Section 20B (Transfer Duty Act) – Transactions, operations, schemes or understanding for obtaining undue tax benefits

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20B.  Transactions, operations, schemes or understanding for obtaining undue tax benefits

(1)     Notwithstanding anything in this Act, whenever the Commissioner is satisfied that any transaction, operation, scheme or understanding (whether enforceable or not), including all steps by which it is carried into effect-

(a)     has been entered into or carried out which has the effect of granting a tax benefit to any person; and

(b)     having regard to the substance of the transaction, operation, scheme or understanding-

(i)     was entered into or carried out in a manner which would not normally be employed for bona fide business purposes, other than the obtaining of a tax benefit; or

(ii)    has created rights or obligations which would not normally be created between persons dealing at arm’s length; and

(c)     was entered into or carried out solely or mainly for the purposes of obtaining a tax benefit,

the Commissioner shall determine the liability for any duty imposed by this Act, and the amount thereof, as if the transaction, operation, scheme or understanding had not been entered into or carried out, or in such manner as in the circumstances of the case the Commissioner deems appropriate for the prevention or diminution of such tax benefit.

(2)     For the purpose of this section ‘tax benefit’ means-

(a)     any reduction in the liability of any person to pay duty;

(b)     any increase in the entitlement of any person to the refund of duty; or

(c)     any other avoidance or postponement of liability for the payment of any duty imposed by this Act or any tax, duty or levy imposed by any other Act administered by the Commissioner.

(3)     Any decision of the Commissioner under subsection (1) shall be subject to objection and appeal in accordance with Chapter 9 of the tax Administration Act, and whenever in proceedings relating thereto it is proved that the relevant transaction, operation, scheme or understanding results or would result in a tax benefit, it shall be presumed, until the contrary is proved, that such transaction, operation, scheme or understanding was entered into or carried out solely or mainly for the purpose of obtaining a tax benefit.

[Section 20B inserted by section 9 of Act 45 of 2003 and section 1 of Act 39 of 2013 effective on 16 January 2014]

Section 21 (Transfer Duty Act) – Repeal of laws

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21. Repeal of Laws

 

The Laws specified in the Schedule are hereby repealed to the extent set out in the fourth column of the said Schedule: Provided that any duty which has at the date of commencement of this Act become payable under any law so repealed, but which has not at that date been paid, shall be recovered in accordance with and subject to the provisions of the said law: Provided further that if any such duty was not paid before the twentieth day of March, 1963, any interest payable in respect of such duty under any such law for the period from that date to the date of payment of the duty, shall be calculated at the rate of seven and a half per centum per annum in respect of each completed month in that period.

[Section 21 amended by section 4 of Act 70 of 1963 and section 3 of Act 72 of 1970]

Schedule (Transfer Duty Act) – Repeal of laws

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Schedule

 

REPEAL OF LAWS

Province or Union

Number and Date of Law

Title or Subject of Law

Extent of Repeal

Cape of Good Hope

Ordinance No. 6 of 1844           

Ordinance for Regulating Sales   

So much as is unrepealed      

Act No. 5 of 1884      

Transfer Duty Consolidation and Amendment Act, 1884           

The whole, except sections twenty-four, twenty-five, twenty-eight and thirty           

Act No. 46 of 1902    

The Higher Educational Institutions Transfer Duty Exemption Act, 1902 

So much as relates to transfer duty  

Ordinance No. 5 of 1921           

Consolidated Education Ordinance, 1921        

So much of sections three hundred and eighteen and three hundred and twenty as relates to transfer duty

Transvaal

Proclamation No. 8 of 1902

Transfer Duty Proclamation, 1902

The whole, except sections twenty-two, twenty-three, twenty-six, twenty-eight, twenty-nine and thirty

Ordinance No. 14 of 1905

Ordinance to amend the Transfer Duty Proclamation, 1902

The whole

Natal

Law No. 5 of 1860     

To amend the Law for regulating the payment of Transfer Duty on the sale or transfer of Immovable Property         

