80L. Definitions
Category: PART IIA – Tax avoidance (ITA)
“Arrangement” definition of section 80L of ITA
For purposes of this Part –
‘arrangement’ means any transaction, operation, scheme, agreement or understanding (whether enforceable or not), including all steps therein or parts thereof, and includes any of the foregoing involving the alienation of property;
PART IIA – Tax Avoidance (ITA)
Part IIA
Tax Avoidance
“Avoidance arrangement” definition of section 80L of ITA
‘avoidance arrangement’ means any arrangement that, but for this Part, results in a tax benefit;
Section 80A (ITA) – Impermissible tax avoidance arrangements
80A. Impermissible tax avoidance arrangements
An avoidance arrangement is an impermissible avoidance arrangement if its sole or main purpose was to obtain a tax benefit and –
(a) in the context of business –
(i) it was entered into or carried out by means or in a manner which would not normally be employed for bona fide business purposes, other than obtaining a tax benefit; or
(ii) it lacks commercial substance, in whole or in part, taking into account the provisions of section 80C;
(b) in a context other than business, it was entered into or carried out by means or in a manner which would not normally be employed for a bona fide purpose, other than obtaining a tax benefit; or
(c) in any context –
(i) it has created rights or obligations that would not normally be created between persons dealing at arm’s length; or
(ii) it would result directly or indirectly in the misuse or abuse of the provisions of this Act (including the provisions of this Part).
“Impermissible avoidance arrangement” definition of section 80L of ITA
‘impermissible avoidance arrangement’ means any avoidance arrangement described in section 80A;
Section 80B (ITA) – Tax consequences of impermissible tax avoidance
80B. Tax consequences of impermissible tax avoidance
(1) The Commissioner may determine the tax consequences under this Act of any impermissible avoidance arrangement for any party by –
(a) disregarding, combining, or re-characterising any steps in or parts of the impermissible avoidance arrangement;
(b) disregarding any accommodating or tax-indifferent party or treating any accommodating or tax-indifferent party and any other party as one and the same person;
(c) deeming persons who are connected persons in relation to each other to be one and the same person for purposes of determining the tax treatment of any amount;
(d) reallocating any gross income, receipt or accrual of a capital nature, expenditure or rebate amongst the parties;
(e) re-characterising any gross income, receipt or accrual of a capital nature or expenditure; or
(f) treating the impermissible avoidance arrangement as if it had not been entered into or carried out, or in such other manner as in the circumstances of the case the Commissioner deems appropriate for the prevention or diminution of the relevant tax benefit.
(2) Subject to the time limits imposed by sections 99, 100 and 104(5)(b) of the Tax Administration Act, the Commissioner must make compensating adjustments that he or she is satisfied are necessary and appropriate to ensure the consistent treatment of all parties to the impermissible avoidance arrangement.
“Party” definition of section 80L of ITA
‘party’ means any –
(a) person;
(b) permanent establishment in the Republic of a person who is not a resident;
(c) permanent establishment outside the Republic of a person who is a resident;
(d) partnership; or
(e) joint venture,
who participates or takes part in an arrangement;
Section 80C (ITA) – Lack of commercial substance
80C. Lack of commercial substance
(1) For purposes of this Part, an avoidance arrangement lacks commercial substance if it would result in a significant tax benefit for a party (but for the provisions of this Part) but does not have a significant effect upon either the business risks or net cash flows of that party apart from any effect attributable to the tax benefit that would be obtained but for the provisions of this Part,
(2) For purposes of this Part, characteristics of an avoidance arrangement that are indicative of a lack of commercial substance include but are not limited to –
(a) the legal substance or effect of the avoidance arrangement as a whole is inconsistent with, or differs significantly from, the legal form of its individual steps; or
(b) the inclusion or presence of –
(i) round trip financing as described in section 80D; or
(ii) an accommodating or tax indifferent party as described in section 80E; or
(iii) elements that have the effect of offsetting or cancelling each other.
“Tax” definition of section 80L of ITA
‘tax’ includes any tax, levy or duty imposed by this Act or any other Act administered by the Commissioner;