what would happen if a limited company sells lands and distribute the cash from the land . do they pay dividend tax and ati sijui compensating tax ama what. please tax experts nisaidieni juu watu washalipwa pesa na hawawesi rudisha

When a company sells a building, like Williamson did, the gains made are recognised as income, but for CORPORATE TAX purposes are deducted from other 'normal' income and the remainder is taxed.

When PAT (profit after tax) is distributed to shareholders, the distributing company is obliged to with hold 5% (10% for non-residents) at source.

The shareholder is not subject to any other tax as this withholding tax is considered final.

To cut the long story short, any distributed profits from whatever source is subject to w/h taxx.

But if it has done improvements to the land, then I don't think it is capital gains any more, thus corporation taxe would have to apply at 30%

Compensating Tax is paid when the company doesn't distribute a dividend, or distributes less than it ought to.

Because of not distributing a dividend, the taxman doesn't get the withholding tax due from it, therefore he charges a Compensating Tax on the company.

However, a company can appeal against a Compensating Tax charge if they have no liquid cash, are involved in a major capital project, have loans to pay etc.

sparky,

we bought land as a group for 3 million and sold it for 9 million. we want to break the group and share the 6 million amongs 10 people. each person gets 6oo k. we can pay withholding tax at 5% consindering the 600k ad dividend, but are we liable to pay 30% of the 6 million profit before we divide the money?