40. Section 33 of the Income Tax Act, 1962, is hereby amended by the substitution for the heading of the following heading: “Assessment of owners or charterers of ships or aircraft [not ordinarily 25 in]. who are not residents of the resident or registered, managed or controlled Republic”. Amendment of section 36 of Act 58 of 1962, as amended by section 12 of Act 72 of 1963, section 15 of Act 90 of 1964, section 20 of Act 88 of 1965, section 23 of Act 55 of 1966, section 16 of Act 95 of 1967, section 14 of Act 76 of 1968, section 26 of Act 30 89 of 1969, section 21 of Act 65 of 1973, section 28 of Act 85 of 1974, section 20 of Act 104 of 1980, section 25 of Act 94 of 1983, section 16 of Act 96 of 1985, section 14 of Act 70 of 1989, section 26 of Act 101 of 1990, section 30 of Act 129 of 1991, section 24 of Act 141 of 1992, section 29 of Act 113 of 1993 and section 17 of Act 36 of 1996 41. (1) Section 36 of the Income Tax Act, 1962, is hereby amended by the substitution 35 for paragraph (hhj of the proviso to paragraph (c) of the definition of “capital expenditure” in subsection (1 1) of the following paragraph: “(hh) where a [change of ownership] sale, transfer, lease or cession of [a] any mining property, as contemplated in section 37, occurs [and the assets passing by such change of ownership include any] which results in the 40 disposal of an asset in respect of which the provisions of paragraph (d) are applicable, so much of the effective value as relates to the asset so [included] disposed of shall qualify for the calculation of the amount under this paragraph as from the first day of the year of assessment following the year of assessment during which the [change of ownership occurred] agreement 45 of sale, transfer, lease or cession of that mining property takes effect; and”. (2) Subsection (1) shall come into operation on the date of promulgation and shall apply in respect of any disposal of an asset on or after that date. 5 2 \o -2423 GOVERNMENT GAZETTE. I3 DECEMBER 2001 Act No. 60. 2001 SECOND REVENUE LAWS AMENDMENT ACT. 2001 Substitution of section 37 of Act 58 of lY62, as amended by section 29 of Act 85 of 1974 and section 25 of Act 141 of 1992 42. ( 1 ) Section 37 of the Income Tax Act. 1963. is hereby substituted by the following section: "Calculation of capital expenditure on sale. transfer, lease or cession of mining property 5 37.(1) For the purposes of this Act. but subject to subsection ( ] A ) , whenever [a change of ownership of a mining property, occurs the new owner] a taxpayer- or cedes any mining property: and ((/) ( h i disposes of any assets contemplated in section 36(11) (hereinafter referred to as 'the capital assets' ) in consequence of the sale, transfer. lease or cession contemplated in paragraph (ai, sells, transfers. leases I O 15 the person acquiring those capital assets shall be deemed to have acquired such [preliminary surveys, boreholes, shafts, development and equip- ment (in this section referred to as the development assets) as are included in the] capital assets [passing by such change of ownership] at a cost equal to the effective value [to the new owner of the development assets at the time the change of ownership takes place takes place] of those capital asset5 to that person on the effective date of that agreement of 20 sale. transfer. lease or cession of the mining property, and the said cost shall by [the new owner] that be deemed to be expenditure that is incurred [the change of person during the period ownership occurs] that agreement takes effect and to be capital expendi- ture which is in respect of such period required to be taken into account for 35 the purposes of the definition of 'capital expenditure incurred' in section 36( 1 I ). [Provided that if in a case in which consideration is given, the effective value of all the assets so passing, exceeds the consideration, the amount of such cost and expenditure shall be deemed to be an amount which bears to the amount of such consideration the same ratio as such 30 effective value of the development assets bears to the effective value to the new owner at the said time of all the assets passing.] of assessment during which ( 1 A ) Where any consideration is given by the person acquiring the assets the taxpayer. as contemplated in subsection ( l ) , and the disposed of by effective value of all those assets acquired, exceeds that consideration. the amount of the cost and expendi- ture in respect of the capital assets shall. for the purposes of subsection ( I ). be deemed to be an amount which bears to the total amount of such consideration the same ratio as such effective value of those capital assets bears to the effective value mining property) so disposed of to that person. (including any mining to that person of all the assets (including any 40 property) so 35 ( 2 ) For the purposes of paragraph ( j ) of the definition of 'gross income' in section 1 and section 36. the [person from whom ownership of any mining property is acquired in consequence of a change of ownership of that property] taxpayer who disposes of any capital assets contemplated 45 in subsection (1 ). shall be deemed to have disposed of [the development such capital assets [passing by the change of assets included in the] ownership] for a consideration equal in value to the cost of [the development] those capital assets to the [new owner] person acquiring such capital assets as determined under subsection consideration shall be deemed to have been received by or to have accrued [person at the time the change of ownership takes place] to the said taxpayer on the effective date of the agreement of sale, transfer, lease or cession. (1) and (,lA), and such SO 54 \ L j '2'127 GO\'EKNMENT GAZETTE. 12 DECEMREK 2001 Act No. 60. 2001 SECOND REVENCE L,AR'S AMENDMENT ACT. 1001 (31 If the value of the consideration given or the value of the property [passing where no consideration is given] disposed of is in dispute. [it] the \,slue mag. [with the consent of the new owner] be fixed b!~ the Commissioner and shall [failing such consent] be determined- ( ( / / i n the case of an!' mininy propertv. in the same manner as if transfer dut!, were payable: 0' f h ! in the case of an!' capital asset. at the market value of such capital 5 asset. __ of the agreement of sale. transfer. lease ( 4 1 The effectiw \,slue [at the time the change of ownership takes or place] on the effective date cession. of all the assets [passing and of the development assets included therein] disposed of. shall be determined by the Director General [Mineral and Energy Affairs] for Minerals and Energ!. npho shall. notwithstanding the repeal of the Second Schedule to the Transvaal Mining Leases and Mineral Lau, Amendment Act. 1 9 1 8 (Act No. 30 of I C ) 1 8 1. for the purposes 15 of such determination have all the powers which were conferred upon him by the pro\>isions of that Schedule. I O ( 5 ) For the purpose of this section. 'mining propert!.' means- ( a ) an! , / I ! an!' land on uhlch mininr is carried on: or riyht to minerals (including any right to mine lease o r sub-lease of such a right.", for minerals) and a 20 ( 2 ) Subsection ( 1 ) shall come into operation on the date of promulgation of this Act and shall appl!. in respect of an! disposal of a capital asset on or after that date. Amendment of section 38 of Act 58 of 1962, as amended by section 21 of Act 90 of 1962, section 16 of Act 90 of 1964, section 28 of Act 89 of 1969, section 31 of Act 85 25 of 1974. section 27 of Act 94 of 1983, section 24 of Act 121 of 1984, section 32 of Act 53 of 1999 and section 36 of Act 30 of 2000 33. t 1 t Section -38 of the Income Tax Act. 1962. is hereby amended by the substitution for paragraph (('1 of subsection (1) of the following paragraph: [the Commissioner is satisfied was incorporated to 30 any cornpan). which a section of the serve a specified purpose, beneficial to the public or public, if under the constitution of the company no shareholder is entitled to participate in the profits or income of the company to an extent greater than seven per cent of the nominal value of his shareholding] has been approved as a public benefit organisation in terms of the prmisions of section 35 iO(3t:". ( 2 ) Subsection ( 1 ) shall be deemed to ha\.e come into operation on 15 Jul! 2001. Insertion of Part 111 in Chapter I1 of Act 58 of 1962 11. ( I I The lollouing Part is hsreb! inserted i n the Income Tax Act. 1962. after Part If of Chapter 11: "PART I11 General 41. ( 1 ) For the purposes of this Part. unless the context otherwise 30 45 indicates. any word or expression that has been defined in section 1, shall bear the same meaning so defined. and- 'capital asset' means an asset stock: Schedule, trading constitute does not which 'controlled company' means company is the controlling company; 'controlling company' means a company which holds for its own benefit. whether directly or indirectly through one or more companies in the group of companies of which all the companies in question are members, shares 55 as defined in paragraph 1 of the Eighth a company in relation to which another 50 56 No 329’3 GO\JERNMEh’T GAZETTE. 