Category: Section 24BA (ITA) – Transactions where assets are acquired as consideration for shares issued

Section 24BA

 

  1. Words preceding paragraph (3)(a) substituted by section 66 of Act 31 of 2013 effective on 1 January 2014.

 

  1. Subsection (4) substituted by section 66 of Act 31 of 2013 effective on 1 January 2013.

 

  1. Section 24BA inserted by section 52 of Act 22 of 2012 effective on 1 January 2013.

Section 24BA (ITA) – Transactions where assets are acquired as consideration for shares issued

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24BA.  Transactions where assets are acquired as consideration for shares issued

(1)     For the purposes of this section, ‘asset’ means an asset as defined in paragraph 1 of the Eighth Schedule or a number of such assets.

(2)     Subject to subsection (4), this section applies where-

(a)     in terms of any transaction, a company, for consideration, acquires an asset from a person in exchange for the issue by that company to that person of shares in that company; and

(b)     the consideration contemplated in paragraph (a) is (before taking into account any other transaction, operation, scheme, agreement or understanding that directly or indirectly affects that consideration) different from the consideration that would have applied had that asset been acquired in exchange for the issue of those shares in terms of a transaction between independent persons dealing at arm’s length.

(3)     Notwithstanding paragraph 11(2)(b) of the Eighth Schedule, where a company acquires an asset from a person in exchange for the issue by that company to that person of shares in that company as contemplated in subsection (2) and the market value of-

(a)     that asset immediately before that disposal exceeds the market value of the shares immediately after that issue, the amount of the excess must-

(i)      be deemed to be a capital gain in respect of a disposal by that company of the shares; and

(ii)     where those shares are acquired by that person as-

(aa)   a capital asset, be applied to reduce any amount of expenditure incurred by that person in acquiring those shares that is allowable in terms of paragraph 20 of the Eighth Schedule; or

(bb)   trading stock, be applied to reduce any amount that must be takan into account by the person in respect of the shares in terms of section 11(a) or 22(1) or (2); or 

(b)     the shares immediately after that issue exceeds the market value of that asset immediately before the disposal, the amount of the excess must, for the purposes of Part VIII, be deemed to be a dividend as defined in section 64D that-

(i)      consists of a distribution of an asset in specie; and

(ii)     is paid by the company on the date of that issue.

(4)     This section must not apply where a company acquires an asset from a person as contemplated in subsection (2)(a) if-

(a)

(i)      that company and that person form part of the same group of companies immediately after that company acquires that asset; or

(ii)     that person holds all the shares in that company immediately after that company acquires that asset; or

(b)     paragraph 38 of the Eighth Schedule applies.