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A full description of Entrepreneur's relief is outside the scope of this website, refer to HMRC - Entrepreneur's relief for a detailed explanation.If Entrepreneur's relief is available, then liquidation will be a more favourable tax treatment, although for non or basic rate taxpayers, consideration should be given to declaring an income dividend before the liquidation to use up the basic rate allowance.At the maximum effective capital gains tax rate for individuals, the shareholder is liable for R0,15 of tax.

The receipt or accrual of a capital distribution gives rise to a deemed part-disposal by the shareholder for capital gains tax purposes.

See so that funds may be passed to individual shareholders as dividends. Higher rate taxpayers may prefer to receive capital if possible because of the lower rates of CGT.

Distributions made on striking off has also been introduced to target ‘phoenixing’.

If the company pays out a distribution of R11 in anticipation of its liquidation (representing R9 of share premium and R2 of retained income—everything but the share capital), the following tax implications arise: The portion of the base cost attributable to the part-disposal is (R9/R12 x R10), or R7,50 —the capital distribution is R9, the market value of the share is R12 (the Act provides that the market value prior to the deemed part-disposal must be used for the calculation), and the original base-cost of the share is R10.

The capital gain on part-disposal is thus (R9,00-R7,50), or R1,50.


  1. Tax consequences of a liquidation distribution followed by an amalgamation. tax consequences of a ‘liquidation. be subject to dividends tax or normal.

  2. Corporate Taxation in Switzerland. Case Studies. Martin Ruchti, MBA, Swiss Chartered Accountant. Interest is tax deductible, dividend payments are not.

  3. The increase in the dividend tax rates from April 2016 will make it even more tempting to arrange for returns from a company to be taxed as capital at rates as low as 10% and no more than 28% rather than income. Profits extracted from a company as dividends are taxed as income.

  4. Definition A liquidating cash dividend is a distribution to that returns some of the original investment to the owners. In other words, a liquidating cash.

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