12 DECEMBER 7001 Act No. 60. 2001 SECOND RE\‘ENUE LAM’S AMENDMEKT ACT. 2001 which constitute at least 75 percent of the total equity share capital of any other company: Provided that in determining the total equity share capital of that other company. regard must be had to any agreement in respect of on the date of determining whether a company is a which any person is controlling company, entitled to acquire an interest in the equity share capital in that company on that date at no or nominal cost: ‘depreciable asset‘ means a capital asset in respect of which a deduction is allowable under the provisions of the Act, the recovery or recoupment of which would have to be included in the income of that person in terms of paragraph ( j ) of the definition of ‘gross income’ in section 1 or section 8 ( 3 ) ( a ) . were that a:jset to be disposed of: ’equity share’ in relation to a company, means a share in the equity share capital of that company: ‘group of companies’ means a controlling company and one or more other companies which are controlled companies company: share capital of which is ‘listed company‘ means a company the equity listed on a stock exchange as defined in section 1 of the Stock Exchanges Control Act. 1985 ( 4ct No. 1 of 1985): ‘market \;due‘ in relation to an asset means the price which could obtained upon a sale of that asset between a willing buyer and a willing seller dealing at arm’s length in an open market; and ’unlisted company’ means an!; company which is not a listed company. in relation to that controlling 5 I O 1.5 be 20 ( 2 ) Any person who acquires or disposes of any asset in terms of any transaction in respect of which the provisions of this Part apply. must provide full particulars relating to that transaction to the Commissioner. in such form as the Commissioner may prescribe. in the return furnished by that person for the year of assessment in which that transaction takes effect. ( 3 ) The Minister may prescribe by regulation the circumstances under which prior written approval of the Commissioner must be obtained or may 30 be elected to be obtained in respect of any company formation transaction. share-for-share transaction. intra-group transaction. unbundling transaction or liquidation distribution before the provisions of this Part shall apply in respect of that transaction. transfer or distribution. 15 Company Formations 35 42. (1) For the purposes of this section- ‘company formatior;, transaction’ means a transaction in terms of which a person (other than a trust which is not a special trust) transfers an asset to a company which is a resident. in exchange for equity shares of that company and that person. after that transaction. company: ’qualifying interest‘ of any person means equity shares held by that person in a company. which- l a ) is a listed company or udl become a listed company within six months holds a qualifying interest in that 30 ( b ) the Commissioner. 45 after that transaction (or as may be approved by where the Comlnissioner is satisfied that those equity shares cannot be due to circumstances listed within that initial six months period beyond the control of the company. such further period not exceeding six months): or in any other case. constitute an interest of more than 25 per cent of the SO total equity share capital of that company: Provided that in determin- ing the total equity share capital of that company, regard must be had is, on the date of to any agreement in terms of which any person determining the qualifying interest. entitled to acquire an interest in the equity share capital in that company on that date at no or nominal 55 cost. ( 2 ) Notwithstanding any provision to the contrary contained in the Act. but subject to subsections (3) and (5). where a person disposes of a capital asset to a company In terms of a company formation transaction and the market value of that capital asset exceeds the base cost of that capital asset 60 on the date of that disposal--- 58 No. 22923 GAZETTE, GOVERNMENT 12 DECEMBER 2001 Act No. 60,2001 SECOND REVENUE LAWS AMENDMENT ACT, 2001 ( a ) that person must be deemed to have- (i) disposed of that capital asset for an amount equal to the base cost of that ciqital asset on the date of that disposal; and (ii) acquired those equity shares on the date that such person acquired that capital asset and for a cost equal to that base cost, which cost must, for the purposes of paragraph 20(l)(a) of the Eighth Schedule, be treated as an expenditure actually incurred and paid by that person in respect of those equity shares; and (b) that company must be deemed to have acquired that capital asset on 5 the date that such person acquired that capital asset and at a cost equal to the base cost contemplated in paragraph (a), which cost must, for the purposes of paragraph 20( l)(a) of the Eighth Schedule, be treated and paid by that company in as an expenditure actually incurred respect of that asset. 10 (3) Subject to subsection ( 5 ) , where a person disposes of a capital asset (hereinafter referred to to a company in the as ‘the formation asset’) circumstances contemplated in subsection ( 2 ) and that person, at any time during the period of 18 months prior to that disposal, disposed of any other capital asset to that company in respect of which a capital loss was determined- ( a ) that person rnust, for purposes of subsection (2)(a), be deemed to have- (i) disposed an amount equal to of that formation asset for the market value of that formation asset: Provided that the amount of the capital gain determined in respect of the disposal of that formation asset which must be determination of the aggregate capital gain or aggregate capital loss of that person in terms of the Eighth Schedule, shall not exceed the amount by which the capital losses determined in respect of all disposals by that person to that company within that gains determined in period of 18 months, exceeds all capital respect of all disposals by that person to that company during that period; and taken into account in the 15 20 25 30 (ii) acquired the equity shares in that company in terms of the company formation transaction, at a cost equal to the sum of- (aa) the base cost of that formation asset on disposal thereof to 35 that company; and (bb) the amount of that capital gain that was taken into account in the determination gain or aggregate capital loss of that person, as contemplated in subparagraph (i); ( b ) that person must, where the amount of the aggregate capital of that capital loss was disregarded in terms of the provisions of subsection (9), reduce the balance of that capital loss by the amount of the capital gain taken into account in the determination of the aggregate capital gain or aggregate capital loss, as contemplated in paragraph (a)(i); and the company must, for purposes of subsection (2)(b), be deemed to have acquired that formation asset at a cost equal to the cost of the to that person as contemplated in paragraph (a)(ii), equity shares which cost must for the purposes of paragraph 20( l)(a) of the Eighth Schedule be treated as expenditure actually incurred and paid by that company in respect of that asset. (c) (4) Notwithstanding any provision to the contrary contained in this Act, where any person disposes of any asset (other than any financial instrument as defined in paragraph 1 of the Eighth Schedule) to a company in terms of a company formation transaction and that asset constitutes trading stock and is attributable 1.0 the business undertaking of that person which is transferred to that company as a going concern, and will constitute trading stock in the hands o f the company to which that asset is so disposed of- 40 45 50 55 60 No. 22923 GAZETTE, GOVERNMENT 2001 12 DECEMBER Act No. 