Demutualisation Levy Act, 1998

1. For the purposes of this Act any word or expressio I to which a meaning has been 20 assigned in the Income Tax Act bears the meaning so a:signed and, unless the context otherwise indicates— (i) (ii) (iii) (iv) (v) “affected company’ means any company which carries on long-term insurance business in the Republic consequent upon a demutualisation scheme etfected by a mutual insurer; (iii) “Commissioner’” means the Commissioner f jr the South African Revenue Service; (vii) “demutu:tlisation scheme” means any transac[ian contemplated in section 25 of the Insurance Act, confirmed by the court i] accordance with that section. which results in— ((I) the transfer of the business of a mutual imurer to a company with a share 25 30 capital; (b) the conversion of a mutual insurer into a c.>mpany with a share capital; or (c~ any combination of paragraphs (a) and (, J); (ii) “free reserves’” means those funds accumulate d by any mutual insurer which 35 represent the excess of assets over liabilities al (d as determined in accordance with section 4; (xii) “free stlares” means shares allotted and issuet[ in terms of a demutualisation scheme, other than shares issued for the purposes of raising capital: (iv) J N(), 192.$4 Act No. 50, 1998 GOVERN ‘WENT GAZETTE, 9 SEPTEMBER 1998 DEMUTUALISATION L :VY ACT, 1998 (vi) (vii) (viii) (ix) (x) (xi) (xii) ((’) (b) “holding company”’ means a holding compan { as defined in section i of the Companies Act, 1973 (Act No. 61 of 1973); (J) “income Tax Act” means the Income Tax Act, i 962 (Act No. 58 of 1962); (vi) “insurance Act” means the Insurance Act, 1943 (Act No. 27 of 1943); (xi) “members” means those persons— ((1) who, in the case of natural persons, .tre ordinarily resident in the Republic; or whic}l, in the case of persons other than natural persons, are effectively tnanaged in the Republic; or in the case where the Commissioner is sa’ isfied that it is not possible for the affected cotnpany to determine the place where they ar~ ordinarily resident or their place of etiective management, whose only or last recorded address in the records of any mlltual insurer is in the Republic, to whom free shares are allotted and issued in terms of a demutualisation scheme effected by any mutual insurer; (viii) “mutual insurer” means any insurer registere[ in terms of the Insurance Act. which is not a company with a share capital; t ix) “share” means any security, stock, share, deb~nture or other interest capable of being sold in a share market or exchange w“ otherwise; (i) “Umsobomvu Fund” means the fund establi ;hed in accordance with such terms and conditions as the Minister of Fil~ance may determine to fund national projects for skills development and j(,b creation. (x) Administration of Act

2. The Commissioner must adtninister [his Act, Imposition of levy, and rate 3. ( I ) There must be levied and paid to the Comm ,ssioner for the benefit of the Umsobornvu Fund, a levy to be known as the dernutuaiisation levy at the rate of 2,5 per cent of the value of a p~ortion of the free reserves of any mutual insurer which enters into a demutualisation scheme. (2) The portion of the free reserves which is subject to the levy is an amount which bears to the free reserves of the tnutual insurer. the sar~e ratio as the number of free shares allotted to members bears to the total nutnber of ft se shares allotted and issued in terms of the demutualisation scheme, (3) The number of shares allotted to members contemplated in subsection (2) includes the shares that would, but for the levy, have been issued to members, but which shares are retained or utilised for the purposes of the payment or recovery of the levy. Determination of free reserves 4. ( 1 ) Subject to subsection (2), the value of the free ;eserves is the free reserves— (a) as determined at a specific date and recorded n the demutualisation scheme confirmed by the Registrar of Insurance, as contemplated in section 25 of the Insurance Act; (h) reflected as such in the financial statements su’~mitted with the application to the court for confirmation of the demutualisat:on scheme: and (c) recorded in the demutualisation scheme as i pproved by the court on the confirmation thereof. (2) The value of the free reserves as at the specific date must for the purposes of section 3 be increased at a rate of 12 per cent per annum Jeckoned from the specific date up to the date on which the liability for the levy arises. 5 1() 15 20 25 30 35 40 45 6 No. 19254 Act No. 50, 1998 Date of liability for levy GOVERNMENT GAZETTE, 9 SEPTEMBER 1998 DEMUTUALISATK)N LEVY ACT, 199S

