47J. Currency of payments made to Commissioner
If an amount deducted or withheld by a resident in terms of section 47D is denominated in any currency other than the currency of the Republic, the amount so deducted or withheld and paid to the Commissioner must be translated to the currency of the Republic at the spot rate on the date on which that amount was so deducted or withheld.
“foreign financial instrument holding company” ……….
[Definition of “foreign financial instrument holding company” substituted by section 49 of Act 45 of 2003, amended by section 32 of Act 32 of 2004, substituted by section 37 of Act 31 of 2005, section 28 of Act 20 of 2006, amended by section 32 of Act 8 of 2007, section 25 of Act 3 of 2008 and section 61 of Act 7 of 2010 and deleted by section 54 of Act 43 of 2014 effective on 20 January 2015]
43. Substitutive share-for-share transactions
47K. Notification of specified activity
Any resident who is primarily responsible for founding, organising, or facilitating a specified activity in the Republic and who will be rewarded directly or indirectly for that function of founding, organising or facilitating must, in the manner and form prescribed by the Commissioner –
(a) notify the Commissioner of that specified activity within 14 days after the agreement relating to that founding, organising or facilitating of that specified activity has been concluded; and
(b) provide to the Commissioner such other details relating thereto as may be required by the Commissioner.
(1A) Where a person disposes of an equity share in a company that constitutes a pre-valuation date asset and acquires another equity share in that company in terms of a substitutive share-for-share transaction, for the purposes of determining the date of acquisition of that equity share and the expenditure in respect of the cost of acquisition of that equity share, that person must be treated as having-
(a) disposed of that equity share at the time immediately before that substitutive share-for-share transaction, for an amount equal to the market value of that equity share at that time; and
(b) immediately reacquired that equity share at that time at an expenditure equal to that market value-
(i) less any capital gain, and
(ii) increased by any capital loss,
that would have been determined had that equity share been disposed of at market value at that time, which expenditure must be treated as an amount of expenditure actually incurred at that time for the purposes of paragraph 20(1)(a) of the Eighth Schedule.
[Subsection (1A) added by section 92 of Act 31 of 2013 effective on 24 October 2013 – comes into operation in terms of section 92 of Act 31 of 2013 as substituted by section 124 of Act 43 of 2014]
(2) Subject to subsection (4), where a person disposes of an equity share in a company and acquires another equity share in that company in terms of a substitutive share-for-share transaction, that person must be deemed to have-
(a) disposed of that equity share so disposed of for an amount equal to the expenditure incurred by that person in respect of that equity share so disposed of which is or was allowable in terms of paragraph 20 of the Eighth Schedule or taken into account in terms of section 11(a) or 22(1) or (2), as the case may be;
(b) acquired that other equity share so acquired on the latest date on which that person acquired any share comprising the equity share so disposed of for a cost equal to the expenditure incurred by that person as contemplated in paragraph (a); and
(c) incurred the cost contemplated in paragraph (b) on the date contemplated in that paragraph, which cost must-
(i) if the equity share so acquired is acquired as a capital asset, be treated for the purposes of paragraph 20 of the Eighth Schedule as an expenditure actually incurred by that person in respect of the equity share so acquired; or
(ii) if the equity share so acquired is acquired as trading stock, be treated for the purposes of section 11(a) or 22(1) or (2) as the amount to be taken into account by that person in respect of the equity share so acquired.
[Subsection (2) amended by section 92(1)(i) of Act 31 of 2013 effective on 1 April 2013, substituted by section 92(1)(j) of Act 31 of 2013 effective on 24 October 2013 – comes into operation in terms of section 92 of Act 31 of 2013, substituted by section 124 of Act 43 of 2014)]
(3) ……….
[Subsection (3) deleted by section 90 of Act 31 of 2013 effective on 24 October 2013 – comes into operation in terms of section 92 of Act 31 of 2013, substituted by section 124 of Act 43 of 2014]
(4)
(a) This subsection applies where-
(i) a person disposes of an equity share in a company in terms of a substitutive share-for-share transaction; and
(ii) that person becomes entitled, in exchange for that equity share, to any consideration other than a dividend, foreign dividend or another equity share that is acquired by that person in terms of that substitutive share-for-share transaction.
