What Does Dividend In Specie Mean?

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What Does Dividend In Specie Mean?

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Asked by: varinder

The South African Revenue Service (SARS) indicated that foreign dividends in specie should be subject to normal tax in South Africa. However, in terms of section 9(4) of the Act, foreign dividends are not regarded as being from a South African source.

How are dividends in specie taxed?

Where a company makes an in-specie distribution – in effect makes a dividend consisting of an asset, the actual market value of that asset is generally treated as a taxable distribution in the hands of an individual shareholder.

How does a dividend in specie work?

A distribution in specie occurs where a company makes a distribution of an identified non-cash asset, such as without first declaring an amount in cash. Distributions in specie fall under section 845 of Companies Act 2006. Most commonly such assets may be property or machinery or the benefit of a debt.

Is a cash distribution the same as a dividend?

The Bottom Line

A dividend is a payment from a C corporation, usually in the form of cash or additional shares. A distribution, on the other hand, is a payment from a mutual fund or S corporation, always in the form of cash.

How does an in specie transfer work?

‘In specie’ is a Latin term meaning ‘in the actual form’. Transferring an asset ‘in specie’ means to transfer the ownership of that asset from one person/company/entity to another person/company/entity in its current form, that is without the need to convert the asset to cash.

Is stamp duty payable on a dividend in specie of shares?

If the company declares that the dividend will be payable in shares (i.e. in specie), there is no charge to stamp duty when the dividend is paid, as there is no transfer of existing securities and the company uses its reserves to issue new shares, and there is no duty on a share issue.

What is a capital dividend?

What Is a Capital Dividend? A capital dividend, also called a return of capital, is a payment that a company makes to its investors that is drawn from its paid-in-capital or shareholders’ equity. Regular dividends, by contrast, are paid from the company’s earnings.

Does an in specie transfer trigger CGT?

While you do not sell the asset down to cash, an in-specie transfer will generally trigger a capital gains tax event, as you transfer the ownership.

Can dividends be withheld from shareholders?

Dividends Tax is a tax on shareholders (beneficial owners) when dividends are paid to them, and, under normal circumstances, is withheld from their dividend payment by a withholding agent (either the company paying the dividend or, where a regulated intermediary is involved, by the latter).

How long does an in specie transfer take?

In-specie transfers typically take up to 6 weeks to complete. You can also opt for a ‘mixed’ transfer, which means we transfer some of your balance across in-specie and the rest as cash.

In specie is a Latin term that means “in its actual form.” It is sometimes used to indicate that distribution of an asset will be in its actual form, rather than transferring it into cash or another form.

What is an in specie?

In specie is the delivery of a financial asset in its current form rather than in an equivalent amount of cash. In specie transactions may involve either physical assets or financial assets. Tax implications may influence the decision to use in specie.

What is an in specie distribution?

In specie is a term which literally translates to ‘in its actual form’. This refers to the process of distributing an asset in its physical form rather than selling it and then distributing the proceeds.

What is dividend in kind?

Distributions made in a form other than cash or stock of the payor (eg. property) are generally referred to as “dividends-in-kind”.

Can a company pay dividend out of its capital?

Dividend should be declared only out of profits earned by the company. However, profits out of capital transactions, if not realised in cash, shall be excluded for this purpose. … These profits are known as capital profits and are not available for distribution as Dividend.

What is tax free dividend?

The dividends received from any Indian Company upto Rs. 10 Lakhs are tax free in the hands of the investors under Section 10(34). However, the dividends received from any Mutual Fund Company are fully exempt without any maximum limit under Section 10(35).

Is return of capital good or bad?

If you see return of capital was employed at your fund, this isn’t necessarily bad news. Although investors should avoid funds with consistent use of destructive return of capital, to dismiss a CEF from investment consideration simply because it has distributed return of capital is unwise.

Can pension payments be made in specie?

The law as it currently stands, does not allow for pensions to be paid in anyway other than cash. On the other hand, lump sum payments can be made in cash or in-specie transfer of assets.

How do you account for distribution in specie?

Measuring an in-specie distribution

Provided the company has adequate distributable reserves, the distribution is made at the carrying value of the (non-cash) asset in the balance sheet (not market value). The accounting entry will normally be: DR – Retained reserves; CR – Asset account (at carrying/book value).

What is an in specie contribution?

In-specie contributions are where assets such as property or shares are transferred into a Sipp without first being converted into cash. … For the asset transfer to give rise to tax relief the contribution effected in this way must retain its monetary form.

Is it better to receive dividends as cash or shares?

Stock dividends are thought to be superior to cash dividends as long as they are not accompanied by a cash option. Companies that pay stock dividends are giving their shareholders the choice of keeping their profit or turning it to cash whenever they so desire; with a cash dividend, no other option is given.

Is dividend good or bad?

Dividend-paying stocks are advantageous to shareholders. This is due to the fact that investors can get a regular income from their equity investment while continuing to retain the shares in order to profit from additional share price appreciation. Dividends are money in your pocket as the stock market rises and falls.

Are dividends free money?

