three different tax acts were considered. Findings suggest a dividend cession is not a financial service and consequently a taxable supply for VAT purposes. This finding supports the normal tax view of National Treasury that a dividend cession constitutes an income stream independent from the underlying share and thus ordinary revenue. Findings provide guidance on the value of supply provisions and also enunciate that the subsequent dividend distribution in specie could result in VAT implications.


Dividend cession; financial service; equity share; equity security; VAT


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Crossref Citations

1. Donations in kind: An investigation of the value for purposes of section 18A of the Income Tax Act
Rudie Nel, Nicolette Klopper
Journal of Economic and Financial Sciences  vol: 12  issue: 1  year: 2019  
doi: 10.4102/jef.v12i1.418