(b) Where a person disposes of an equity share in terms of a substitutive share-for-share transaction and becomes entitled to consideration other than another equity share as contemplated in paragraph (a)(ii)-
(i) subsection (2) must not apply to the part of the equity share so disposed of that relates to that consideration; and
[Subparagraph (i) substituted by section 56 of Act 43 of 2014 effective on 20 January 2015]
(ii) either-
(aa) where that equity share is so disposed of as a capital asset, the base cost at the time of that disposal of the part of the equity share contemplated in subparagraph (i) must be deemed to be equal to an amount which bears to the base cost of the equity share so disposed of the same ratio as the market value of that consideration bears to the sum of the market value of that consideration and the market value of the equity share acquired by that person in terms of that substitutive share-for-share transaction; or
(bb) where that interest is so disposed of as trading stock, the amount to be taken into account in terms of section 11 (a) or 22(1) or (2) in respect of the part of the equity share contemplated in subparagraph (i) must be deemed to be equal to an amount which bears to the total amount taken into account in terms of section 11(a) or 22(1) or (2) in respect of the equity share so disposed of the same ratio as the market value of that consideration bears to the sum of the market value of that consideration and the market value of the equity share acquired by that person in terms of that substitutive share-for-share transaction.
[Subsectiom (4) substituted by section 92 of Act 31 of 2013 effective on 24 October 2013 – comes into operation in terms of section 92 of Act 31 of 2013, substituted by section 124 of Act 43 of 2014]
(4A) If an equity share is issued in terms of a substitutive share-for-share transaction, the issue price of the linked unit disposed of in terms of that transaction is deemed to be contributed tax capital in respect of the class to which the equity share so acquired relates.
[Subsection (4A) inserted by section 92 of Act 31 of 2013 effective on 24 October 2013 – comes into operation in terms of section 92 of Act 31 of 2013 as substituted by section 124 of Act 43 of 2014]
46A. Limitation of expenditure incurred in respect of shares held in an unbundling company
(1) Notwithstanding any other provision of this Act, if a taxpayer acquires a share in an unbundled company from an unbundling company in terms of an unbundling transaction defined in section 46 and a share in that unbundling company was within a period of two years preceding the acquisition held by a person who was a connected person in relation to the taxpayer at any time during that period, and any amount received by or accrued to that person in respect of the disposal of the share at any time during that period would not have been subject to normal tax or would not have been taken into account for purposes of determining the net income, as defined in section 9D, of that person, the expenditure incurred by the taxpayer in respect of any share held in that company as a result of that unbundling transaction shall not for purposes of this Act exceed an amount determined in accordance with subsection (2).
[Subsection (1) substituted by section 28(1) of Act 20 of 2021 effective on 1 January, 2022 and applicable in respect of the allocation of expenditure to unbundled shares acquired on or after that date]
(2) The amount to be determined for purposes of subsection (1) is the sum of-
(a) the cost of the equity share to the connected person contemplated in subsection (1) that first held that share less the sum of all deductions that have been allowed in respect of the share to any connected person that held that share during that period;
(b) any amount contemplated in paragraph (n) of the definition of ‘gross income’ in section 1 that is required to be included in the income of any connected person that held that share during that period that arises as a result of the disposal of the share by any such person; and
(c) any capital gain of any connected person that held that share during that period that arises as a result of the disposal of the share by any such person.
PART IV
Turnover tax payable by micro businesses
‘substitutive share-for-share transaction’ means a transaction between a person and a company in terms of which that person disposes of an equity share in the form of a linked unit in that company and acquires an equity share other than a linked unit in that company.