60,2001 SECOND REVENUE LAWS AMENDMENT ACT, 2001 (a) that person must be deemed to have- (i) disposed of that asset for an amount equal to the cost of that asset contemplated in section 22(1) or (3), as the case may be; and (ii) acquired the equity shares in terms of that company formation transaction at a cost equal to that amount, which cost must, for purposes of paragraph 20( l)(a) of the Eighth Schedule, be treated as an expenditure actually incurred and paid in respect of those equity shares; and (b) that company must, be deemed to have acquired that asset at a cost equal to the contemplated in section 22(1) or (3), as the case may be. amount of the cost to that person of that asset, ( 5 ) Subject to subsection (ll), where- (a) a person disposes of an asset to a company in terms of a company formation transaction; and (b) that person in exchange for that asset, becomes entitled to any consideration in addition to any equity shares issued by the company to that person, the disposal of that asset to that company, contemplated in paragraph ( a ) must, to the extent that any equity shares are issued by the company to that person, be deemed to be a disposal in terms of a company formation transaction for purposes of this section, and to the extent that such person becomes entitled to any other consideration, as contemplated in paragraph (b)- (i) in the case of a disposal of a capital asset, be treated as a part disposal for purposes of the Eighth Schedule; or 5 10 15 20 25 (ii) in the case of disposal of an asset which constitutes trading stock, be deemed to be a sale of that trading stock for the purposes of the Act. (6) Where a person transfers an asset or a liability to a company as part of a company formation transaction and that asset or liability constitutes- ( a ) a depreciable asset, any allowance which- 30 (i) that company may be entitled to in terms of this Act shall be limited to the amount of any allowance which that person would have been entitled to deduct in respect of that asset, had that asset not been disposed of by that person to that company; and (ii) was allowed as a deduction during any year of assessment in the determination of the taxable income of that person- (aa) which has been recovered or recouped by that person shall, for the purposes of section 8(4)(a) and paragraph (j) of the definition of ‘gross income’ be deemed not to have been recovered, recouped or received; and (bb) must for the purposes of the recoupment of any allowance, or inclusion thereof in the income of that company, be deerned to have been allowed as a deduction of that company during that year of assessment; or (b) any asset or liability in respect of which an allowance under section 11 (i), 1 lu), 24 or 24C was allowable to that person as at the end of the year of assessment preceding that in which that asset or liability is transferred- (i) the amount of any debt due to that person that was included in the income of that person during any year of assessment, must for purposes of section 11 (i) be deemed to have been included in the income of that company during that year; and (ii) so much of that allowance as relates to the asset or liability so transferred must not be included in that person’s income during the year of that transfer but must be included in the income of that company. 35 40 45 50 55 62 GAZETTE, GOVERNMENT No. 22923 12 DECEMBER 2001 Act No. 60,2001 SECOND REXENUE LAWS AMENDMENT ACT, 2001 (7) Where a person- ( a ) acquired any equity share in a company in terms of a company formation transaction, as contemplated in subsection (2) or (4), and more than 50 per cent of the market value of all the assets disposed of by that person to that company consists of depreciable assets or trading stock or both depreciable assets and trading stock; and (b) disposes of any such equity share (other than by way of involuntary disposal, as contemplated in paragraph 65 of the Eighth Schedule, or the death of that person) within a period of 18 months after the date of acquisition contemplated in paragraph (a), that equity share must be deemed to be trading stock of that person. (8) Where a person disposed of any asset in terms of a company formation transaction, as contemplated in subsection (2) or (4), and that person ceases to hold a qualifying interest in that company, as contemplated in paragraph (b) of the definition of ‘qualifying interest’ in subsection (I), within a period of 18 months after the date of the disposal of that asset (whether or not by way of the disposal of any shares in that company), that person must- ( a ) where that person ceased to hold a qualifying interest other than as the result of the disposal of any equity shares, be deemed to have- of that all the equity shares acquired (i) disposed of company formation transaction which were not disposed of immediately before that person ceased to hold such a qualifying interest, for an amount equal to the market value of those equity shares on the date that those equity shares were acquired in terms of the company formation transaction; and in terms (ii) immediately reacquired all the equity shares not disposed of immediately after that person ceased to hold a qualifying interest at a cost equal to that market value, which cost be treated as expenditure actually incurred and paid by that person in respect of those equity shares for purposes of paragraph 20(l)(a) of the Eighth Schedule; or (b) where that person ceases to hold a qualifying interest as a result of the disposal of any equity shares, (other than in terms of an intra-group transaction Contemplated transaction contemplated in section 45 or a liquidation distribution contemplated in section 46), be deemed to have- (i) disposed of all the equity shares (other than any in section 44, unbundling shares contemplated in subsection (7)) for proceeds equal to- (aa) in the case of the equity share actually disposed of by that person, the higher of the proceeds from that disposal or the market value of those equity shares on the date of that disposal; or 5 10 15 20 25 30 35 40 (bb) in the case of equity shares not actually disposed of by that person, the market value of those equity shares on the date that person acquired those equity shares; and 45 (ii) immediately reacquired any equity shares held after that person ceased to hold a qualifying interest at a cost equal to that market value contemplated in subparagraph (i)(bb): Provided that the provisions of this subsection shall not apply where that person ceases to hold a qualifying interest in that company as the result of the death of that person and that qualifying interest accrues to the surviving spouse of that person upon his or her death. 50 (9) Despite paragraph 39 of the Eighth Schedule, where a person disposes of a capital asset to a company in terms of a company formation 55 64 No. 22923 GAZETTE, GOVERNMENT 12 DECEMBER 2001 Act No. 60,2001 SECOND REVENUE LAWS AMENDMENT ACT, 2001 transaction and the base cost of that asset exceeds the market value of that asset at the date of that disposal- (a) that person must disregard any capital loss determined in respect of the disposal of that asset to that company in determining the aggregate capital gain or aggregate capital loss of that person; and (b) that company must be deemed to have acquired that asset for a cost equal to the market value of that asset on the date of that disposal, which cost must be treated as an expenditure actually incurred and paid for the purposes of paragraph 20( l ) ( a ) of the Eighth Schedule in respect of that asset: Provided that a person’s capital loss which is disregarded during any year of assessment in terms of paragraph (a) may, after reduction thereof as contemplated in subsection (3)(b), be deducted from any capital gain determined in respect of any capital asset disposed of by that person to that company during that year or any subsequent year of assessment, if that person at the time of that disposal holds a qualifying interest in that company. (10) Where a company disposes of a capital asset within a period of 18 of a company formation asset in terms months after acquiring that transaction- (a) the capital gain determined in respect of the disposal of that asset may not be set of€ against any assessed loss, balance of assessed loss, capital loss or assessed capital loss of that company; or (b) the company .must disregard any capital loss determined in respect of the disposal of that asset. (11) Where