Paragraph 76B (Eighth Schedule) – Reduction in base cost of shares as result of distributions

76B. Reduction in base cost of shares as result of distributions

(1) Where-

(a) a return of capital or foreign return of capital by way of a distribution of cash or an asset in specie is received by or accrues to a holder of a share in respect of that share;

(b) that return of capital or foreign return of capital is received by or accrues to the holder of that share on or after 1 April 2012 and prior to the disposal of that share; and

for purposes of determining the date of acquisition of that share and the expenditure in respect of the cost of acquisition of that share, the holder of that share must be treated as-

(i) having disposed of that share at a time immediately before the return of capital or foreign return of capital is received or accrues for an amount equal to the market value of the share at that time; and

(ii) having immediately reacquired that share at that time at an expenditure equal to that market value-

(aa) less any capital gain that would have been determined had the share been disposed of at market value at that time; and

(bb) increased by any capital loss that would have been determined had the share been disposed of at market value at that time,

which expenditure must be treated as an amount of expenditure actually incurred for the purposes of paragraph 20(1)(a):

: Provided that the market value of a share listed on a recognised exchange and for which a price was quoted on that exchange is equal to the sum of-

(i) the ruling price of that share at the close of business on the last business day before the accrual of the return of capital or foreign return of capital; and

(ii) the amount of the return of capital or foreign return of capital.

[Proviso to subparagraph (1) added by section 79 of Act 15 of 2016 effective on 19 January 2017]

(2) Where-

(a) a return of capital or foreign return of capital by way of a distribution of cash or an asset in specie is received by or accrues to a holder of a share in respect of that share; and

(b) that return of capital or foreign return of capital is received by or accrues to the holder of that share on or after 1 April 2012 and prior to the disposal of that share,

the holder of that share must reduce the expenditure in respect of the share by the amount of that cash or the market value of that asset on the date that the asset or that cash is received by or accrues to the holder of that share.

[Words following item (b) substituted by section 122 of Act 25 of 2015 effective on 8 January 2016]

(3) Where the amount of a return of capital or foreign return of capital contemplated in subparagraph (2) exceeds the expenditure in respect of the share in respect of which that return of capital or foreign return of capital is received or accrues, the amount of the excess must be treated as a capital gain in determining the aggregate capital gain or aggregate capital loss of the holder of that share for the year of assessment in which that return of capital or foreign return of capital is received by or accrues to the holder of that share.