Author: admin_kmos

Section 103 (ITA) – Transaction, operations or schemes for purposes of avoiding or postponing liability for or reducing amounts of taxes on income

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103.  Transactions, operations or schemes for purposes of avoiding or postponing liability for or reducing amounts of taxes on income

(1)     ……….

(2)     Whenever the Commissioner is satisfied that –

(a)     any agreement affecting any company or trust; or

(b)     any change in –

(i)      the shareholding in any company; or

(ii)     the members’ interests in any company which is a close corporation; or

(iii)    the trustees or beneficiaries of any trust,

as a direct or indirect result of which –

(A)    income has been received by or has accrued to that company or trust during any year of assessment; or

(B)    any proceeds received by or accrued to or deemed to have been received by or to have accrued to that company or trust in consequence of the disposal of any asset, as contemplated in the Eighth Schedule, result in a capital gain during any year of assessment,

has at any been entered into or effected by any person solely or mainly for the purpose of utilising any assessed loss, any balance of assessed loss, any capital loss or any assessed capital loss, as the case may be, incurred by the company or trust, in order to avoid liability on the part of that company or trust or any other person for the payment of any tax, duty or levy on income, or to reduce the amount thereof –

(aa)   the set–off of any such assessed loss or balance of assessed loss against any such income shall be disallowed;

(bb)   the set-off of any such assessed loss or balance of assessed loss against any taxable capital gain, to the extent that such taxable capital gain takes into account such capital gain, shall be disallowed; or

(cc)   the set off of such capital loss or assessed capital loss against such capital gain shall be disallowed.

(3)     ……….

(4)     If in any objection and appeal proceedings relating to a decision under subsection (2) it is proved that the agreement or change in shareholding or members’ interests or trustees or beneficiaries of the trust in question would result in the avoidance or the postponement of liability for payment of any tax, duty or levy imposed by this Act or any previous Income Tax Act or any other law administered by the Commissioner, or in the reduction of the amount thereof, it shall be presumed, until the contrary is proved in the case of any such agreement or change in shareholding or members’ interests or trustees or beneficiaries of such trust, that it has been entered into or effected solely or mainly for the purpose of utilising the assessed loss, balance of assessed loss, capital loss or assessed capital loss in question in order to avoid or postpone such liability or to reduce the amount thereof.

(5)     Where under any transaction, operation or scheme-

(a)     any taxpayer has ceded the right to receive any amount in exchange for the right to receive any amount of dividends; and

(b)     in consequence of that cession the liability for normal tax of the taxpayer or any other party to the transaction, operation or scheme, as determined before applying the provisions of this subsection, has been reduced or extinguished,

the Commissioner shall determine the liability for normal tax of the taxpayer and any other party to the transaction, operation or scheme as if that cession had not been effected.


(6)     Where the Commissioner has applied the provisions of this section in the determination of any taxpayer’s liability for any tax, duty or levy imposed in terms of this Act, the Commissioner shall not exercise his discretion in terms of the provisions of section 89quat(3) or (3A) so as to direct that interest shall not be payable in respect of that portion of any tax which is attributable to the application of this section.

104.  ……….

105.  ……….

106.  ……….

Section 102 – Refunds and set off

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102.      Refunds

[Heading of section 102 substituted by section 4 of Act 16 of 2016]

  

(1)       ……….

(1A)    The Commissioner may refuse to authorise a refund under section 190 of the Tax Administration Act, if –

(a)     that person has failed to furnish a return as required in terms of this Act, until that person has furnished such re turn as required; or

(b)     the refund is claimed by that person after a period of three years after the end of the year of assessment, in the case where that person was not required by any provision of this Act to furnish a return of income for that year of assessment and did not render such a return during the period of three years since the end of that year of assessment.

Paragraph 6 (Sixth Schedule) – Inclusions of taxable turnover

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6.     INCLUSIONS IN TAXABLE TURNOVER

 

The taxable turnover of a registered micro business includes-

 

(a)     50 per cent of all receipts of a capital nature from the disposal of-

 

(i)      immovable property mainly used for business purposes, other than trading stock; and

 

(ii)     any other asset used mainly for business purposes, other than any financial instrument; and

 

(b)     in the case of a company, investment income (other than dividends and foreign dividends).

Paragraph 5 (Sixth Schedule) – Taxable turnover

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5.    TAXABLE TURNOVER

 

The taxable turnover of a registered micro business in relation to any year of assessment consists of all amounts not of a capital nature received by that registered micro business during that year of assessment from carrying on business activities in the Republic, including amounts described in paragraph 6 and excluding amounts described in paragraph 7, less any amounts refunded to any person by that registered micro business in respect of goods or services supplied by that registered micro business to that person during that year of assessment or any previous year of assessment.

