22.1 INTRODUCTION
For the first time we are seeing that it is necessary to make two disciplines merge into one in the accountant’s office. Secretarial practitioners now need to venture into the area of tax because of relatively new legislation. In my view Company Secretarial Practitioners need to know about CONTRIBUTED TAX CAPITAL (CTC).
The Tax and Secretarial functions merge.
Although the definition of CONTRIBUTED TAX CAPITAL (CTC) is really a tax concept and has nothing to do with company law it is really only the company secretary or the secretarial practitioner that has the necessary records to record and calculate CTC. We have been doing share buy backs and other share transactions without really understanding the tax consequences of keeping proper records of CTC. The record keeping is normally handled by the secretarial department but only from a company secretarial point of view without understanding the tax consequences. The time has come for tax people and secretarial people to work together to come up with the required information thus reducing risk that companies face from SARS. It is now obligatory to have this information on tap for the purposes of completing the ITR14 tax return.
Any repayment of CONTRIBUTED TAX CAPITAL (CTC) to a shareholder is not a dividend.
CTC is a tax concept only. From a practical point of view the CTC may be the same as the share capital of a company and may very well be the case where smaller companies are concerned.
In terms of the Income Tax Act there are four parts to the definition of CTC.