n Without Prejudice - The debt/equity conundrum : tax

Volume 7, Issue 10
  • ISSN : 1681-178X



In taxation, the distinction between debt and equity is an important one in view of the radically different tax treatment each is accorded. The servicing of debt capital in the form of interest payments is, in terms of s11(a) of the Income Tax Act [read with s23(g)], a deductible expenditure. By contrast, the servicing of equity capital in the form of dividend payments is not considered a deductible expenditure. But it is becoming increasingly difficult to distinguish between these two forms of corporate finance.

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