39.    Capital losses determined in respect of disposals to certain connected persons

(1)     A person must, when determining the aggregate capital gain or aggregate capital loss of that person, disregard any capital loss determined in respect of the disposal of an asset to any person-

(a)     who was a connected person in relation to that person immediately before that disposal; or

(b)     which is immediately after the disposal –

(i)      a member of the same group of companies as that person; or

(ii)     a trust with a beneficiary which is a member of the same group of companies as that person.

(2)     A person’s capital loss which is disregarded in terms of subparagraph (1) may be deducted from that person’s capital gains determined in respect of disposals of assets during that year or subsequent years to the same person to whom the disposal giving rise to that capital loss was made, if at the time of those subsequent disposals, that person is still a connected person in relation to that person.

(3)     For the purposes of subparagraph (1), a connected person in relation to-

(a)     a natural person does not include a relative of that person other than a parent, child, stepchild, brother, sister, grandchild or grandparent of that person; or

(b)     a fund of an insurer contemplated in section 29A does not include another such fund of that insurer in respect of the disposal of an asset by such fund to another such fund.

(4)     Subparagraph (1) does not apply in respect of the disposal by a trust of any right, marketable security or equity instrument contemplated in section 8A or 8C to a beneficiary of that trust, if –

(a)     that right, marketable security or equity instrument is disposed of to that beneficiary –

(i)      by virtue of that beneficiary’s employment with an employer, directorship of a company or services rendered or to be rendered by that beneficiary as an employee to an employer: or

(ii)     as a result of the exercise, cession, release, conversion or exchange by that beneficiary of the right, marketable security or equity instrument contemplated in subitem (i); and

(b)     that trust is an associated institution as contemplated in paragraph 1 of the Seventh Schedule in relation to that employer or company.

(5)     For the purposes of subparagraph (1), where a company redeems its shares, the holder of those shares must be treated as having disposed of them to that company.

[Subparagraph (5) added by section 79 of Act 23 of 2018 effective on 17 Januaery 2019]