(2)     Subject to subsection (7), where an unbundling company distributes shares in terms of an unbundling transaction, that unbundling company must disregard that distribution for purposes of determining its taxable income or assessed loss, or its net income as contemplated in section 9D.

[Subsection (2) substituted by section 54(1)(b) of Act 45 of 2003, by section 42(1)(d) of Act 31 of 2005 and by section 29(1) of Act 3 of 2008 and by section 34(1)(a) of Act 23 of 2020 deemed effective on 28 October, 2020 and applicable to unbundling transactions entered into on or after that date]

(3)

(a)     If a shareholder acquires equity shares (hereinafter referred to as ‘unbundled shares’) in terms of an unbundling transaction –

(i)      that shareholder must –

(aa)   allocate a portion of the expenditure and any market value attributable to the equity shares held in the unbundling company (hereinafter referred to as the ‘unbundling shares’) to the unbundled shares in accordance with subparagraph (v); and

(bb)   reduce the expenditure and market value attributable to the unbundling shares by the amount so allocated to the unbundled shares;

(ii)     the unbundled shares must, other than for purposes of determining whether a share has been held for at least three years for the purposes of section 9C(2), be deemed to have been acquired on the same date as the unbundling shares;

[Subparagraph (ii) substituted by section 57 of Act 35 of 2007 and section 54 of Act 17 of 2017 effective on 1 January 2016]

(iii)    the unbundled shares must be deemed to have been acquired as –

(aa)    trading stock, if the unbundling shares were held as trading stock;

(bb)   capital assets, if the unbundling shares were held as capital assets;

(iv)    any expenditure allocated to the unbundled shares must be deemed to have been incurred on the date on which the expenditure was incurred in respect of the unbundling shares; and

(v)     the proportionate amount of the expenditure and market value to be allocated to the unbundled shares in terms of subparagraph (i)(aa) must be determined in accordance with the ratio that the market value of the unbundled shares, as at the end of the day after that distribution, bears to the sum of the market value, as at the end of that day, of the unbundling shares and of the unbundled shares: Provided that a shareholder that acquires unbundled shares in terms of an unbundling transaction shall, in addition to any expenditure allocated to unbundled shares in accordance with this subparagraph, be treated as having incurred an amount equal to any amount of tax payable by the unbundling company arising in respect of all equity shares to which this section does not apply as contemplated in subsection (7) the same ratio as the number of equity shares held by that shareholder in that unbundled company bears to the number of all the issued equity shares in that unbundled company immediately after that unbundling transaction.

[Subparagraph (v) amended by section 37(1)(b) of Act 17 of 2023 with effect from 1 January, 2024 and applicable in respect of the allocation of expenditure to unbundled shares acquired on or after that date]

(3A)  If shares are distributed in terms of an unbundling transaction, the contributed tax capital of-

(a)     the unbundling company immediately after the distribution is deemed to be an amount which bears to the contributed tax capital of that company immediately before distribution the same ratio as the aggregate market value, immediately after the distribution, of the shares in that company bears to the aggregate market value of the shares immediately before distribution; and

(b)     the unbundled company immediately after the distribution is deemed to be an amount equal to the sum of-

(i)      an amount which bears to the contributed tax capital of the unbundling company immediately before the distribution the same ratio as the aggregate market value of the distributed shares before the distribution bears to the aggregate market value of the shares in the unbundling company immediately before the distribution; and

(ii)     an amount which bears to the contributed tax capital of the unbundled company immediately before the distribution the same ratio as the shares held in that company immediately before the distribution by persons other than the unbundling company bear to all shares held in that company immediately before the distribution.

(4)     Where those shares are distributed by an unbundling company to a shareholder in terms of an unbundling transaction and that shareholder held the unbundling shares as a result of the exercise, by that shareholder, of a right contemplated in section 8A, a portion of any gain made by that shareholder in the exercise of that right to acquire those unbundling shares must be included in the income of that shareholder –

(a)     in the year of assessment during which that shareholder becomes entitled to dispose of those shares, which portion shall be an amount which bears to such gain the same ratio as that contemplated in subsection (3)(a); and

(b)     in the year of assessment during which that person becomes entitled to dispose of unbundling shares, which portion shall be calculated by reducing such gain by the amount which has been determined or is to be determined in terms of paragraph (a).

(5)     Subject to subsection (7), where shares are distributed by an unbundling company to a shareholder in terms of an unbundling transaction, the distribution by that unbundling company of the shares must be disregarded in determining any liability for dividends tax.

[Subsection (5) substituted by section 54(1)(g) of Act 45 of 2003, by section 42(1)(g) of Act 31 of 2005, by section 71(1)(c) of Act 24 of 2011, by section 78(1)(b) of Act 22 of 2012 and by section 34(1)(b) of Act 23 of 2020 deemed effective on 28 October, 2020 and applicable to unbundling transactions entered into on or after that date]

(5A)   Where shares are distributed by an unbundling company to a shareholder in terms of an unbundling transaction, paragraph 76B of the Eighth Schedule does not apply to that distribution.

(6)     ……….

(6A)   This section does not apply in respect of an unbundling transaction where the unbundling company is a REIT or a controlled company as defined in section 25BB(1).

[Subsection (6A) added by section 58 of Act 43 of 2014, substituted by section 65 of Act 25 of 2015 effective on 8 January 2016]

(7)

(a)     In the case of an unbundling transaction contemplated in subsection (1)(a), this section does not apply in respect of any equity share that is distributed by an unbundling company to any shareholder that-

(i)      is a disqualified person; and

(ii)     holds at least 5 per cent of the equity shares in the unbundling company immediately before that unbundling transaction.

[Paragraph (a) substituted by section 95(1)(h) of Act 31 of 2013 and by section 34(1)(c) of Act 23 of 2020 deemed effective on 28 October, 2020 and applicable to unbundling transactions entered into on or after that date]

(b)     For the purposes of paragraph (a), a ‘disqualified person’ means-

(i)      a person that is not a resident;

(ii)     the government of the Republic in the national, provincial or local sphere, contemplated in section 10(1)(a);

(iii)    a public benefit organisation as defined in section 30 that has been approved by the Commissioner in terms of that section;

(iv)    a recreational club as defined in section 30A that has been approved by the Commissioner in terms of that section;

(v)     a company or trust contemplated in section 37A;

(vi)    a fund contemplated in section 10(1)(d)(i) or (ii); or

(vii)   a person contemplated in section 10(1)(cA) or (t).

(8)     Where an unlisted unbundling company disposes of shares in an unlisted unbundled company in terms of an unbundling transaction to a shareholder and that unbundled company is a controlled group company in relation to that shareholder immediately before and after that disposal, the provisions of this section will not apply to that disposal if that shareholder and that unbundling company agree in writing that this section does not apply to that disposal.