Author: admin_kmos

“Protected cell company” definition of section 9D of ITA

Posted on by admin_kmos

“protected cell company” means any entity incorporated, established or formed, whether by way of conversion or otherwise, in terms of any law of any country other than the Republic-

 

(a)     if the principal trading activities of that entity constitute the business of an insurer; and

 

(b)     where that law makes provision for-

 

(i)      the segregation of specified assets of that entity into structurally independent cells or segregated accounts;

 

(ii)     the linking or attribution of specified assets and liabilities to those cells or segregated accounts; or

 

(iii)    separate participation rights in respect of each such cell or segregated account,

 

irrespective of whether or not that law provides that the establishment or formation of a cell or segregated account creates a legal person distinct from that entity.

“Participation rights” definition of section 9D of ITA

Posted on by admin_kmos

“participation rights” in relation to a foreign company means –

 

(a)     the right to participate all or part of the benefits of the rights (other than voting rights) attaching to a share, or any interest of a similar nature, in that company; or

 

(b)     in the case where no person has any right in that foreign company as contemplated in paragraph (a) or no such rights can be determined for any person, the right to exercise any voting rights in that company; and

“Foreign financial instrument holding company” definition of section 9D of ITA

Posted on by admin_kmos

“foreign financial instrument holding company” ……….

 [Definition of “foreign financial instrument holding company” substituted by section 22 of Act 45 of 2003, amended by section 14 of Act 31 of 2005 and section 9 of Act 20 of 2006 and deleted by section 12 of Act 43 of 2014 effective on 20 January 2015]

“Foreign company” definition of section 9D of ITA

Posted on by admin_kmos

“foreign company” means any-

 

(a)     cell or segregated account contemplated in the definition of “protected cell company”;

 

(b)     protected cell company to the extent that-

 

(i)      specified assets of that company are not segregated into structurally independent cells or segregated accounts as contemplated in paragraph (a) of the definition of ‘protected cell company’; or

 

(ii)     specified assets and liabilities of that company are not linked or attributed to cells or segregated accounts as contemplated in paragraph (b) of the definition of ‘protected cell company’; or

 

(c)     foreign company, as defined in section 1, other than a protected cell company;

“Foreign business establishment” definition of section 9D of ITA

Posted on by admin_kmos

“foreign business establishment”, in relation to a controlled foreign company, means –

(a)     a fixed place of business located in a country other than the Republic that is used or will continue to be used for the carrying on of the business of that controlled foreign company for a period of not less than one year, where-

(i)     that business is conducted through one or more offices, shops, factories, warehouses or other structures;

(ii)     that fixed place of business is suitably staffed with on-site managerial and operational employees of that controlled foreign company who conduct the primary operations of that business;

(iii)    that fixed place of business is suitably equipped for conducting the primary operations of that business;

(iv)    that fixed place of business has suitable facilities for conducting the primary operations of that business; and

(v)     that fixed place of business is located outside the Republic solely or mainly for a purpose other than the postponement or reduction of any tax imposed by any sphere of government in the Republic:

Provided that for the purposes of determining whether there is a fixed place of business as contemplated in this definition, a controlled foreign company may take into account the utilisation of structures as contemplated in subparagraph (i), employees as contemplated in subparagraph (ii), equipment as contemplated in subparagraph (iii), and facilities as contemplated in subparagraph (iv) of any other company-

(aa) if that other company is subject to tax in the country in which the fixed place of business of the controlled foreign company is located by virtue of residence, place of effective management or other criteria of a similar nature;

(bb)  if that other company forms part of the same group of companies as the controlled foreign company; and

(cc)  to the extent that the structures, employees, equipment and facilities are located in the same country as the fixed place of business of the controlled foreign company;

  

(b)     any place outside the Republic where prospecting or exploration operations for natural resources are carried on, or any place outside the Republic where mining or production operations of natural resources are carried on, where that controlled foreign company carries on those prospecting, exploration, mining or production operations;

  

(c)     a site outside the Republic for the construction or installation of buildings, bridges, roads, pipelines, heavy machinery or other projects of a comparable magnitude which lasts for a period of not less than six months, where that controlled foreign company carries on those construction or installation activities;

