Category: PART IIA – Tax avoidance (ITA)

Section 80D (ITA) – Round trip financing

Posted on by admin_kmos

80D.    Round trip financing

 

(1)     Round trip financing includes any avoidance arrangement in which –

 

(a)     funds are transferred between or among the parties (round tripped amounts); and

 

(b)     the transfer of the funds would –

 

(i)      result, directly or indirectly, in a tax benefit but for the provisions of this Part; and

 

(ii)     significantly reduce, offset or eliminate any business risk incurred by any party in connection with the avoidance arrangement.

 

(2)     This section applies to any round tripped amounts without regard to –

 

(a)     whether or not the round tripped amounts can be traced to funds transferred to or received by any party in connection with the avoidance arrangement;

 

(b)     the timing or sequence in which round tripped amounts are transferred or received; or

 

(c)     the means by or manner in which round tripped amounts are transferred or received,

 

(3)     For the purposes of this section, the term ‘funds’ includes any cash, cash equivalents or any right or obligation to receive or pay the same.

“Accommodating or tax-indifferent party” definition of section 80E of ITA

Posted on by admin_kmos

(1)     A party to an avoidance arrangement is an accommodating or tax-indifferent party if –

 

(a)     any amount derived by the party in connection with the avoidance arrangement is either –

 

(i)      not subject to normal tax; or

 

(ii)     significantly offset either by any expenditure or loss incurred by the party in connection with that avoidance arrangement or any assessed loss of that party; and

 

(b)     either –

 

(i)      as a direct or indirect result of the participation of that party an amount that would have –

 

(aa)   been included in the gross income (including the recoupment of any amount) or receipts or accruals of a capital nature of another party would be included in the gross income or receipts or accruals of a capital nature of that party; or

 

(bb)   constituted a non-deductible expenditure or loss in the hands of another party would be treated as a deductible expenditure by that other party; or

 

(cc)    constituted revenue in the hands of another party would be treated as capital by that other party; or

 

(dd)   given rise to taxable income to another party would either not be included in gross income or be exempt from normal tax; or

 

(ii)     the participation of that party directly or indirectly involves a prepayment by any other party,

Section 80F (ITA) – Treatment of connected persons and accommodating or tax-indifferent parties

Posted on by admin_kmos

80F.     Treatment of connected persons and accommodating or tax-indifferent parties

 

For the purposes of applying section 80C or determining whether or not a tax benefit exists for purposes of this Part, the Commissioner may –

 

(a)     treat parties who are connected persons in relation to each other as one and the same person; or

 

(b)     disregard any accommodating or tax-indifferent party or treat any accommodating or tax-indifferent party and any other party as one and the same person.

Section 80G (ITA) – Presumption of purpose

Posted on by admin_kmos

80G.    Presumption of purpose

 

(1)     An avoidance arrangement is presumed to have been entered into or carried out for the sole or main purpose of obtaining a tax benefit unless and until the party obtaining a tax benefit proves that, reasonably considered in light of the relevant facts and circumstances, obtaining a tax benefit was not the sole or main purpose of the avoidance arrangement.

 

(2)     The purpose of a step in or part of an avoidance arrangement may be different from a purpose attributable to the avoidance arrangement as a whole.

Section 80J (ITA) – Notice

Posted on by admin_kmos

80J.     Notice

 

(1)     The Commissioner must, prior to determining any liability of a party for tax under section 80B, give the party notice that he or she believes that the provisions of this Part may apply in respect of an arrangement and must set out in the notice his or her reasons therefor.

 

(2)     A party who receives notice in terms of subsection (1) may, within 60 days after the date of that notice or such longer period as the Commissioner may allow, submit reasons to the Commissioner why the provisions of this Part should not be applied.

 

(3)     The Commissioner must within 180 days of receipt of the reasons or the expiry of the period contemplated in subsection (2) –

 

(a)     request additional information in order to determine whether or not this Part applies in respect of an arrangement;

 

(b)     give notice to the party that the notice in terms of subsection (1) has been withdrawn; or

 

(c)     determine the liability of that party for tax in terms of this Part.

 

(4)     If at any stage after giving notice to the party in terms of subsection (1), additional information comes to the knowledge of the Commissioner, he or she may revise or modify his or her reasons for applying this Part or, if the notice has been withdrawn, give notice in terms of subsection (1).

Subsections 2, 3 and 4 of section 80E of ITA

Posted on by admin_kmos

(2)     A person may be an accommodating or tax-indifferent party whether or not that person is a connected person in relation to any party,

 

(3)     The provisions of this section do not apply if either –

 

(a)     the amounts derived by the party in question are cumulatively subject to income tax by one or more spheres of government of countries other than the Republic which is equal to at least two-thirds of the amount of normal tax which would have been payable in connection with those amounts had they been subject to tax under this Act; or

 

(b)     the party in question continues to engage directly in substantive active trading activities in connection with the avoidance arrangement for a period of at least 18 months: Provided these activities must be attributable to a place of business, place, site, agricultural land, vessel, vehicle, rolling stock or aircraft that would constitute a foreign business establishment as defined in section 9D(1) if it were located outside the Republic and the party in question were a controlled foreign company.

 

(4)     For the purposes of subsection (3)(a), the amount of tax imposed by another country must be determined after taking into account any applicable agreements for the prevention of double taxation and any assessed loss, credit or rebate to which the party in question may be entitled or any other right of recovery to which that party or any connected person in relation to that party may be entitled.