11. The principal Act is amended by the insertion immediately after section ninety-seven A of the following new section: 97AA (I) Where- Insertion of new section 97AA Special provisions ( a) actual conditions are imposed in terms of wher�_actual subsection (I) of section ninety-seven A between 7°1d�ions me " e two assoc·1ated persons and those conditions in- issuing elude the issuing of a security; and securi1y (b) the matters sp·ecified in subsection (2) are relevant, in any way and to any extent, to the determination of the arm's length conditipns for the purposes of section ninety-seven A; those conditions shall be determined, not only as if the issuing company and the other person, referred to in this section as " the first associate ", were not associated, but also as if there were no relationship, arrangement or connection, whether formal or infor- . ma!, between the issuing company and any other person which is associated with the issuing company unless they are both members of the same Zambian grouping. (2) The matters referred to in paragragh (b) of subsection (1) are- (a) the appropriate level or extent of the issuing company's overall indebtedness; · (bJ.whether it might be expected thatthe issuing company and a particular person would have become parties to a transaction involving the issue of a security by the issuing company or the making of a loan, or a loan of a .particular amount, to that company; and (c) the rate of interest and other terms that might be expected to be applicable in any particular case to such a transaction; and the fact that it is not part of any company's business to make loans generally shall be disregarded for the purposes of this section. (3) The membership of a Zambian grouping in relation to any issuin_g company shall be det�rmined as follows: ( ) ( a) Where the issuing coinpany is not a subsidiary .of a --- company resident in the Republic- · · ···--· --�··-· �· (i) if the issuing company has no subsidiaries, the only member of the Zambian-grouping shall be the--·-· - issuing company; , ' ' ' . . �' ( . , .. i. .. .. . - ' . - , - � •• : ... :..... '.� . '_ � . : : ' . . . . . " - . :·;· t. "' � .. : •• - - -� " - i , 6 No. 1 of 2001] Income Tax (Amendment) · . ·• ) (ii) if it has one or more subsidiaries, the only members of the Zambian grouping shall be the issuing company and its subsidiaries; and ( b J where the issuing company is a subsidiary of a company resident in the Republic, in this section referred to as " the Zambian holding company ", the only members of thP Zambian grouping shall be- (i) if there is more than one company resident in Zambia of which the issuing company is a subsidiary, such one of them as is not itself a subsidiary of any of the others, and all its subsidiaries; (ii) if sub paragraph (i) does not apply, the Zambian holding company and all its subsidiaries; butthe first associate is not a member of the Zambian grouping in any case. ( 4) For the purposes of this section- ( a) a company, in this section referred to as" the subsidiary", • is a subsidiary of another company in this section re ferred to as " the parent " at any time if- (i) the parent is beneficially entitled to more than fifty percent of any profits of the subsidiary available for distribution to equity holders of the subsid iary; and (ii) the parent would be beneficially entitled to more than fifty percent of any assets of the subsidiary available for distribution to its equity holders on winding up; and for this purpose any profits or assets available for distribution to any equity holder otherwise than as an equity holder shall be disregarded; ( b) " the issuing company " means the company, which issued !he security referred to in paragraph ( a). of subsection (l); ( c) " security " iifcludes securities not creating or evidencing a charge on assets, and any- (i) interestcpaid or payable by a company on money advanced without the issue of a security for the advance; or .; i l I l l .) Income Tax (Amendment) [No. 1 of 2001 7 (ii) other consideration given by a company for the use of money so advanced; shall be treated as if paid or payable or given in respect of a security issued for the advance by the company; ( d) •· subsidiary " shall have the meaning assigned to it by paragraph ( a) of this subsection; and ( e j " Zambian grouping " refers to those companies that are associated in terms of subsection (5) of section ni11ery seve11 C and are resident in the Republic or deemed to be resident in the Republic for tax purposes and may, as determined by the Commissioner-General, include non resident companies which are associated in terms of that subsection. (5) For the purposes of subsection (4)- ( a) the percentage entitlement of a company means the percent age to which the company is or would be entitled either directly or through another body corporate or other bodies corporate or partly directly and partly through another body corporate or other bodies corporate; (b) the entitlement means, in the case oi' profits, the entitles mentduring the charge year, which is the income year·in question within the meaning of subsection (2) of.section ninety-seven A and, in the case of assets, the entitlement at the end of that charge year; ( c) " equity holder " means a person who- (i) holds ordinary shares in the company; or (ii) is a loan creditor of the company in respect of a loan which is not a normal commercial loan; and ( d) " ordinary shares " means all shares other than fixed-rate preference shares. (6) A " loan creditor " , referred to in subparagraph (ii) of paragraph (c) of subsection (5), in relation to a company, means a creditor in respect of any debt incurred by the company- ( a) for any money borrowed or capital assets acquired by the company; or (b) in respect of any redeemable loan capital issued by the company: Provided that a person carrying on the business of banking shall not be deemed to be a loan--creditorin respect of any Joan capital or debt issued or incurred by the company for ip,oney lent by that person in the ordinary course o( thatbusiness. · · · ii ii Ii ! [ '.I i . I' i ' I ! !. . I I i ., ! l (7) The " fixed rate preference shi!feS " referred to i_n paragraph (d) of subsection (5) are shares which- ( a) do not carry any right either to conversion into shares or securities of any description or to the acquisition of any additional shares or securities; (b) do not carry any right to dividends other than dividends which- (i) are of a fixed amount' or at a fixed rate per cehtum of the nominal value of the shares; and (ii) represent no more than reasonable commercial return on the consideration received by the company in respect of the issue of the shares; and ( c) on the repayment do not carry any rights to an amount exceeding that consideration. (8) A " normal commercial loan" referred to in paragraph ( c) of subsection (5) is a loan- ( a) which does not carry any right either to conversion into shares or securities; and (b) which does not entitle the loan creditor to any amount by way of interest which depends to any extent on the results of the company's business or which exceeds a reasonable commercial return on the amount lent.