Author: admin_kmos

Paragraph 76 (Eighth Schedule) – Returns of capital and foreign returns of capital by way of distributions of cash or assets in specie

Posted on by admin_kmos

76.    Returns of capital and foreign returns of capital by way of distributions of cash or assets in specie

 

(1)     Subject to subparagraph (2), where a return of capital or foreign return of capital by way of a distribution of cash or an asset in specie (other than a distribution of a share in terms of an unbundling transaction contemplated in section 46(1)) is received by or accrues to a holder of a share in respect of that share, that holder must where the date of distribution of that cash or asset occurs-

 

(a)     before valuation date, reduce the expenditure contemplated in paragraph 20 actually incurred before valuation date in respect of that share by the amount of that cash or the market value of that asset;


(b)     on or after valuation date but before 1 October 2007 and that share is disposed of by the holder of that share on or before 31 March 2012, treat the amount of that cash or the market value of that asset as proceeds when that share is disposed of;


(c)     on or after 1 October 2007 but before 1 April 2012, treat the amount of that cash or the market value of that asset as proceeds when that share is partly disposed of in terms of paragraph 76A.

 

(2)     Where a holder of shares uses the weighted average method in respect of shares that are identical assets as contemplated in paragraph 32(3A)(a) and a return of capital or foreign return of capital by way of a distribution of cash or an  asset in specie (other than a distribution of a share in terms of an unbundling transaction contemplated in section 46(1)) is received by or accrues to that holder of shares in respect of those shares on or after valuation date but before 1 October 2007, the weighted average base cost of those shares must be determined by-

 

(a)     deducting the amount of that cash or the market value of that asset from the base cost of those shares held when that return of capital or foreign return of capital was received or accrued; and


(b)     dividing the result by the number of those shares held when that return of capital or foreign return of capital was received or accrued.

 

(3)       ……….

 

(4)     Every-

 

(a)     company that makes a distribution to any other person; and


(b)     person that pays a distribution to any other person on behalf of a company,


on or after 1 April 2012 must, by the time of the distribution or payment, notify that other person in writing of the extent to which the distribution or payment constitutes a return of capital.

Paragraph 75 (Eighth Schedule) – Distributions in specie by company

Posted on by admin_kmos

75.    Distributions in specie by company

 

(1)       Where a company makes a distribution of an asset in specie to a person holding a share in that company-

 

(a)     that company must be treated as having disposed of that asset to that person on the date of distribution for an amount received or accrued equal to the market value of that asset on that date; and


(b)     that person must be treated as having acquired that asset on the date of distribution and for expenditure equal to the market value of that asset on that date, which expenditure must be treated as an amount of expenditure actually incurred for the purposes of paragraph 20(1)(a).

“Date of distribution” definition of Eighth Schedule

Posted on by admin_kmos

“date of distribution”, in relation to any distribution, means-

 

(a)    to the extent that the distribution does not consist of a distribution of an asset in specie–

 

(i)      where the company that makes the distribution is a listed company, the date on which the distribution is paid; or

 

(ii)     where the company that makes the distribution is not a listed company, the earlier of the date on which the distribution is paid or becomes due and payable; or

 

(b)     to the extent that the distribution consists of a distribution of an asset in specie, the earlier of the date on which the distribution is paid or becomes due and payable.

Paragraph 73 (Eighth Schedule) – Attribution of income and capital gain

Posted on by admin_kmos

73.    Attribution of income and capital gain

 

(1)     Where both an amount of income and a capital gain are derived by reason of or are attributable to a donation, settlement or other disposition, the total amount of that income and gain-

 

(a)     that is deemed in terms of section 7 to be that of a person other than the one to whom it accrues or by whom it is received or for whose benefit it is expended or accumulated; and

 

(b)     that is attributed in terms of this Part to a person other than the one in whom it vests, shall not exceed the amount of the benefit derived from that donation, settlement or other disposition.

 

(2)     For purposes of this paragraph, the benefit derived from a donation, settlement or other disposition means the amount by which the person to whom that donation, settlement or other disposition was made, has benefited from the fact that it was made for no or an inadequate consideration, including consideration in the form of interest.

Paragraph 72 (Eighth Schedule) – Attribution of capital gain and other amounts vesting in person that is not a resident

Posted on by admin_kmos

72. Attribution of capital gain and other amounts vesting in person that is not a resident

(1)       This paragraph applies where-

(a)     a resident has made a donation, settlement or other disposition to any person (other than an entity which is not resident and which is similar to a public benefit organisation contemplated in section 30);

(b)     a capital gain (including any amount that would have constituted a capital gain had that person been a resident) attributable to that donation, settlement or other disposition has arisen during a year of assessment; and

(c)     an amount consisting of or derived, directly or indirectly, from-

(i)      that capital gain; or

(ii)     the amount that would have constituted a capital gain,

has during that year vested in or is treated as having vested in any person who is not a resident (other than a controlled foreign company, in relation to that resident).