Paragraph 4 (Sixth Schedule) – Permissible shares and interests

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4.     PERMISSIBLE SHARES AND INTERESTS

 

The disqualification in terms of paragraph 3(a) or 3(f)(iii) does not apply to a share or interest-

 

(a)     in a company as described in paragraph (a) of the definition of a ‘listed company’;

 

(b)     in a portfolio in a collective investment scheme as described in paragraph (e) of the definition of a company;

 

(c)     in a company as described in section 10(1)(e);

 

(d)     in a venture capital company as defined in section 12J;

 

(e)     that constitutes less than 5 per cent of the interest in a social or consumer co-operative or a co-operative burial society as defined in section 1 of the Co-operatives Act, 2005 (Act No. 14 of 2005), or any other similar co-operative if all of the income derived from the trade of that co-operative during any year of assessment is solely derived from its members;

 

(f)      that constitutes less than 5 per cent of the interest in a primary savings co-operative bank or a primary savings and loans co-operative bank as defined in the Co-operative Banks Act, 2007 (Act No. 40 of 2007), that may provide, participate in or undertake only banking services as described in section 14(2)(a) or (b) of that Act; or

 

(g)     in any friendly society as defined in section 1 of the Friendly Societies Act, 1956 (Act No. 25 of 1956).

Paragraph 2 (Sixth Schedule) – Persons that qualify as micro business

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2.     PERSONS THAT QUALIFY AS MICRO BUSINESSES

 

(1)     A person qualifies as a micro business if that person is a-

 

(a)     natural person (or the deceased or insolvent estate of a natural person that was a registered micro business at the time of death or insolvency); or

 

(b)     company,

 

where the qualifying turnover of that person for the year of assessment does not exceed an amount of R1 million.

 

(2)     If a person described in subparagraph (1) carries on a business during the relevant year of assessment for a period which is less than 12 months, the amount described in subparagraph (1) is reduced proportionally taking into account the number of full months that it did not carry on business during that year.

Paragraph 3 (Sixth Schedule) – Persons that do not qualify as micro business

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3.     PERSONS THAT DO NOT QUALIFY AS MICRO BUSINESSES

A person does not qualify as a micro business for a year of assessment where-

 

(a)     that person at any time during that year of assessment holds any shares or has any interest in the equity of a company other than a share or interest described in paragraph 4;

(b)     more than 20 per cent of that person’s total receipts during that year of assessment consists of –

(i)      where that person is a natural person (or the deceased or insolvent estate of a natural person that was a registered micro business at the time of death or insolvency), income from the rendering of a professional service; and

(ii)     where that person is a company, investment income and income from the rendering of a professional service;

(c)     at any time during that year of assessment that person is a ‘personal service provider’ or a ‘labour broker’, as defined in the Fourth Schedule, other than a labour broker in respect of which a certificate of exemption has been issued in terms of paragraph 2(5) of that Schedule;

(d)     ……….

(e)     the total of all amounts received by that person from the disposal of-

(i)      immovable property used mainly for business purposes; and

(ii)     any other asset of a capital nature used mainly for business purposes, other than any financial instrument,

exceeds R1,5 million over a period of three years comprising the current year of assessment and the immediately preceding two years of assessment, or such shorter period during which that person was a registered micro business;

(f)      in the case of a company-

(i)      its year of assessment ends on a date other than the last day of February;

(ii)     at any time during its year of assessment, any holder of shares in that micro business is a person other than a natural person (or the deceased or insolvent estate of a natural person);

(iii)    at any time during its year of assessment, any holder of shares in that micro business holds any shares or has any interest in the equity of any other company other than a share or interest described in paragraph 4 : Provided that the provisions of this item do not apply to the holding of any shares in or interest in the equity of a company, if the company-

(aa)    has not during any year of assessment –

(A)    carried on any trade; and

(B)     owned assets, the total market value of which exceeds R5000; or

(bb)   has taken the steps contemplated in section 41(4) to liquidate, wind up or deregister: Provided further that this paragraph ceases to apply if the company has at any stage withdrawn any step so taken or does anything to invalidate any step so taken, with the result that the company will not be liquidated, wound up or deregistered;

(iv)    it is a public benefit organisation approved by the Commissioner in terms of section 30;

[Item (iv) substituted by section 89 of Act 25 of 2015 effective on 8 January 2016]

(v)     it is a recreational club approved by the Commissioner in terms of section 30A;

(vi)    it is an association approved by the Commissioner in terms of section 30B; or

[Item (vi) added by section 89 of Act 25 of 2015 effective on 8 January 2016]

(vii)   it is a small business funding entity approved by the Commissioner in terms of section 30C;

[Item (vii) added by section 89 of Act 25 of 2015 effective on 8 January 2016]

(g)     in the case of a person that is a partner in a partnership during that year of assessment-

(i)      any of the partners in that partnership is not a natural person;

(ii)     that person is a partner in more than one partnership at any time during that year of assessment; or

(iii)    the qualifying turnover of that partnership for that year of assessment exceeds the amount described in paragraph 2.