5. Liability for the payment of the levy arises on the d,ite on which the free shares are issued to the members in terms of’ the demutualisation scheme. Members liable for levy 6. ( 1 ) The members are liable for the levy, but it must be paid on their behalf by the 5 affected company. (2) Any amount payable by the affected company on behalf of the members may be recovered by the company by the retention or utilisation of an appropriate number of free shares that would, but for the levy, have been issued to those members. (3) The shares contemplated in subsection (2) may, subject to subsection (4), include 10 any shares issued to the affected company by its holding company solely for the purpose of the payment of the levy. (4) The latter shares contemplated in subsection (3) nlay only be held by an affected company subject to section 19A of the Insurance Act. (5) The shares contemplated in subsections (2) and (3) maybe realised by the affected 15 company in an appropriate way and any surplus or shortf dl in the amount so realised. as compared with the amount of the levy payable, shall be i,or the account of the company. Payment of levy 7. ( 1 ) The levy must be paid by the affected comparly to the Commissioner within three months from the date on which the liability for tht levy arises in terms of section 20 5 and the payment must be accompanied by a return in such form as the Commissioner may require. (2) The public oflicer of the affected company, appoiuted in terms of section 101 of the Income Tax Act, is responsible for carrying out the dt ties of the company prescribed by this Act. 25 Assessment by Commissioner

8. Where the Commissioner is satisfied that any amou It of the levy has not been paid or has not been paid in full within the period co~templated in section 7, the Commissioner may make a reasonable estimate of the t npaid amount and issue to the affected company a notice of assessment of the unpaid .lmount. Interest on late payment

9. Where an affected company fails to pay any levy i 1 full before or on the last date for payment prescribed by section 7, interest must be paid by the company on the balance of the levy outstanding at the prescribed rate rt:ckoned from the last date for payment up to the date on which payment is received bv the Commissioner. 30 35 Penalties

10. If the affected company fails to pay the full amount of the levy before or on the last date for payment prescribed by section 7, a penalt y of 10 per cent of any unpaid amount must be paid. The Commissioner may, however, having regard to the circumstances of the case, remit the penalty or any portion thereof. 40 Discretion of Commissioner

11. Any decision by the Commissioner in the exercist: of a discretion under this Act is subject to objection and appeal. 8 N(). 19254 Act No. 5(I, 1998 GOVERN)fENT GAZETTE, 9 SEPTEMBER 1998 DEMUTLJALISATION [.1 ,VY ACT, 1998 Application of Income Tax Act 12. ( I ) The provisions of the Income Tax Act relating te (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (1) the administration thereof as contained in Cha ]ter 1 of that Act; the furnishing of information, documents or tk ings by any person; the obtaining of information, documents or things at certain premises; the conducting of inquiries; the procedures for searches and seizures; penalty on default; assessments; objections and appeals; the recovery of tax; refunds; transactions, operations or schemes for tte purposes of avoiding or postponing liability for or reducing the amoun [ of tax; public officers of companies, apply with the necessary changes required by the context in— (m) the administration of this Act; (n) the furnishing and obtaining of information, documents or things for the purposes of determining the levy; (o) any refusal or failure by any company t- (i) furnish any information or reply; (ii) attend to or give evidence as and when re([uired by the Commissioner or any officer duly authorised thereto; (iii) answer truly and fully any questions; or (iv) produce any information, documents or things required of it by the Commissioner or any such officer: (P) any— (i) default by any company in rendering a re;um; (ii) omission by any company from a return )f any amount which ought to have been included therein; or (iii) incorrect statement made by any compan/ in a return; (q) any assessment, objection and appeal and the ] ecovery or refund of the levy; (r) any transaction, operation or scheme entere I into or carried out for the purposes of avoiding or postponing liability for the levy or reducing the amount of the levy; (s) the appointment of a public officer. (2) In the application contemplated in subsection (l I “tax” must be construed as 5 10 15 20 25 30 35 “levy”. Overpayments of levy

13. The repayment of any amount of the levy overpaid 10 the Commissioner as a result 40 of an amount— (a) not being leviable under this Act; or (b) levied and paid in excess of what is Ieviable ulder this Act, is a direct charge against the Umsobomvu Fund. Short title 45

14. This Act shall be called the Demutuaiisation Levy Act, 1998.