a person disposes of- (a) any asset to a company in terms of a company formation transaction, as contemplated in subsection (2), which secures any debt- (i) which was incurred by that person more than 18 months before that disposal; or 5 10 15 20 25 30 (ii) which was incurred by that person within a period of 18 months before that disposal- (aa) and that debt was incurred at the same time as that asset was acquired by that person; or (bb) to the extent that debt constitutes the refinancing of any debt in respect of that asset incurred more than 18 months before that disposal, 35 and that company assumes that debt or an equivalent amount of debt that is secured by that asset; or (b) any business undertaking to a company as a going concern in terms of a company formation transaction, as contemplated in subsection (2), which includes any amount of any debt that is attributable to, and arose in, the normal course of that business undertaking, 40 that person must be deemed to have acquired any equity share in exchange for the disposal of that asset or business undertaking at a cost equal to the base cost of that asset or business undertaking, reduced by the amount of that debt: Provided that where that debt exceeds the base cost of that asset or business undertaking, that person must acid that excess to proceeds when that person disposes of that equity share. 45 (12) Where in terms of a company formation transaction- 50 (a) any company (hereinafter referred to as ‘the subsidiary’) which is a resident acquires all the assets and assumes all the liabilities relating to the business undertaking of any company which is not a resident (hereinafter referred to as ‘the foreign company’), carried on through a branch in the Republic; 55 (b) the business undertaking of that branch has been transferred to that subsidiary as a going concern; and 66 GAZETTE, GOVERNMENT No. 22923 2001 12 DECEMBER Act No. 60,2001 SECOND REVENUE LAWS AMENDMENT ACT, 2001 ( c ) at the time of the transfer of that business undertalung, all the issued share capital of the subsidiary was held for its own benefit by the foreign Compimy, that foreign company and that subsidiary must be deemed to be one and the same company in respect of any transaction of the branch, for purposes of determining any taxable income derived or any assessed loss incurred by the subsidiary after the transfer of that business undertaking. (13) The provisions of this section shall not apply in respect of the disposal of any asset- (a) by a person to a company, where all the receipts and accruals of that company are exempt from tax in terms of the provisions of section 10; ( b ) by a person, where the asset constitutes a financial instrument as defined in paragraph 1 of the Eighth Schedule, unless- (i) that financial instrument constitutes a debt due to that person in respect of goods sold or services rendered by that person in the course of carrying on any business which is transferred as a going concern; or (ii) the total market value of all financial instruments so transferred (other than debts contemplated in subparagraph (i)), does not exceed five per cent of the total market value of all assets of any business which is transferred as a going concern; ( c ) by a company where that asset was acquired by that company in terms of any company formation transaction, unless that asset was held by that company for a period of more than 18 months. Share-for-share Transactions 43. (1) For the purposes of this section, a ‘share-for-share transaction’ in terms of which any person (other than a trust means any transaction which is not a special trust) disposes of any equity share (hereinafter referred to as the ‘target share’) in a company (hereinafter referred to as the ‘target company’), which is a resident to any other company (hereinafter referred to as the ‘acquiring company’), which is a resident, in exchange for any equity share issued by that acquiring company to that person, and- (a) the acquiring company- (i) six months, as may be approved by in the case where that target company is a listed company or will become a listed company within six months after that transaction (or where the Commissioner is satisfied that those equity shares cannot be listed within that initial six months period due to * circumstances beyond the control of the company, such further period not exceeding the Commissioner), after that transaction and any other share-for- share transaction (entered into in terms of any offer made on the same ternls as that transaction and which period of 45 days before or after that transaction) holds equity shares in that target company, which constitute a direct interest of- (aa) more than 25 per cent in the equity share capital of that target company, in the case where no other shareholder holds an equal or greater amount of equity share capital in that target company; or is accepted within a 5 10 15 20 25 30 35 40 45 (bb) in any other case, at least 35 per cent in the equity share 50 capital of the target company; or (ii) where the target company is not a company contemplated in subparagraph (i), after that transaction holds shares in the target company, which constitute a direct interest of more than 50 per cent in the equity share capital of the target company; and 55 68 No. 22923 GAZETTE, GOVERNMENT 12 DECEMBER 2001 Act No. 60,2001 SECOND REVENUE LAWS AMENDMENT ACT, 2001 (6) that person after that transaction holds equity shares in that acquiring company- (i) which is a listed company on the date of that transaction; or (ii) in any other case, which constitutes a direct interest of more than 25 per cent in the equity share capital of that acquiring company: Provided that in determining the total equity share capital of the target company or the acquiring company, regard must be had to any agreement in terms of which, on the date of determining the interest of that acquiring company or that person, any person is entitled to acquire an interest in the equity share capital of that target company or acquiring company, as the case may be on that date, at no or nominal cost. (2) Notwithstanding any provision to the contrary contained in this Act, but subject to subsection (4), where a person disposes of any target shares, which are held by that person other than as trading stock, to an acquiring company in terms of a share-for-share transaction and the market value of those target shares exceeds the base cost thereof- ( a ) that Derson must be deemed to have- (b) the (i) (i) (ii) disposed of those target shares for an amount equal to the base cost to that person of those target shares on the date of that disposal; and acquired the shares in that acquiring company on the date that such person acquired those target shares, and at a cost equal to the base cost contemplated in subparagraph (i), which cost must be treated as expenditure actually incurred and paid for purposes of paragraph 20(l)(a) of the Eighth Schedule in respect of those shares in the acquiring company; and acquiring company must- where the target company is a listed company and the equity shares in that company were acquired by the acquiring company from any shareholder who does not hold a direct interest of more than 25 per cent in the equity share capital of the acquiring company after that transaction, be deemed to have acquired those equity shares at a cost equal to the market value of those equity shares; or in any other case, be deemed to have acquired those equity shares at a cost equal to that base cost contemplated in paragraph (a)(i), which cost must be treated as expenditure actually incurred and paid by that company for the purposes of paragraph 20( l)(a) of the Eighth Schedule in respect of those target shares. (ii) S 10 1s 20 25 30 35 (3) Notwithstanding any provision to the contrary contained in this Act, but subject to subsection (4), where a person disposes of any equity shares, which are held by that person as trading stock, to a company in terms of a share-for-share transaction- ( a ) that person must be deemed to have- 40 (i) disposed of those equity shares for an amount equal to the cost of those equity shares contemplated in section 22(1) or (3), as the case may be; and 45 (ii) acquired the equity shares in the company in terms of the share-for-share transaction at a cost equal to that amount and those equity shares so acquired must be deemed to be trading stock of that person; and (b) that company must be deemed to