The amendments now result in exempt dividends being treated as additional proceeds, in the case that the shares are held as capital assets, or additional income in the event that the shares are held on revenue account, if certain conditions are met. This is especially the case in the context of simplifying or restructuring groups using corporate roll-over concessions. Should these simplifications or restructures results in the declaration of a dividend and combined with the termination of the company’s corporate existence, such dividends could be subject to additional capital gains tax or income tax. 

In addition to applying to legitimate restructurings, the anti-dividend stripping rules also find application in relation to the redemption of certain preference share structures. It is not uncommon for preference shares to contain gross-up clauses which may now be triggered pursuant to the redemption of these instruments.

It appears that the unintended consequences have been recognised by the Minister, and that the application of these rules will be clarified.