(d)     agricultural land in any country other than the Republic used for bona fide farming activities directly carried on by that controlled foreign company;

(e)     a vessel, vehicle, rolling stock or aircraft used for the purposes of transportation or fishing, or prospecting or exploration for natural resources, or mining or production of natural resources, where that vessel, vehicle, rolling stock or aircraft is used solely outside the Republic for such purposes and is operated directly by that controlled foreign company or by any other company that has the same country of residence as that controlled foreign company and that forms part of the same group of companies as that controlled foreign company;

(f)      a South African ship as defined in section 12Q engaged in international shipping as defined in that section; or

(g)     a ship engaged in international traffic used mainly outside the Republic;

“Controlled foreign company” definition of section 9D of ITA

Posted on by admin_kmos

(1)     For the purposes of this section-

“controlled foreign company” means-

(a)     any foreign company where more than 50 per cent of the total participation rights in that foreign company are directly or indirectly held, or more than 50 per cent of the voting rights in that foreign company are directly or indirectly exercisable, by one or more persons that are residents other than persons that are headquarter companies: Provided that-

(i)     no regard must be had to any voting rights in any foreign company-

(aa) which is a listed company; or

(bb) if the voting rights in that foreign company are exercisable indirectly through a listed company;

(ii)    any voting rights in a foreign company which can be exercised directly by any other controlled foreign company in which that resident (together with any connected person in relation to that resident) can directly or indirectly exercise more than 50 per cent of the voting rights are deemed for purposes of this definition to be exercisable directly by that resident; and

(iii)   a person is deemed not to be a resident for purposes of determining whether residents directly or indirectly hold more than 50 per cent of the participation rights or voting rights in a foreign company, if-

(aa) in the case of a listed company or a foreign company the participation rights of which are held by that person indirectly through a listed company, that person holds less than five per cent of the participation rights of that listed company; or

(bb) in the case of a scheme or arrangement contemplated in paragraph (e)(ii) of the definition of “company” in section 1 or a foreign company the participation rights of which are held and the voting rights of which may be exercised by that person indirectly through such a scheme or arrangement, that person-

(A)    holds less than five per cent of the participation rights of that scheme or arrangement; and

(B)    may not exercise at least five per cent of the voting rights in that scheme or arrangement,

unless more than 50 per cent of the participation rights or voting rights of that foreign company or other foreign company are held by persons who are connected persons in relation to each other; or

[Paragraph (a) amended by section 10(1)(a) of Act 34 of 2019]

(b)     any foreign company where the financial results of that foreign company are reflected in the consolidated financial statements, as contemplated in IFRS 10, of any company that is a resident, other than a headquarter company;

[Paragraph (b) substituted by section 18(a) of Act 23 of 2018 and by section 10(1)(b) of Act 34 of 2019]

[Definition of “controlled foreign company” substituted by section 14 of Act 31 of 2005, amended by section 15 of Act 35 of 2007 and section 16 of Act 7 of 2010 and substituted by section 15 of Act 17 of 2017 effective on 1 January 2018 and applies in respect of any year of assessment commencing on or after that date]

Subsections 2, 2A, 3, 4, 5, 6, 7 and 8 of section 9C of ITA

Posted on by admin_kmos

(2)     Any amount received or accrued (other than a dividend or foreign dividend) or any expenditure incurred in respect of an equity share must be deemed to be of a capital nature if that equity share had, at the time of the receipt or accrual of that amount or incurral of that expenditure, been held for a period of at least three years.

[Subsection (2) substituted by section 7 of Act 3 of 2008. section 24 of Act 24 of 2011 and section 12 of Act 25 of 2015 effective on 1 January 2016]

(2A)  Subsection (2) does not apply in respect of so much of the amount received or accrued in respect of the disposal of an equity share contemplated in that subsection, other than an equity share held for longer than five years, as does not exceed the expenditure allowed in respect of that share in terms of section 12J(2).