[Definition of ‘substitutive share-for-share transaction’ substituted by section 92 of Act 31 of 2013 effective on 24 October 2013 – comes into operation in terms of section 92 of Act 31 of 2013 as substituted by section 124 of Act 43 of 2014]
(2) Where a liquidating company disposes of-
(a) a capital asset in terms of a liquidation distribution to its holding company which acquires it as a capital asset-
(i) that liquidating company must be deemed to have disposed of that asset for an amount equal to the base cost of that asset on the date of the disposal thereof; and
(ii) that liquidating company and that holding company must, for purposes of determining any capital gain or capital loss in respect of a disposal of that asset by that holding company, be deemed to be one and the same person with respect to-
(aa) the date of acquisition of that asset by that liquidating company and the amount and date of incurral by that liquidating company of any expenditure in respect of that asset allowable in terms of paragraph 20 of the Eighth Schedule; and
(bb) any valuation of that asset effected by that liquidating company as contemplated in paragraph 29(4) of the Eighth Schedule; or
(b) an asset held by it as trading stock in terms of a liquidation distribution to its holding company which acquires it as trading stock-
(i) that liquidating company must be deemed to have disposed of that asset for an amount equal to the amount taken into account by that liquidating company in respect of that asset in terms of section 11(a) or 22(1) or (2), and
(ii) that liquidating company and that holding company must, for purposes of determining any taxable income derived by that holding company from a trade carried on by it, be deemed to be one and the same person with respect to the date of acquisition of that asset by that liquidating company and the amount and date of incurral by that liquidating company of any cost or expenditure incurred in respect of that asset as contemplated in section 11(a) or 22(1) or (2).
: Provided that in the case of a liquidation distribution contemplated in paragraph (b) of the definition of ‘liquidation distribution’, this subsection does not apply to any asset disposed of in terms of that liquidation distribution to a holding company which is a resident and which forms part of the same group of companies (as defined in section 1) as the liquidating company if that asset constitutes-
(a) a capital asset acquired by the holding company as a capital asset and the base cost of that asset exceeds the market value of that asset at the time of that disposal; or
(b) trading stock acquired by the holding company as trading stock and the amount taken into account in respect of that asset in terms of section 11(a) or 22(1) or (2) exceeds the market value of that asset at the time of that disposal.
(3) Where a liquidating company disposes of-
(a) an asset that constitutes an allowance asset for that liquidating company to its holding company in terms of a liquidation distribution and that holding company acquires that asset as an allowance asset or that holding company is a REIT or a controlled company, as defined in section 25BB(1), that acquires that asset as a capital asset or allowance asset-
[Words preceding subparagraph (i) substituted by section 58 of Act 23 of 2018 effective on 18 December 2017]
(i) no allowance allowed to that liquidating company in respect of that asset must be recovered or recouped by that liquidating company or included in that liquidating company’s income for the year of that transfer; and
(ii) that liquidating company and that holding company must be deemed to be one and the same person for purposes of determining the amount of any allowance or deduction –
(aa) to which that holding company may be entitled in respect of that asset; or
(bb) that is to be recovered or recouped by or included in the income of that holding company in respect of that asset; or
[Item (bb) substituted by section 55 of Act 17 of 2017 and section 58 of Act 23 of 2018 effective on 18 December 2017]
(b) a contract to its holding company as part of a disposal of a business as a going concern in terms of a liquidation distribution and an allowance in terms of section 24 or 24C was allowable to that liquidating company in respect of that contract for the year preceding that in which that contract is transferred or would have been allowable to that liquidating company for the year of that transfer had that contract not been so transferred-
(i) no allowance allowed to that liquidating company under those sections must be included in that liquidating company’s income for the year of that transfer; and
(ii) that liquidating company and that holding company must be deemed to be one and the same person for purposes of determining the amount of any allowance-
(aa) to which that holding company may be entitled under those sections; or
(bb) that is to be included in the income of that holding company under those sections.
[Paragraph (b) substituted by section 66 of Act 25 of 2015 effective on 8 January 2016]
(3A) The provisions of subsections (2) and (3) apply to a disposal of an asset by a liquidating company to its holding company in terms of a liquidation distribution only to the extent that –
(a) equity shares held by that holding company in that liquidating company are disposed of as a result of the liquidation, winding up or deregistration of that liquidating company; and
(b) that holding company has not assumed any debt of that liquidating company which was incurred by that liquidating company within a period of 18 months before that disposal, unless that debt –
(i) constitutes the refinancing of any debt incurred in more than 18 months before that disposal; or
(ii) is attributable to and arose in the normal course of a business undertaking disposed of, as a going concern, to that holding company as pan of that liquidation distribution.