The whole      

Law No. 20 of 1865   

To exempt growing crops and Machinery from the payment of Transfer Duty on being sold along with the Lands on which they are growing or to which they are attached        

The whole      

Law No. 19 of 1883   

To amend Law No. 5 of 1860   

The whole      

Law No. 19 of 1884   

To amend in certain respects the Law and Practice in reference to Registration    

So much as is unrepealed      

Law No. 5 of 1890     

To amend in certain respects Law No. 5 of 1860 and Law No. 19 of 1883           

The whole      

Law No. 6 of 1891     

To amend Law 19, 1884 entitled “Law to amend in certain respects the Law and Practice in reference to Registration”  

The whole      

Act No. 43 of 1889    

The Natal Mines Act, 1889           

Sections ninety and ninety-one      

Act No. 7 of 1903      

To amend the Law relating to Sale and Purchase of Land   

Sections three, four and six and the Schedule        

Act No. 23 of 1907    

To amend Law No. 5 of 1890 and Law No. 6 of 1891   

The whole      

Act No. 31 of 1908    

To impose a cession fee upon unregistered Crown Leases

The whole      

Act No. 11 of 1909    

To amend the Transfer Duty Law No. 5 of 1860           

The whole      

Act No. 12 of 1909    

To amend Law No. 19, 1884, relative to the registration of leases  

The whole

Orange Free State

Law Book Chapter CXVIII          

Transfer and Registration of Stands        

Sections six and eight

Law No. 14 of 1897   

To impose a tax on fixed property situate in but sold outside the Orange Free State by public auction           

The whole      

Ordinance No. 12 of 1906   

Transfer Duty Ordinance, 1906   

The whole, except sections forty-one, forty-two, forty-five, forty-seven, forty-nine, fifty-one, fifty-two and fifty-three       

Ordinance No. 18 of 1906   

Villages Management Amendment Ordinance, 1906   

Section five    

Act No. 30 of 1908    

Transfer Duty Amendment Act, 1908       

The whole      

Union

Act No. 11 of 1913    

Transfer Duty Reduction Act, 1913       

The whole      

Act No. 42 of 1917    

Financial Adjustment Act, 1917   

Section eight  

Act No. 28 of 1919    

Transvaal Transfer Duty Amendment Act, 1919           

The whole      

Act No. 43 of 1919    

Financial Adjustments Act, 1919   

Section three  

“Commissioner” definition of section 1 of Transfer Duty Act

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“Commissioner” means the Commissioner for the South African Revenue Service appointed in terms of section 6 of the South African Revenue Service Act, 1997 (Act No. 34 of 1997), or the Acting Commissioner designated in terms of section 7 of that Act;

 [Definition of “Commissioner” deleted by section 1 of Act 77 of 1964, inserted by section 4 of Act 106 of 1980 and substituted by section 34 of Act 34 of 1997 and section 271 of Act 28 of 2011 effective on 1 Oct 2012]

“Company” definition of section 1 of Transfer Duty Act

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“company” includes-

(a)     any association, corporation or company (including a close corporation) incorporated or deemed to be incorporated by or under any law in force or previously in force in the Republic or in any part thereof, or any body corporate formed or established or deemed to be formed or established by or under any such law; or

(b)     any association, corporation or company incorporated under the law of any country other than the Republic or any body corporate formed or established under such law; or

(c)     any association (not being an association referred to in paragraph (a)) formed in the Republic to serve a specified purpose, beneficial to the public or a section of the public;

[Definition of “company” inserted by section 1 of Act 5 of 2001]

“Date of acquisition” definition of section 1 of Transfer Duty Act

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“date of acquisition” means –

