‘tax benefit’ means the avoidance, postponement, reduction or evasion of a liability for tax.
Category: Part B – Reportable Arrangements (TAA)
Section 35 (TAA) – Reportable arrangements
35. Reportable arrangements
(1) An “arrangement” is a reportable arrangement if a person is a “participant” in the “arrangement” and the “arrangement”–
(a) contains provisions in terms of which the calculation of interest as defined in section 24J of the Income Tax Act, finance costs, fees or any other charges is wholly or partly dependent on the assumptions relating to the tax treatment of that ‘arrangement’ (otherwise than by reason of any change in the provisions of a tax Act);
(b) has any of the characteristics contemplated in section 80C(2)(b) of the Income Tax Act, or substantially similar characteristics;
(c) gives rise to an amount that is or will be disclosed by any ‘participant’ in any year of assessment or over the term of the ‘arrangement’ as-
(i) a deduction for purposes of the Income Tax Act but not as an expense for purposes of ‘financial reporting standards’; or
(ii) revenue for purposes of ‘financial reporting standards’ but not as gross income for purposes of the Income Tax Act;
(d) does not result in a reasonable expectation of a ‘pre-tax profit’ for any ‘participant’; or
(e) results in a reasonable expectation of a ‘pre-tax profit’ for any ‘participant’ that is less than the value of that ‘tax benefit’ to that ‘participant’ if both are discounted to a present value at the end of the first year of assessment when that ‘tax benefit’ is or will be derived or is assumed to be derived, using consistent assumptions and a reasonable discount rate for that ‘participant’.
(2) An “arrangement” is a “reportable arrangement” if the Commissioner has listed the “arrangement” in a public notice.
Section 36 (TAA) – Excluded arrangements
36. Excluded arrangements
(1) An ‘arrangement’ is an excluded ‘arrangement’ if it is-
(a) a debt in terms of which-
(i) the borrower receives or will receive an amount of cash and agrees to repay at least the same amount of cash to the lender at a determinable future date; or
(ii) the borrower receives or will receive a fungible asset and agrees to return an asset of the same kind and of the same or equivalent quantity and quality to the lender at a determinable future date;
(b) a lease;
(c) a transaction undertaken through an exchange regulated in terms of the Financial Markets Act, 2012 (Act 19 of 2012); or
[Paragraph (c) substituted by section 40 of Act 23 of 2015]
(d) a transaction in participatory interests in a scheme regulated in terms of the Collective Investment Schemes Control Act, 2002 (Act No. 45 of 2002).
(2) Subsection (1) applies only to an ‘arrangement’ that-
(a) is undertaken on a stand-alone basis and is not directly or indirectly connected to any other ‘arrangement’ (whether entered into between the same or different parties); or
(b) would have qualified as having been undertaken on a stand-alone basis as required by paragraph (a), were it not for a connected ‘arrangement’ that is entered into for the sole purpose of providing security and if no ‘tax benefit’ is obtained or enhanced by virtue of the security ‘arrangement’.
(3) Subsection (1) does not apply to an ‘arrangement’ that is entered into-
(a) with the main purpose or one of its main purposes of obtaining or enhancing a ‘tax benefit’; or
(b) in a specific manner or form that enhances or will enhance a ‘tax benefit’.
(4) The Commissioner may determine an “arrangement” to be an excluded “arrangement” by public notice.
Section 37 (TAA) – Disclosure obligation
37. Disclosure obligation
(1) The information referred to in section 38 in respect of a “reportable arrangement” must be disclosed by a person who-
(a) is a “participant” in an “arrangement” on the date on which it qualifies as a “reportable arrangement”, within 45 business days after that date; or
(b) becomes a “participant” in an “arrangement” after the date on which it qualifies as a “reportable arrangement”, within 45 business days after becoming a “participant”.
(2) ……….
(3) A “participant” need not disclose the information if the “participant” obtains a written statement from any other “participant” that the other “participant” has disclosed the “reportable arrangement”.
(4) ……….
(5) SARS may grant extension for disclosure for a further 45 business days, if reasonable grounds exist for the extension.
Section 38 (TAA) – Information to be submitted
38. Information to be submitted
The following information in relation to a “reportable arrangement”, must be submitted in the prescribed form and manner and by the date specified:
(a) a detailed description of all its steps and key features, including, in the case of an ‘arrangement’ that is a step or part of a larger ‘arrangement’, all the steps and key features of the larger ‘arrangement’;
(b) a detailed description of the assumed ‘tax benefits’ for all ‘participants’, including, but not limited to, tax deductions and deferred income;
(c) the names, registration numbers, and registered addresses of all ‘participants’;
(d) a list of all its agreements; and
(e) any financial model that embodies its projected tax treatment.