have acquired those target shares at a cost equal to the amount of the cost contemplated in paragraph (a)(i), which cost must be treated as expenditure actually incurred and paid by that company for purposes of paragraph 20(l)(a) of the Eighth Schedule in respect of those target shares. (4) For the purposes of this section, where- so 55 70 No. 22923 2001 DECEMBER 12 GOVERNMENT GAZETTE, Act No. 60,2001 SECOND REVENUE LAWS AMENDMENT ACT, 2001 ( a ) a person disposes of any equity shares to a company in terms of a share-for-share transaction; and (b) that person becomes entitled to any consideration in addition to any equity shares issued by the company to that person, in exchange for those equity shares, the disposal of those equity shares to that company must, to the extent that any equity shares are issued by the company to that person, be deemed to be a disposal in terms of a share-for-share transaction for purposes of this section and to the extent that such person becomes entitled to any other consideration, as contemplated in paragraph (6)- (i) in the case where the equity shares disposed of were held other than as trading stock, be treated as a part disposal for purposes of the Eighth Schedule; or (ii) in the case where the equity shares disposed of constituted trading 5 10 stock, be deemed to be a sale of that trading stock for purposes of this 15 Act. company, as 20 to hold an interest in the acquiring (5) Where the provisions of subsection (2) or (3) apply in respect of a of a share-for-share of 18 months after that disposal of an equity share by a person in terms transaction and that person, within a period transaction, ceases of the definition of ‘share-for-share contemplated in paragraph (b)(ii) transaction’, (whether or not by way of a disposal of any equity shares in that acquiring company), other than by way of an intra-group transaction contemplated in section 44, that person must be deemed to have- (a) disposed of all the equity shares acquired in terms of that share-for- 25 share transaction, which were not disposed of immediately before that person ceased to hold a qualifying interest for proceeds equal to- in the case of the equity shares actually disposed of by (i) that person, the higher of the proceeds from that disposal or the market value of those equity shares on the date of that disposal; or 30 of equity shares not actually disposed of by that person, the market value of those equity shares on the date that person acquired those equity shares; and (ii) in the case (b) immediately reacquired all the equity shares held in the acquiring company after that person ceases to hold that interest at a cost equal to 35 that market value contemplated in paragraph (u)(ii): Provided that the provisions of this subsection shall not apply where that person ceases to hold an interest, as contemplated in paragraph (b)(ii) of the definition of ‘share-for-share transaction’, in that company as the result of the death of that person and that interest accrues to the surviving spouse of 40 that person upon his or her death. (6) Where a person disposes of any target share to a company in terms of a share-for-share transaction in the circumstances contemplated in subsec- tion (2) and that person, at any time within the period of 18 months before that transaction, disposed of any other equity share respect of which a c;@al loss was determined- (a) that person must be deemed to have- to that company in 45 (i) disposed of that target share to the acquiring company for proceeds equal to the market value of that target share: Provided that the amount of the capital gain determined in respect of the 50 disposal of that target share which must be taken into account in the determination of the aggregate capital gain or aggregate capital loss of that person in terms of the Eighth Schedule, shall not exceed the amount by which the capital losses, determined in respect of all disposals of equity shares by that person to that 55 1 2 DECEMBER No. 22923 12 GAZETTE, GOVERNMENT 2001 Act No. 60,2001 SECOND REVENUE LAWS AMENDMENT ACT, 2001 company during that 18 month period, exceed the capital gains determined in respect of all disposals of equity shares by that person to that company during that period; and (ii) acquired the equity shares in that acquiring company in terms of a share-for-share transaction, at a cost equal to the sum of- (aa) the base cost of that target share on disposal thereof to that 5 company; and (bb) the amount of that capital gain that was taken into account in the determination gain or aggregate capital loss of that person, as contemplated in subparagraph (i); of the aggregate capital (b) that person must, where the amount of that capital loss was disregarded in terms of the provisions of subsection (7), reduce the balance of that capital loss by the amount of the capital gain taken into account in the determination of the aggregate capital gain or aggregate capital loss, as contemplated in paragraph (a)(i); and the company must be deemed to have acquired those target shares at a cost equal in the acquiring company, as contemplated in paragraph (a)(ii). to that person of the equity shares to the cost (c) (7) Despite paragraph 39 of the Eighth Schedule, where a person disposes of any equity share to a company in terms of a share-for-share transaction and the base cost of that share exceeds the market value of that equity share at the time of that disposal- (a) that person must disregard any capital loss determined in respect of the disposal of that equity share to that company in determining the aggregate capital gain or aggregate capital loss of that person; and (b) that company must be deemed to have acquired that equity share for a cost equal to the market value of that share on the date of that disposal, which cost must be treated as an expenditure actually incurred and paid for the purposes of paragraph 20(l)(a) of the Eighth Schedule in respect of that target share: 10 15 20 25 30 Provided that a person’s capital loss which is disregarded during any year of assessment in terms of paragraph (a) may, after reduction thereof as (6)(b), be deducted from any capital gain contemplated in subsection determined in respect of any capital asset disposed of by that person to that company during that year or any subsequent year of assessment, if that person at the time of that disposal holds an interest in that company as of the definition of ‘share-for-share contemplated in paragraph (b)(ii) transaction’. (8) Where an acquiring company disposes of an equity share (other than in section 44, an in terms of an intra-group transaction contemplated unbundling transaction contemplated in section transaction contemplated in section 46), within a period of 18 months after acquiring that equity share in terms of a share-for-share transaction- ( a ) the company may not set off any capital gain determined in respect of the disposal of that equity share against any assessed loss, balance of assessed loss, capital loss or assessed capital loss of that company; and ( E ) the company must disregard any capital loss determined in respect of 45 or a liquidation 35 40 45 the disposal of that equity share. (9) The provisions of this section shall not apply in respect of the disposal 50 of any equity share by a company- (a) to a transferee company, all the receipts and accruals of which are exempt from tax in terms of the provisions of section 10; 14 No. 22923 GAZETTE, GOVERNMENT 12 DECEMBER 2001 Act No. 60,2001 SECOND RE.VENUE LAWS AMENDMENT ACT, 2001 ( b ) (e) where that equity share was acquired in terms of a share-for-share transaction in terms of this section within a period of 18 months before that disposal; or where more than 50 per cent of either the market value or the actual costs of all the assets of that target company and any other company, which is a controlled company in relation to that target company on the date of that share-for-share transaction, consists of financial instruments, as defined in paragraph 1 of the Eighth Schedule, other than any shares held in any other company which is a controlled company in relation to that target company. Intra-group transactions 44. (1) For the purposes of this section- to another company which is a resident ‘intra-group transaction’ means a transaction in terms of which any asset is disposed of by one company which is a resident (hereinafter referred to as the ‘transferor company’) (hereinafter referred to