Binding Private Ruling 364

Summary of the corporate structure:

The shareholders of Company A, a non-resident entity, are as follows:

(i) South African (“SA”) company (“SACo”) – 90%

(ii) Minority shareholder – 10%.

Description of proposed transaction:

Company A is considering listing 100% of its equity shares on a foreign securities exchange, which will include an Initial Public Offering (IPO) of 20% of Company A.

Company A will declare a special dividend, payable in cash, to its existing shareholders prior to the IPO (pre-IPO special dividend). The special dividend will exceed 15% of the higher of the market value of the Company A shares, a relevant requirement for the application of paragraph 43A.

Company A will increase its authorised share capital in preparation for the IPO, where after Company A will issue shares to new non-resident investors.

Ruling:

i) The dilution of the applicant’s shareholding in Company A, as a result of the IPO, will not constitute a “disposal” as contemplated in paragraph 64B of the Eighth Schedule. [Paragraph 64B exempts SA residents from a CGT event on the disposal of foreign equity provided certain requirements are met.]

ii)  The capital gain or loss, as determined by paragraph 43A(2), may not be disregarded under the provisions of paragraph 64B of the Eighth Schedule.

Find a copy of BPR 364 here.

​12/06/2021