Income Tax Act, 1962 (Act No. 58 of 1962)Department of FinancePractice Note No. 25Excessive Remuneration and Other Charges |
Date: 16 August 1994
| 1) | Before 1990 it was standing practice to disallow in the hands of a company some or all of the remuneration paid to a director or employee who is a shareholder if such remuneration was regarded as excessive in relation to the services rendered by the shareholder to the company. The amount disallowed was treated as a dividend in the hands of the shareholder. |
| 2) | Following upon the exemption from tax of dividends in 1990 the aforementioned practice was discontinued as from 1 March 1990. The effect hereof is that from that date the full amount of excessive remuneration is taxable in the hands of the shareholder concerned. |
| 3) | The practice in regard to excessive remuneration is not limited to directors' fees and salaries, but also applies to interest and rental charges and administration and other fees. |