[Subsection (2A) inserted by section 12 of Act 60 of 2008 and substituted by section 24 of Act 24 of 2011, section 12 of Act 25 of 2015 and section 17 of Act 23 of 2018 effective on 17 January 2019]

(3)     The provisions of this section shall not apply to any equity share if at the time of the receipt or accrual of any amount (other than an amount constituting a dividend or foreign dividend) in respect of that share the taxpayer was a connected person in relation to the company that issued that share and-

(a)     more than 50 per cent of the market value of the equity shares of that company was attributable directly or indirectly to immovable property other than-

(i)      immovable property held directly or indirectly by a person that is not a connected person in relation to the taxpayer; or

(ii)     immovable property held directly or indirectly for a period of at least three years immediately prior to that receipt or accrual; or

(b)     that company acquired any asset during the period of three years immediately prior to that receipt or accrual and amounts were paid or payable by any person to any person other than that company for the use of that asset while that asset was held by that company during that period.

[Subsection (3) substituted by section 7 of Act 3 of 2008, amended by section 24 of Act 24 of 2011 and section 12 of Act 25 of 2015 and substituted by section 17 of Act 23 of 2018 effective on 17 January 2019]

(4)     For purposes of this section, where any share has been transferred by a lender to a borrower in terms of a securities lending arrangement, and an identical share has been returned by the borrower to the lender, in terms of that securities lending arrangement, that share and that other share shall be deemed to be one and the same share in the hands of the lender.

[Subsection (4) substituted by section 12 of Act 25 of 2015 effective on 1 January 2016]

(4A)  For purposes of this section, where any share has been transferred by a transferor to a transferee in terms of a collateral arrangement and an identical share has in turn been transferred by the transferee to the transferor in terms of that collateral arrangement, that share and that other share shall be deemed to be one and the same share in the hands of the transferor.

[Subsection (4A) inserted by section 12 of Act 25 of 2015 effective on 1 January 2016]

(5)     There shall in the year of assessment in which any equity share held for a period of at least three years is disposed of by the taxpayer be included in the taxpayer’s income any expenditure or losses incurred in respect of such equity share and allowed as a deduction from the income of the taxpayer during that or any previous year of assessment in terms of section 11.

[Words preceding the proviso substituted by section 12 of Act 25 of 2015 effective on 1 January 2016]

: Provided that this subsection must not apply-

(a)     in respect of any expenditure or loss to the extent that the amount of that expenditure or loss is taken into account in terms of section 8(4)(a) or section 19; or

(b)     to expenditure in respect of equity shares in a REIT or a controlled company, as defined in section 25BB(1), that is a resident except to the extent that such amount was taken into account in determining the cost price or value of trading stock under section 11(a), 22(1) or (2).

[Paragraph (b) substituted by section 14 of Act 17 of 2017 effective on 18 December 2017]

[Proviso to subsection (5) added by section 13 of Act 22 of 2012 and substituted by section 19 of Act 15 of 2016 effective on 1 January 2016, applies in respect of years of assessment ending on or after that date.]

(6)     Where the taxpayer holds shares of the same class in the same company which were acquired by the taxpayer on different dates and the taxpayer has disposed of any of those shares, the taxpayer shall for the purposes of this section be deemed to have disposed of the shares held by the taxpayer for the longest period of time.

[Subsection (6) substituted by section 24 of Act 24 of 2011 and section 12 of Act 25 of 2015 effective on 1 January 2016]

(7)     The provisions of section 22(8) shall not apply on or after the date that an equity share has been held for a period exceeding three years.

[Subsection (7) substituted by section 12 of Act 25 of 2015 effective on 1 January 2016]

(8)     For the purposes of this section, where a company issues shares to a person in substitution of previously held shares in that company by reason of a subdivision, consolidation or similar arrangement or a conversion contemplated in section 40A or 40B, such share and such previously held shares shall be deemed to be one and the same share if –

(i)      the participation rights and interests of that person in that company remain unaltered; and

(ii)     no consideration whatsoever passes directly or indirectly from that person to that company in relation to the issued shares.

“Qualifying share” definition of section 9C of ITA

Posted on by admin_kmos

“qualifying share”……….

[Definition of “qualifying share” substituted by section 7 of Act 3 of 2008, amended by section 11 of Act 43 of 2014 and deleted by section 12 of Act 25 of 2015 effective on 1 January 2016]