(4) Where the holding company acquires any asset from the liquidating company in terms of a liquidation distribution and that holding company disposes of that asset within a period of 18 months after so acquiring that asset and-
(a) that asset, other than an asset contemplated in section 25BB(5) constitutes a capital asset for that holding company-
(i) so much of any capital gain determined in respect of the disposal of that asset as does not exceed the amount that would have been determined had that asset been disposed of at the beginning of that period of 18 months for proceeds equal to the market value of that asset as at that date, may not be taken into account in determining any net capital gain or assessed capital loss of that holding company but is subject to paragraph 10 of the Eighth Schedule for purpose of determining an amount of taxable capital gain derived from that gain, which taxable capital gain may not be set off against any assessed loss or balance of assessed loss of that holding company; or
(ii) so much of any capital loss determined in respect of the disposal of that asset as does not exceed the amount that would have been determined had that asset been disposed of at the beginning of that period of 18 months for proceeds equal to the market value of that asset as at that date must be disregarded in determining the aggregate capital gain or aggregate capital loss of that holding company for purposes of the Eighth Schedule: Provided that the amount of any capital loss so disregarded may be deducted from the amount of any capital gain determined in respect of the disposal during that year or any subsequent year of assessment of any other asset acquired by that holding company from the liquidating company in terms of that liquidation distribution; or
[Paragraph (a) amended by section 43 of Act 34 of 2019 and by section 29 of Act 20 of 2021]
(b) that asset constitutes-
(i) trading stock in the hands of that holding company, so much of the amount received or accrued in respect of the disposal of that trading stock as does not exceed the market value of that trading stock as at the beginning of that period of 18 months and so much of the amount taken into account in respect of that trading stock in terms of section 11(a) or 22(1) or (2) as is equal to the amount so taken into account in terms of subsection (2)(b); or
: Provided that this subparagraph does not apply to any asset that constitutes trading stock that is regularly and continuously disposed of by that holding company
(ii) an allowance asset in the hands of that holding company, so much of any allowance in respect of that asset that is recovered or recouped by or included in the income of that holding company, other than a holding company that is a REIT or a controlled company, as defined in section 25BB(1), as a result of that disposal as does not exceed the amount that would have been recovered had that asset been disposed of at the beginning of that period of 18 months for an amount equal to the market value of that asset as at that date,
[Subparagraph (ii) substituted by section 55 of Act 17 of 2017 effective on 18 December 2017]
must be deemed to be attributable to a separate trade carried on by that holding company, the taxable income or assessed loss from which trade may not be set off against or added to any assessed loss or balance of assessed loss of that holding company.
(5) Where-
(a) a holding company disposes of any equity share in a liquidating company as a result of the liquidation, winding up or deregistration of that liquidating company; or
(b) in anticipation of or in the course of the liquidation, winding up or deregistration of a liquidating company, a return of capital by way of a distribution of cash or an asset in specie by that company is received by or accrues to a holding company,
the holding company must disregard that disposal or return of capital for purposes of determining its taxable income, assessed loss, aggregate capital gain or aggregate capital loss.
(6) The provisions of this section do not apply where –
(a) the holding company is-
(i) a public benefit organisation as defined in section 30 that has been approved by the Commissioner in terms of that section;
(ii) a recreational club as defined in section 30A that has been approved by the Commissioner in terms of that section; or
(iii) a person contemplated in section 10(1)(cA), (cP), (d), (e) or (t);
(b) the holding company and the liquidating company agree in writing that this section does not apply; or
(c) the liquidating company-
(i) has not, within a period of 36 months after the date of the liquidation distribution, or such further period as the Commissioner may allow, taken the steps contemplated in section 41(4) to liquidate, wind up or deregister; or
(ii) has at any stage withdrawn any step taken to liquidate, wind up or deregister that company, as contemplated in paragraph (i), or does anything to invalidate any step so taken, with the result that the company will not be liquidated, wound up or deregistered:
Provided that any tax which becomes payable as a result of the application of this paragraph shall be recoverable from the holding company or, where the holding company is a controlled foreign company, from any resident who directly or indirectly holds any participation rights in that controlled foreign company as contemplated in section 9D(2).
48. Definitions
For purposes of this Part, unless the context otherwise indicates, any word or expression that has been defined in section 1 shall bear the meaning so defined and any word or expression that has been defined in the Sixth Schedule shall bear the meaning so defined.