as the ‘transferee company’) and both companies form part of the same group of companies on the date of that transaction. (2) Notwithstanding any provision to the contrary contained in this Act, where a transferor company disposes of any asset to a transferee company, in terms of an intra-group transaction the transferor company and transferee company may jointly elect that the provisions of subsection (3) or ( 9 , as the case may be, must apply. (3) Notwithstanding the provisions of paragraph 38 of the Eighth Schedule, where the transferor company and the transferee company have elected that the provisions of this subsection must apply in respect of the disposal by that transferor company of any capital asset to that transferee company- (a) the transferor company must be deemed to have disposed of that asset for an amount equal to the base cost of that asset on the date of that disposal; (6) the transferee company must be deemed to have acquired that capital asset on the date that the transferor company acquired that asset, and at a cost equal to the base cost contemplated in paragraph (a), which cost must be and paid by the transferee company for purposes of paragraph 20( l)(a) of the Eighth Schedule in respect of that capital asset. treated as expenditure actually incurred (4) Where a transferor company transfers an asset or a liability to a transferee company as part of an intra-group transaction and that asset or liability constitutes- (a) a depreciable asset, any allowance which- (i) that transferee company may be entitled to in terms of this Act shall be limited to the amount of any allowance which that transferor company would have been entitled to deduct in respect of that asset, had that asset not been disposed of by that transferor company to that transferee company; and (ii) was allowed as a deduction during any year of assessment in the of that transferor com- determination of the taxable income pany- (aa) which has been recovered or recouped by that transferor company shall, for the purposes of section 8(4)(a) and paragraph (j) of the definition of ‘gross income’ be deemed not to have been recovered, recouped or received; and (bb) must for the purposes of the recoupment of any allowance, of that transferee or inclusion thereof in the income 5 10 15 20 25 30 35 40 45 50 76 GAZETTE, GOVERNMENT No. 22923 12 DECEMBER 2001 Act No. 60,2001 SECOND REVENUE LAWS AMENDMENT ACT, 2001 company, be deemed to have been allowed as a deduction of that transferee company during that year of assessment; or ( b ) any asset or liability in respect of which an allowance under section 1 l(i), ll(j), 24 or 24C was allowable to that transferor company as at the end of the year of assessment preceding that in which that asset or liability is transferred- (i) the amount of any debt due to that transferor company that was included in the income of that transferor company during any year of assessment, must for purposes of section 1 l(i) be deemed to have been included in the income of that transferee company during that year; and 5 10 (ii) so much of that allowance as relates to the asset or liability so transferred must not be included in the income of that transferor during the year of that transfer but must be included in the income of that transferee company. 15 ( 5 ) Notwithstanding section 22(8), where the transferor company and the of this subsection transferee company have elected that the provisions apply in respect of the disposal by that transferor company to that transferee company of any asset that constitutes trading stock- (a) that transferor company must be deemed to have disposed of that asset for an amount equal to the amount of the cost to that transferor company of that asset as contemplated in section 22(1) or (3), as the case may be; and 20 (b) the transferee company must be deemed to have acquired that asset on the date that the transferor company acquired that asset, and at a cost equal to the cost contemplated in paragraph (a). 25 (6) Where an asset is disposed of by a transferor company to a transferee company in terms of an intra-group transaction in respect of which the provisions of subsection (3) or ( 5 ) apply and the transferor company and the transferee company at any time thereafter cease to form part of the same group of companies before the disposal by the transferee company of that asset, that transferee company must be deemed to have disposed of that asset for an amount equal to the market value of that asset on the date that such companies cease to form part of the same group of companies and as having immediately reaquired that asset for a cost equal to that market value: Provided that where the transferor company or transferee company is liquidated or deregistered as contemplated in section 46, the holding company and the liquidating company, as contemplated in that section, must be deemed to be one and the same company for purposes of'this subsection. (7) The provisions of subsections (3) and (5) shall not apply, where- (a) the asset disposed of by a company is a financial instrument, as defined in paragraph 1 of the Eighth Schedule, unless- (i) that financial instrument constitutes a debt due to that person in respect of goods sold or services rendered by that person in the course of carrying on any business which is transferred as a going concern; or (ii) the total value of all financial instruments so transferred, (other than debts contemplated in subparagraph (i)), does not exceed five per cent of the total value of all assets of any business which is transferred as a going concern; 30 35 40 45 50 (bj all the receipts and accruals of the transferee company are exempt from tax in terms of section 10; or (c) more than 50 per cent of either the market value or the actual costs of all the assets of that company and any other company, which is a controlled company in relation to that company, on the date of that 55 78 No. 22923 GAZETTE, GOVERNMENT 12 DECEMBER 2001 Act No. 60,2001 SECOND REVENUE LAWS AMENDMENT ACT, 2001 transfer, consists of financial instruments, as defined in paragraph 1 of the Eighth Schedule, other than any shares held in any controlled company in relation to that company. (8) Where a transferee company acquired a capital asset from a transferor of an intra-group transaction, as contemplated in company in terms subsection (3) and that transferee company disposes of that asset within a period of 18 months after that acquisition, and- (a) a capital gain is determined in respect of that disposal, any amount recovered or recouped or capital gain so determined may not be set off against any assessed loss, balance of assessed loss, capital loss or 10 assessed capital loss of that transferee company; or 5 (b) a capital loss is determined in respect of that disposal, that capital loss the must be provisions of section 11 (0) must be disallowed. an allowance under disregarded and any claim for (9) An acquisition or disposal of any asset in terms of an intra-group 15 transaction in respect of which the provisions of subsection (3) or ( 5 ) apply, shall be deemed not to be a dividend for purposes of Part VI1 of Chapter 11 of this Act. Unbundling Transactions 45. (1) For the purposes of this section- ‘distributable shares’ means any equity shares resident, held directly by an unbundling company which is a resident, for its own benefit on the date of the unbundling transaction, if that unbundling company’s interest in that company on that date- ( a ) where that company is a listed company or will become a in a company which is a six months, as may be approved by listed company, within six months after that transaction (or such further period not exceeding the Commissioner, where the Commissioner is satisfied that those equity shares cannot be listed within that initial six months period due to circumstances beyond the control of the company), constitutes- (i) more than 25 per cent in the equity share capital of that company, in the case where no other shareholder holds an equal or greater amount of equity share capital in that company; or (ii) in any other case, at least 35 per cent in the equity share capital of the company; (b) where that compyy is an unlisted company- (i) constitutes more than 50 per cent of the equity share capital of that unlisted company; and (ii) in the case where the unbundling company is a listed company, those equity shares are, in pursuance of a distribution in specie thereof in the course