Dividends are not free money (though lots of investors seem to think they are) In a yield-starved economy, many stock investors look to cash dividends as a source of income.

A company that declares and pays a dividend that constitutes a distribution of an asset in specie is liable for the dividends tax at a reduced rate in respect of that portion of the dividend that constitutes the distribution of an asset in specie if the person to whom the payment is made has, by the date of payment, …

How is a dividend in specie taxed?

Where a company makes an in-specie distribution – in effect makes a dividend consisting of an asset, the actual market value of that asset is generally treated as a taxable distribution in the hands of an individual shareholder.

How do you account for distribution in specie?

Measuring an in-specie distribution

Provided the company has adequate distributable reserves, the distribution is made at the carrying value of the (non-cash) asset in the balance sheet (not market value). The accounting entry will normally be: DR – Retained reserves; CR – Asset account (at carrying/book value).

How does dividend in specie work?

Where a dividend is declared in cash, but satisfied by a transfer of assets, it is called ‘dividend in specie’. … A distribution in specie occurs where a company makes a distribution of an identified non-cash asset, such as without first declaring an amount in cash.

Is a dividend in specie a disposal?

A capital allowances adjustment may be required. A ‘dividend in specie’ is a distribution and a disposal by the company.

What are distributions in specie?

The phrase in specie describes the transfer of an asset in its current form rather than in the equivalent amount of cash. In specie distributions are usually made when cash isn’t readily available or when it’s simply more practical to hand over the asset rather than cash.

Does an in specie transfer trigger CGT?

While you do not sell the asset down to cash, an in-specie transfer will generally trigger a capital gains tax event, as you transfer the ownership.

What is distribution in specie mean?

In Specie Distribution. A testator may make specific bequests of personal property in favour of named beneficiaries. Indeed, he may also devise specific real property to named devisees.

What is a dividend in specie SARS?

A dividend in specie refers to distribution to shareholders in a form other than cash. Please note: Effective 20 January 2015. A beneficial owner of a dividend in specie which is exempt has to submit a return to the Commissioner of SARS. A refund can now be claimed for a dividend in specie.

How does dividends work in South Africa?

In South Africa dividends come in several forms, but the most common is cash, which is deposited into shareholders’ investment accounts. For example, if a company declares R0. 30 dividend and you own 100 shares, you’ll receive R30. … Typically, mature companies with strong cash flows are more likely to pay dividends.

What is dividend tax SARS?

Dividends received by individuals from South African companies are generally exempt from income tax, but dividends tax at a rate of 20% is withheld by the entities paying the dividends to the individuals.

What is an in specie transaction?

What is an in-specie transfer? The transfer of an asset in its current form rather than in the equivalent amount of cash. The legal ownership of the asset is transferred from one provider/scheme to another without the need to sell and re-purchase the asset.

What is an in specie trade?

‘In specie’ is a Latin term meaning ‘in the actual form’. Transferring an asset ‘in specie’ means to transfer the ownership of that asset from one person/company/entity to another person/company/entity in its current form, that is without the need to convert the asset to cash.

Is dividend in specie subject to CGT?

An in specie distribution would typically have already been subject to CGT in the hands of the company making the distribution. The full value of the distribution in specie would again be subject to CGT in the hands of the recipient shareholder, resulting in double taxation of the same economic gain.

Can an in specie contribution be concessional?

When a member transfers an asset into their SMSF, they can choose to treat it either as a contribution or an asset sale. If you choose to treat an in specie asset transfer as a contribution, you can also choose whether it will be a concessional (before tax) or non-concessional (after tax) contribution.

What are in specie contributions?

In specie contributions are superannuation contributions that are made using assets other than cash. An in specie contribution can include shares, managed funds and real estate. An in specie contribution can be accepted by a superannuation fund if it is permitted within the superannuation fund’s trust deed.

How long do in specie transfers take?

In-specie transfers typically take up to 6 weeks to complete. You can also opt for a ‘mixed’ transfer, which means we transfer some of your balance across in-specie and the rest as cash.

Is stamp duty payable on a dividend in specie?

A dividend in specie will prima facie be exempt from SDLT because no chargeable consideration is given for the dividend. Where a company wishes to transfer assets to its shareholders, it is important that a final cash dividend not be declared.

What is a deemed dividend South Africa?

The current deemed dividend provision applies where a debt arises “by virtue of a share held in the company” and where the following conditions are present: the debtor is a person other than a company; the debtor is a South African resident and the debtor is either a connected person in relation to the company, or a …

What is dividend in kind?

Distributions made in a form other than cash or stock of the payor (eg. property) are generally referred to as “dividends-in-kind”.

Can Director buy company assets?

Similarly, it’s possible that a director may wish to retain some company assets. If so, the director can purchase the assets from the insolvency practitioner, but at the same rate as the market value.

What is in specie transfer of shares?

In specie is a process of transferring investment funds or shares without actually selling the underlying. investment product (between platforms or from retail funds into a platform)

What’s the difference between distribution and dividend?

A dividend is a payment from a C corporation, usually in the form of cash or additional shares. A distribution, on the other hand, is a payment from a mutual fund or S corporation, always in the form of cash.