Author: admin_kmos

Section 36 (TAA) – Excluded arrangements

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36.  Excluded arrangements

(1)     An ‘arrangement’ is an excluded ‘arrangement’ if it is-

(a)     a debt in terms of which-

(i)      the borrower receives or will receive an amount of cash and agrees to repay at least the same amount of cash to the lender at a determinable future date; or

(ii)     the borrower receives or will receive a fungible asset and agrees to return an asset of the same kind and of the same or equivalent quantity and quality to the lender at a determinable future date;

(b)     a lease;

(c)     a transaction undertaken through an exchange regulated in terms of the Financial Markets Act, 2012 (Act 19 of 2012); or

[Paragraph (c) substituted by section 40 of Act 23 of 2015]

(d)     a transaction in participatory interests in a scheme regulated in terms of the Collective Investment Schemes Control Act, 2002 (Act No. 45 of 2002).

(2)     Subsection (1) applies only to an ‘arrangement’ that-

(a)     is undertaken on a stand-alone basis and is not directly or indirectly connected to any other ‘arrangement’ (whether entered into between the same or different parties); or

(b)     would have qualified as having been undertaken on a stand-alone basis as required by paragraph (a), were it not for a connected ‘arrangement’ that is entered into for the sole purpose of providing security and if no ‘tax benefit’ is obtained or enhanced by virtue of the security ‘arrangement’.

(3)     Subsection (1) does not apply to an ‘arrangement’ that is entered into-

(a)     with the main purpose or one of its main purposes of obtaining or enhancing a ‘tax benefit’; or

(b)     in a specific manner or form that enhances or will enhance a ‘tax benefit’.

(4)     The Commissioner may determine an “arrangement” to be an excluded “arrangement” by public notice.

Section 35 (TAA) – Reportable arrangements

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35.  Reportable arrangements

 

(1)     An “arrangement” is a reportable arrangement if a person is a “participant” in the “arrangement” and the “arrangement”–

 

(a)     contains provisions in terms of which the calculation of interest as defined in section 24J of the Income Tax Act, finance costs, fees or any other charges is wholly or partly dependent on the assumptions relating to the tax treatment of that ‘arrangement’ (otherwise than by reason of any change in the provisions of a tax Act);

 

(b)     has any of the characteristics contemplated in section 80C(2)(b) of the Income Tax Act, or substantially similar characteristics;

 

(c)     gives rise to an amount that is or will be disclosed by any ‘participant’ in any year of assessment or over the term of the ‘arrangement’ as-

 

(i)      a deduction for purposes of the Income Tax Act but not as an expense for purposes of ‘financial reporting standards’; or

 

(ii)     revenue for purposes of ‘financial reporting standards’ but not as gross income for purposes of the Income Tax Act;

 

(d)     does not result in a reasonable expectation of a ‘pre-tax profit’ for any ‘participant’; or

 

(e)     results in a reasonable expectation of a ‘pre-tax profit’ for any ‘participant’ that is less than the value of that ‘tax benefit’ to that ‘participant’ if both are discounted to a present value at the end of the first year of assessment when that ‘tax benefit’ is or will be derived or is assumed to be derived, using consistent assumptions and a reasonable discount rate for that ‘participant’.

 

(2)     An “arrangement” is a “reportable arrangement” if the Commissioner has listed the “arrangement” in a public notice.

“Pre-tax profit” definition of section 34 of TAA

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‘pre-tax profit’, in relation to an ‘arrangement’, means the profit of a ‘participant’ resulting from that ‘arrangement’ before deducting normal tax, which profit must be determined in accordance with ‘financial reporting standards’ after taking into account all costs and expenditure incurred by the ‘participant’ in connection with the ‘arrangement’ and after deducting any foreign tax paid or payable by the ‘participant’ in connection with the ‘arrangement’;

“Participant” definition of section 34 of TAA

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“participant”, in relation to an ‘arrangement’, means-

(a)     a “promoter”;

(b)     a person who directly or indirectly will derive or assumes that the person will derive a “tax benefit” or “financial benefit” by virtue of an “arrangement”; or

(c)     any other person who is party to an “arrangement” listed in a public notice referred to in section 35(2);

[Definition of “participant” substituted by section 40 of Act 44 of 2014 effective on 20 January 2015 and section 39 of Act 23 of 2015 effective on 8 January2016]

“Financial reporting standards” definition of section 34 of TAA

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‘financial reporting standards’ means, in the case of a company required to submit financial statements in terms of the Companies Act, 2008 (Act No. 71 of 2008), financial reporting standards prescribed by that Act, or, in any other case, the International Financial Reporting Standards or appropriate financial reporting standards that provide a fair presentation of the financial results and position of the taxpayer;