of an unbundling transaction, to be listed on a stock exchange as defined in section 1 of the Stock Exchanges Control Act, 1985 (Act No. 1 of 1985), within six months of such distribution in specie (or such further period not exceeding six months, as may be approved by the Commissioner, where the Commissioner is satisfied that those equity shares cannot be listed within that initial six months period due to circumstances beyond the control of the company): 20 25 30 35 40 45 Provided that- (i) in determining the total equity share capital of a company contem- 50 plated in paragraphs (a) and (b), regard must be had to any agreement in terms of which any person is, on the date of determining that interest of the unbundling company, entitled to acquire an interest in the equity share capital in that company on that date at no or nominal cost; and (ii) any such equity share in a listed or unlisted company which was 55 acquired by the unbundling company during the period of 18 months before the date of that unbundling transaction, shall not- 80 No. 22923 GOVERNMENT GAZETTE, 12 DECEMBER 2001 Act No. 60,2001 SECOND REVENUE LAWS AMENDMENT ACT, 2001 (aa) be taken into account in determining the interest in terms of paragraph (a) or (b); or (bb) constitute a distributable share for purposes of this section, unless that equity share was acquired in terms of any transaction contemplated in t h ~ s Part or an unbundling transaction contemplated in section 60 of the Income Tax Act, 1993 (Act No. 113 of 1993), or a rationalisation scheme contemplated in section 39 of the Taxation Laws Amendment Act, 1994 (Act No. 20 of 1994); 5 15 ‘holding company’ in relation to any other company means a company which is a resident and which directly holds for its own benefit at least 75 10 per cent of the equity share capital of that other company; ‘qualifying shareholder’ means any person who by reason of being the owner or the beneficial owner of an equity share in an unbundling company, is entitled to receive distributable shares by way of a distribution in specie in the course of an unbundling transaction; ‘unbundled company’ means any company the equity shares of which are distributed by an unbundling company in terms of an unbundling transaction; ‘unbundling company’ means the unbundling company contemplated in the definition of ‘unbundling transaction’; ‘unbundling transaction’ means any transaction, which is to be carried out to enable- (a) the shareholders of any listed company; or (b) the holding company of an unlisted company, (which listed or unlisted company is hereinafter referred to as the 25 ‘Unbundling company’), to acquire directly by way of a distribution in specie by that unbundling company all the distributable shares held by that unbundling company in the company which is to be unbundled, in such manner as will ensure that the effective interest of such shareholders or holding company in such distributable shares will not be materially 30 changed by such transaction. 20 (2) Notwithstanding any provision to the contrary contained in this Act, where an unbundling company disposes of any distributable shares to its shareholders or its holding company, as the case may be, in terms of an unbundling transaction- (a) that unbundling company must be deemed to have disposed of those shares for proceeds equal to the base cost of those shares on the date of that disposal; and (b) the sharehotder or that holding company, as the case may be, must- 35 (i) be deemed to have acquired the equity shares held in the 40 unbundling company (hereinafter referred to as the previously held shares) and those distributable shares at a cost equal t o - (aa) where those previously held shares were held by that shareholder as trading stock, the cost to that person of the previously held shares for the purposes of section 22( 1) or 45 (3), as the case may be, or where such person is not a company, the lesser of such cost or the diminished value of such disposed shares, as contemplated in that section; (bb) in any other case, the base cost of those previously held shares, which cost must for the purposes of paragraph 50 20(l)(a) of the Eighth Schedule, be treated as expenditure actually incurred and paid in respect of those previously held shares and those distributable shares: 82 No. 22923 GAZETTE, GOVERNMENT 12 DECEMBER 2001 Act No. 60,2001 SECOND REVENUE LAWS AMENDMENT ACT, 2001 Provided that- (A) a portion of such cost or such base cost, as the case may be, must be apportioned to such distributable shares, which portion shall be deemed to be an amount which bears to such cost or such base cost, as the case may be, the same ratio as the market value of such distributable shares bears to the market value of such previously held shares, such market values being determined on the date on which the qualifying shareholders become entitled to acquire distributable shares by way of a distribution in specie; and (B) such previously held shares and such distributable shares must be deemed to be the same shares for purposes of section 9B; 5 10 (ii) where those previously held shares were held by that person in exercised by that person the unbundling company as a result of a right contemplated in 15 section 8A, which has been and distributable shares are distributed to such person in accordance with an unbundling transaction, any portion of any gain made by such person in to acquire such the exercise of such right previously held shares must be included in the income of that 20 person- (aa) in the year of assessment during which that person becomes entitled to dispose of those distributable shares, which portion shall be an amount which bears to such gain the same ratio as the market value of such distributable shares 25 on the date on which that person became entitled to such distributable shares by way of a distribution in specie bears to the market value of such previously held shares on that date; and (bb) in the year of assessment during which that person becomes 30 entitled to dispose of the previously held shares, which portion shall be calculated by reducing such gain by the amount which has been determined or is to be determined in terms of item (aa): 1 Provided that for the purposes of paragraph (A) of the proviso to 35 subparagraph (i) and subparagraph (ii)(aa), the market value of such previously held shares on the date on which the qualifying sharehold- ers became entitled to acquire such distributable shares by way of a distribution in specie, shall be determined without having regard to the fact that such distributable shares are to be issued to such shareholders. 40 (3) Notwithstanding anything to the contrary contained in this Act- (a) the distribution in specie by a company of any distributable shares shall be deemed not to be a dividend for the purposes of Part VI1 of Chapter 11; and (b) any distribution in specie received by a company must be deemed- 45 (i) not to be a dividend which accrued to that company for the purposes of section 64B(3); and (ii) to be profits which are not of a capital nature for the purposes of section 64B(5)(c). (4) The distribution in specie by an unbundling company in terms of an 50 unbundling transaction in respect of which the provisions of this section apply, must be deemed to have been distributed first from the share premium account of that unbundling company (if any) and to the extent that the distribution exceeds the amount of that share premium account, be deemed to have been distributed from undistributed profits. 