(a)     in the case of the acquisition of property (other than the acquisition of property contemplated in paragraph (b)) by way of a transaction, the date on which the transaction was entered into, irrespective of whether the transaction was conditional or not or was entered into on behalf of a company already registered or still to be registered and, in the case of the acquisition of property otherwise than by way of a transaction, the date upon which the person who so acquired the property became entitled thereto: Provided that where property has been acquired by the exercise of an option to purchase or a right of pre-emption, the date of acquisition shall be the date upon which the option or right of pre-emption was exercised;

[Paragraph (a) amended by section 1 of Act 86 of 1987 and Proc.R11 of 1994]

(b)     in the case of the acquisition of property in terms of item 8 of Schedule 1 to the Share Blocks Control Act, 1980 (Act No. 59 of 1980), and if section 9A of this Act does not apply to that acquisition, the date of the written request referred to in subitem (1)(b) of the said item 8;

(c)     ……….

[Paragraph (c) added by section 1 of Act 86 of 1987 and deleted by Proc. R11 of 1994]

[Definition of “date of acquisition” substituted by section 4 of Act 106 of 1980]

“Fair value” definition of section 1 of Transfer Duty Act

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“fair value”–

(a)     in relation to property as defined in paragraphs (a) and (c) of the definition of “property”, means the fair market value of that property as at the date of acquisition thereof;

[Para (a) substituted by section 1 of Act 24 of 2011]

(b)     in relation to a share or member’s interest in a company as contemplated in paragraph (d) or (e) of the definition of “property”, means so much of the fair market value as at the date of acquisition of that share or member’s interest, of any property held by that company which constitutes –

(i)      residential property;

(ii)     a share or member’s interest in any company as contemplated in paragraph (d) or (e) of the definition of “property”; or

(iii)    a contingent right in property of a trust as contemplated in paragraph (f) of the definition of “property”,

(without taking into account any lease agreement, any liability in respect of any loan or any right to or an interest in the use of immovable property conferred on the owner of a share in a share block company as contemplated in section 1 of the Share Blocks Control Act, 1980 (Act No. 59 of 1980), in relation to that residential property or any residential property of any company or trust contemplated in subparagraph (ii) or (iii)), as is attributable to that share or member’s interest;

[Paragraph (b) amended by section 1 of Act 45 of 2003 and section 1 of Act 17 of 2009]

(c)     in relation to any contingent right to any property, which constitutes –

(i)      residential property;

(ii)     a share or member’s interest contemplated in paragraph (d) or (e) of the definition of “property”; or

(iii)    a contingent right in property of a trust as contemplated in paragraph (f) of the definition of “property”,

held by a discretionary trust, means the fair market value of that property (without taking into account any lease agreement or any liability in respect of any loan in relation to that residential property or any residential property of any company or trust contemplated in subparagraph (ii) or (iii)), as at the date of acquisition of that contingent right; or

[Paragraph (c) amended by section 1 of Act 17 of 2009]

(d)     in relation to a share in a company as contemplated in paragraph (g) of the definition of “property”, means so much of the fair market value, as at the date of acquisition of that share, of any property held by that company which constitutes property as contemplated in paragraphs (a) and (c) of that definition (without taking into account any lease agreement or any liability in respect of any loan in relation to that residential property) as is attributable to that share:

[Paragraph (d) inserted by section 1 of Act 17 of 2009 and substituted by section 1 of Act 24 of 2011]

 

Provided that –

(a)     the fair market value of any property of a company or a trust which constitutes a contingent right in property of a trust, as contemplated in paragraphs (b)(iii) and (c)(iii) shall be equal to the fair value of that contingent right as determined in terms of paragraph (c) of this definition; and

(b)     where property, has been acquired by the exercise of an option to purchase or a right of pre-emption, the fair value in relation to that property shall be the fair market value thereof as at the date upon which the option or right of pre-emption was acquired by the person who exercised the option or right of pre-emption;

[Definition of “fair value” substituted by section 2 of Act 74 of 2002]