Tax on reduction of capital: Here’s how shareholders will get affected

The cancellation of shares by an unlisted subsidiary of a listed company has caused concern among investors due to the low price and tax implications. Shareholders will be taxed on the amount paid out as dividend, which could be as high as 35.88%. Employees who acquired shares through stock options will also be affected. The tax treatment of buybacks, capital reductions, and share sales should be harmonized to avoid adverse tax consequences for shareholders.

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