(2) Subject to subsection (3), where during any year of assessment any interest is incurred by a company in respect of a debt issued, assumed or used by that company-
(a) for the purpose of financing the acquisition by that company, in terms of an acquisition transaction, of an equity share; or
(b) in substitution for a debt issued, assumed or used as contemplated in paragraph (a),
the interest incurred by that company in respect of that debt must, to the extent to which the amount thereof relates to a period during which-
(i) that company held that equity share; and
(ii) that equity share constituted a qualifying interest in an operating company, as determined-
(aa) in the case of an equity share held by that company at the end of that year, at the date on which that year ends; or
(bb) if that equity share was disposed of by that company during that year, at the date of that disposal,
be deemed to have been so incurred in the production of the income of that company and laid out or expended by that company for the purposes of trade.
[Subsection (2) substituted by section 46 of Act 23 of 2018 effective on 1 January 2019, applies in respect of years of assessment ending on or after that date]
(3) An equity share in a company constitutes a qualifying interest in an operating company if that equity share is an equity share on the date referred to in subsection (2) in-
(a) a company that qualified as an operating company in its latest year of assessment that ended prior to or on the date referred to in subsection (2); or
(b) any other company, to the extent that the value of that equity share is derived from an equity share or equity shares held by that company in a company or companies described in paragraph (a)-
(i) in relation to which that company is a controlling group company; and
(ii) that form part, with that company, of a group of companies, as defined in section 41(1):
Provided that if at least 90 per cent of the value of that equity share is so derived, that equity share must be treated as an equity share in an operating company.
[Subsection (3) amended by section 46(1) of Act 23 of 2018 and substituted by section 31(1)(b) of Act 34 of 2019 deemed effective on 1 January, 2019 and applicable in respect of years of assessment ending on or after that date]
(4) ……….
[Subsection (4) deleted by section 46 of Act 23 of 2018 effective on 1 January 2019, applies in respect of years of assessment ending on or after that date]
(5) Where a company that acquired equity shares in a controlling group company in relation to an operating company as contemplated in paragraph (b) of the definition of “acquisition transaction” acquires the equity shares held by that controlling group company in that operating company in terms of-
(a) an unbundling transaction as defined in section 46(1)(a) in respect of which section 46 was applied; or
(b) a liquidation distribution as defined in section 47(1)(a) in respect of which section 47 was applied, those equity shares must for purposes of subsection (2) be treated-
(i) as having been acquired by that company in terms of paragraph (a) of the definition of “acquisition transaction”; and
(ii) as constituting a qualifying interest in an operating company to the extent to which the value of the equity shares in the controlling group company from which the equity shares in the operating company were acquired was derived from the value of the equity shares in the operating company so acquired.
[Subsection (5) added by section 31(1)(c) of Act 34 of 2019 deemed to have come into operation on 1 January, 2019 and applicable in respect of years of assessment ending on or after that date]
[Section 24O inserted by section 57 of Act 22 of 2012, amended by section 72 of Act 31 of 2013 and substituted by section 46 of Act 25 of 2015 effective on 1 January 2016]