Category: Paragraph 72 (Eighth Schedule) – Attribution of capital gain vesting in non-resident

Paragraph 72

 

  1. Subparagraph (a) substituted by section 112 of Act 45 of 2003.

 

  1. Subparagraph (b) substituted by section 94 of Act 74 of 2002 and section 80 of Act 31 of 2005.

Paragraph 72 (Eighth Schedule) – Attribution of capital gain and other amounts vesting in person that is not a resident

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72. Attribution of capital gain and other amounts vesting in person that is not a resident

(1)       This paragraph applies where-

(a)     a resident has made a donation, settlement or other disposition to any person (other than an entity which is not resident and which is similar to a public benefit organisation contemplated in section 30);

(b)     a capital gain (including any amount that would have constituted a capital gain had that person been a resident) attributable to that donation, settlement or other disposition has arisen during a year of assessment; and

(c)     an amount consisting of or derived, directly or indirectly, from-

(i)      that capital gain; or

(ii)     the amount that would have constituted a capital gain,

has during that year vested in or is treated as having vested in any person who is not a resident (other than a controlled foreign company, in relation to that resident).

(2)     In determining, for purposes of subparagraph (1), whether an amount would have constituted a capital gain had a person been a resident, the provisions of paragraph 64B(1) and (4) must be disregarded in respect of an amount derived by that person, directly or indirectly, from the disposal of an equity share in a foreign company if-

(a)     more than 50 per cent of the total participation rights, as defined in section 9D(1), or of the voting rights in that company are directly or indirectly held or are exercisable, as the case may be, by that person whether alone or together with any one or more persons that are connected persons in relation to that person; and

(b)     the resident who made the donation, settlement or other disposition or any person that is a connected person in relation to that resident is a connected person in relation to the person who is not a resident; and

(c)     to the extent to which that amount is not included in the income of or attributed as a capital gain to-

(i)      the resident who made that donation, settlement or other disposition; or

(ii)     a resident who is a connected person in relation to the resident referred to in subitem (i).

(3)     An amount that is equal to so much of the amount described in item (c) of subparagraph (1) that has vested in or is treated as having vested in the person who is not a resident as consists of or is derived, directly or indirectly, from-

(a)     the capital gain must be disregarded when determining the aggregate capital gain or aggregate capital loss of that person; and

(b)     the capital gain or the amount that would have constituted a capital gain must be taken into account as a capital gain when determining the aggregate capital gain or aggregate capital loss of the resident who made the donation, settlement or other disposition described in subparagraph (1).

[Paragraph 72 amended by section 94 of Act 74 of 2002, section 112 of Act 45 of 2003 and section 80 of Act 31 of 2005 and substituted by section 86 of Act 23 of 2018 effective on 1 March 2019, applies in respect of amounts vesting on or after that date]