(2)     In determining, for purposes of subparagraph (1), whether an amount would have constituted a capital gain had a person been a resident, the provisions of paragraph 64B(1) and (4) must be disregarded in respect of an amount derived by that person, directly or indirectly, from the disposal of an equity share in a foreign company if-

(a)     more than 50 per cent of the total participation rights, as defined in section 9D(1), or of the voting rights in that company are directly or indirectly held or are exercisable, as the case may be, by that person whether alone or together with any one or more persons that are connected persons in relation to that person; and

(b)     the resident who made the donation, settlement or other disposition or any person that is a connected person in relation to that resident is a connected person in relation to the person who is not a resident; and

(c)     to the extent to which that amount is not included in the income of or attributed as a capital gain to-

(i)      the resident who made that donation, settlement or other disposition; or

(ii)     a resident who is a connected person in relation to the resident referred to in subitem (i).

(3)     An amount that is equal to so much of the amount described in item (c) of subparagraph (1) that has vested in or is treated as having vested in the person who is not a resident as consists of or is derived, directly or indirectly, from-

(a)     the capital gain must be disregarded when determining the aggregate capital gain or aggregate capital loss of that person; and

(b)     the capital gain or the amount that would have constituted a capital gain must be taken into account as a capital gain when determining the aggregate capital gain or aggregate capital loss of the resident who made the donation, settlement or other disposition described in subparagraph (1).

[Paragraph 72 amended by section 94 of Act 74 of 2002, section 112 of Act 45 of 2003 and section 80 of Act 31 of 2005 and substituted by section 86 of Act 23 of 2018 effective on 1 March 2019, applies in respect of amounts vesting on or after that date]

Paragraph 71 (Eighth Schedule) – Attribution of capital gain subject to revocable vesting

Posted on by admin_kmos

71.    Attribution of capital gain subject to revocable vesting

 

Where-

 

(a)     a deed of donation, settlement or other disposition confers a right upon a beneficiary thereof who is a resident to receive a capital gain attributable to that donation, settlement or other disposition or any portion of that gain;

 

(b)     that right may be revoked or conferred upon another by the person who conferred it; and

 

(c)     a capital gain attributable to that donation, settlement or other disposition or a portion of that gain has in terms of that right vested in that beneficiary during a year of assessment throughout which the person who conferred that right has been a resident and has retained the power to revoke that right, that capital gain or that portion thereof must be disregarded when determining the aggregate capital gain or aggregate capital loss of that beneficiary and be taken into account when determining the aggregate capital gain or aggregate capital loss of the person retaining the power of revocation.

Paragraph 70 (Eighth Schedule) – Attribution of capital gain subject to conditional vesting

Posted on by admin_kmos

70.    Attribution of capital gain subject to conditional vesting

 

Where-

 

(a)     a person has made a donation, settlement or other disposition that is subject to a stipulation or condition imposed by that person or anyone else in terms of which a capital gain or a portion of any capital gain attributable to that donation, settlement or other disposition shall not vest in the beneficiaries of that donation, settlement or other disposition or some of those beneficiaries until the happening of some fixed or contingent event;

 

(b)     a capital gain that is attributable to that donation, settlement or other disposition has arisen during a year of assessment throughout which the person who made that donation, settlement or other disposition has been a resident; and

 

(c)     that capital gain or a portion thereof has not vested during that year in any beneficiary who is a resident, that capital gain or that portion thereof must be taken into account in determining the aggregate capital gain or aggregate capital loss of the person who made that donation, settlement or other disposition and disregarded when determining the aggregate capital gain or aggregate capital loss of any other person.

Paragraph 69 (Eighth Schedule) – Attribution of capital gain to parent of minor child

Posted on by admin_kmos

69.    Attribution of capital gain to parent of minor child

 

Where a minor child’s capital gain or a capital gain that has vested in or is treated as having vested in or that has been used for the benefit of that child during the year of assessment in which it arose can be attributed wholly or partly to any donation, settlement or other disposition-

 

(a)     made by a parent of that child; or

 

(b)     made by another person in return for any donation, settlement or other disposition or some other consideration made or given by a parent of that child in favour directly or indirectly of that person or his or her family, so much of that gain as can be so attributed must be disregarded when determining that child’s aggregate capital gain or aggregate capital loss and must be taken into account in determining the aggregate capital gain or aggregate capital loss of that parent.