55 ( 5 ) The provisions of this section shall not apply- (a) where more than 50 per cent of either the market value or the actual costs of all the assets of the unbundled company and any other company, which is a controlled company, in relation to that unbundled 84 No. 22923 GOVERNMENT GAZETTE, 12 DECEMBER 2001 Act No. 60,2001 SECOND REVENUE LAWS AMENDMENT ACT, 200 I company, on the date of that unbundling transaction, consists financial instruments, as defined in paragraph Schedule, other than any shares held in any other controlled company in relation to that unbundled company; or (b) in respect of any distribution of shares in terms of 1 of the Eighth 5 transaction to a shareholder who is not a resident, where shareholder acquires more than in terms of that unbundling transaction. of an unbundling that five per cent of the distributable shares Transactions relating to liquidation, winding-up and deregistration 46. (1) For the purposes of this section- 10 15 ‘distribution in specie’ means a distribution of equity shares whether by means of a dividend, a total or partial reduction of capital (including any of redeemable preference shares or an share premium), a redemption acquisition of equity shares in terms of section 85 of the Companies Act, 1973 (Act No. 61 of 1973); ‘holding company’ in relation to any other company means a company which is a resident, which on the date of the liquidation distribution directly holds for its own benefit shares which constitute at least 75 per cent of the the equity share capital of that other company: Provided that in determining value of the total equity share capital of that company, regard must be had on the date of to any agreement, in terms of which any person is determining whether that company is a holding company, entitled to acquire an interest in the equity share capital in that company on that date at no or nominal cost; ‘liquidating company’ means the liquidating company contemplated definition of ‘liquidation distribution’; ‘liquidation distribution’ means a disposal by a liquidating company which is a resident, of any asset to its holding company in anticipation of or in the course of the liquidation, winding up or deregistration of that liquidating company. in the 20 25 30 ( 2 ) Notwithstanding any provision to the contrary contained in this Act, terms of a where a liquidating company disposes liquidation distribution to its holding company- (a) that liquidating company must be deemed to have disposed of that asset for an amount equal to the base cost of that asset on the date of the disposal thereof; and of a capital asset in (b) that holding company must be deemed to have acquired that asset on 35 1 the same date that that asset was acquired by that liquidating company and at a cost equal to that base cost of that asset to that liquidating company, which cost must be treated as expenditure actually incurred and paid for purposes of paragraph 20( l ) ( a ) of the Eighth Schedule in respect of that asset. 40 (3) Notwithstanding any provision to the contrary contained in this Act, where a liquidating company disposes of an asset, which constitutes trading stock, in terms of a liquidation distribution to its holding company- (a) that liquidating company must be deemed to have disposed of that asset for an amount equal to the cost of that asset as contemplated in section 22(1) or (3), as the case may be; and (b) that holding company must be deemed to have acquired that asset at a cost equal to the cost contemplated in paragraph (a). (4) Where a company disposes of an asset or a liability in terms of a that asset or liability liquidation distribution to its holding company and constitutes- (a) a depreciable asset, any allowance which- (i) that holding company may be entitled to in terms of this Act shall be limited to the amount of any allowance which that liquidating company would have been entitled to deduct in respect of that asset, had that asset not been distributed by that liquidating company to that holding company; and 45 50 55 86 GOVERNMENT No. 22923 GAZET‘IE, 12 DECEMBER 2001 Act No. 60,2001 SECOND REVENUE LAWS AMENDMENT ACT, 2001 ~~ ~~ (ii) was allowed as a deduction during any year of assessment in the determination of the taxable income of that liquidating com- pany- (aa} which has been recovered or recouped by that liquidating company shall, for the purposes of section 8(4)(a) and paragraph (j) of the definition of ‘gross income’ be deemed not to have been recovered, recouped or received; and (bb) must for the purposes of the recoupment of any allowance, or inclusion thereof in the income of that holding company, be deemed to have been allowed as a deduction of that holding company during that year of assessment; or (b) any asset or liability in respect of which an allowance under section ll(i), ll(j), 24 or 24C was allowable to that company as at the end of the year of assessment preceding that in which that asset or liability is transferred- (i) the amount of any debt due to that liquidation company that was included in the income of that liquidating company during any year of assessment, must for purposes of section 11 (i) be deemed to have been included in the income of that holding company during that year; and (ii) so much of that allowance as relates to the asset or liability so transferred must not be included in the income of that liquidating company during the year of that transfer but must be included in the income of that holding company. (5) Where the holding company acquires any asset from the liquidating company in terms of a liquidation distribution in respect of which the provisions of subsection (2) apply, and that holding company disposes of that asset within a period of 18 months after so acquiring that asset- (a) any capital gain determined in respect of the disposal of that asset by the holding company may not be set off against any amount of assessed loss, balance of assessed loss, assessed capital loss or capital loss of that holding company (other than any capital loss determined in respect of the disposal of any other asset acquired by the holding company from the liquidating company in terms of that liquidation distribution); or (b) any capital loss determined in respect of the disposal of that asset must be disregarded in determining the aggregate capital gain or aggregate capital loss of that holding company for purposes of the Eighth Schedule: Provided that the amount of any capital loss so disregarded may be deducted from the amount of any capital gain determined in respect of the disposal during that year or any subsequent year of assessment of any other asset acquired by that holding company from the liquidating company in terms of that liquidation distribution. (6) The provisions of this section shall not apply where- 5 10 15 20 25 30 35 40 (a) all the receipts and accruals of the holding company are exempt from 45 tax in terms of section 10; (b) more than 50 per cent of either the market value or the actual costs of all the assets of that liquidating company and any other company, which is a controlled company in relation to that liquidating company on the date of that liquidation distribution, consists of financial instruments, as defined in paragraph 1 of the Eighth Schedule, other than any shares held in any other controlled company in relation to that liquidating company; the liquidating company has not, within a period of six months after the date of the liquidation distribution, taken such steps as may be prescribed by the Minister by regulation in the Gazette to liquidate, (c) 50 55 88 GOVERNMENT No. 22923 GAZETTE, 12 DECEMBER 2001 Act No. 60,2001 SECOND REVENUE LAWS AMENDMENT ACT, 2001 wind up or deregister that company: Provided that any tax which becomes payable as a result of the application of this paragraph shall be recoverable from the holding company.”. (2) Subsection (1) shall be deemed to have come into operation on 1 October 2001 and shall apply in respect of any transaction entered into on or after that date. 5 Amendment of section 56 of Act 58 of 1962, as amended by section 18 of Act 90 of 1964, section 25 of Act 55 of 1966, section 33 of Act 89 of 1969, section 38 of Act 85 of 1974, section 21 of Act 113 of 1977, section 13 of Act 101 of 1978, section 23 of Act 96 of 1981, section 31 of Act 94 of 1983, section 4 of Act 30 of 1984, section 28 of Act 121 of 1984, section 18 of Act 96 of 1985, section 21 of Act 85 of 1987, section 26 of 10 Act 90 of 1988, section 28 of Act 141 of 1992, section 32 of Act 113 of 1993, section 18 of Act 36 of 1996, section 39 of Act 30 of 1998, section 38 of Act 30 of 2000 and section 41 of Act 59 of 2000 45. (1) Section 56 of the Income Tax Act, 1962, is hereby amended by the addition to paragraph: subsection (1) 15 following “ ( 4 ) by a company of the to any other company in terms of an contemplated in section 44, where the a sworn affidavit or solemn declaration that such intra-group transfer complies with the provisions contained in section 44.”. intra-group transfer public officer of that company has made (2) Subsection (1) shall be deemed to have come into operation on 1 October 2001, 20 and shall apply in respect of any donation made in terms of an intra-group transaction entered into on or after that date. Amendment of section 60 of Act 58 of 1962, as amended by section 39 of Act 85 of 1974 and section 28 of Act 90 of 1988
