For purposes of this Part –
(a) ‘entertainer or sportsperson’ includes any person who for reward –
(i) performs any activity as a theatre, motion picture, radio or television artiste or a musician;
(ii) takes part in any type of sport; or
(iii) takes part in any other activity which is usually regarded as of an entertainment character;
47A. Definitions
(2) Where a liquidating company disposes of-
(a) a capital asset in terms of a liquidation distribution to its holding company which acquires it as a capital asset-
(i) that liquidating company must be deemed to have disposed of that asset for an amount equal to the base cost of that asset on the date of the disposal thereof; and
(ii) that liquidating company and that holding company must, for purposes of determining any capital gain or capital loss in respect of a disposal of that asset by that holding company, be deemed to be one and the same person with respect to-
(aa) the date of acquisition of that asset by that liquidating company and the amount and date of incurral by that liquidating company of any expenditure in respect of that asset allowable in terms of paragraph 20 of the Eighth Schedule; and
(bb) any valuation of that asset effected by that liquidating company as contemplated in paragraph 29(4) of the Eighth Schedule; or
(b) an asset held by it as trading stock in terms of a liquidation distribution to its holding company which acquires it as trading stock-
(i) that liquidating company must be deemed to have disposed of that asset for an amount equal to the amount taken into account by that liquidating company in respect of that asset in terms of section 11(a) or 22(1) or (2), and
(ii) that liquidating company and that holding company must, for purposes of determining any taxable income derived by that holding company from a trade carried on by it, be deemed to be one and the same person with respect to the date of acquisition of that asset by that liquidating company and the amount and date of incurral by that liquidating company of any cost or expenditure incurred in respect of that asset as contemplated in section 11(a) or 22(1) or (2).
: Provided that in the case of a liquidation distribution contemplated in paragraph (b) of the definition of ‘liquidation distribution’, this subsection does not apply to any asset disposed of in terms of that liquidation distribution to a holding company which is a resident and which forms part of the same group of companies (as defined in section 1) as the liquidating company if that asset constitutes-
(a) a capital asset acquired by the holding company as a capital asset and the base cost of that asset exceeds the market value of that asset at the time of that disposal; or
(b) trading stock acquired by the holding company as trading stock and the amount taken into account in respect of that asset in terms of section 11(a) or 22(1) or (2) exceeds the market value of that asset at the time of that disposal.
(3) Where a liquidating company disposes of-
(a) an asset that constitutes an allowance asset for that liquidating company to its holding company in terms of a liquidation distribution and that holding company acquires that asset as an allowance asset or that holding company is a REIT or a controlled company, as defined in section 25BB(1), that acquires that asset as a capital asset or allowance asset-
[Words preceding subparagraph (i) substituted by section 58 of Act 23 of 2018 effective on 18 December 2017]
(i) no allowance allowed to that liquidating company in respect of that asset must be recovered or recouped by that liquidating company or included in that liquidating company’s income for the year of that transfer; and
(ii) that liquidating company and that holding company must be deemed to be one and the same person for purposes of determining the amount of any allowance or deduction –
(aa) to which that holding company may be entitled in respect of that asset; or
(bb) that is to be recovered or recouped by or included in the income of that holding company in respect of that asset; or
[Item (bb) substituted by section 55 of Act 17 of 2017 and section 58 of Act 23 of 2018 effective on 18 December 2017]
(b) a contract to its holding company as part of a disposal of a business as a going concern in terms of a liquidation distribution and an allowance in terms of section 24 or 24C was allowable to that liquidating company in respect of that contract for the year preceding that in which that contract is transferred or would have been allowable to that liquidating company for the year of that transfer had that contract not been so transferred-
(i) no allowance allowed to that liquidating company under those sections must be included in that liquidating company’s income for the year of that transfer; and
(ii) that liquidating company and that holding company must be deemed to be one and the same person for purposes of determining the amount of any allowance-
(aa) to which that holding company may be entitled under those sections; or
(bb) that is to be included in the income of that holding company under those sections.
[Paragraph (b) substituted by section 66 of Act 25 of 2015 effective on 8 January 2016]
(3A) The provisions of subsections (2) and (3) apply to a disposal of an asset by a liquidating company to its holding company in terms of a liquidation distribution only to the extent that –
(a) equity shares held by that holding company in that liquidating company are disposed of as a result of the liquidation, winding up or deregistration of that liquidating company; and
(b) that holding company has not assumed any debt of that liquidating company which was incurred by that liquidating company within a period of 18 months before that disposal, unless that debt –
(i) constitutes the refinancing of any debt incurred in more than 18 months before that disposal; or
(ii) is attributable to and arose in the normal course of a business undertaking disposed of, as a going concern, to that holding company as pan of that liquidation distribution.
(4) Where the holding company acquires any asset from the liquidating company in terms of a liquidation distribution and that holding company disposes of that asset within a period of 18 months after so acquiring that asset and-
(a) that asset, other than an asset contemplated in section 25BB(5) constitutes a capital asset for that holding company-
(i) so much of any capital gain determined in respect of the disposal of that asset as does not exceed the amount that would have been determined had that asset been disposed of at the beginning of that period of 18 months for proceeds equal to the market value of that asset as at that date, may not be taken into account in determining any net capital gain or assessed capital loss of that holding company but is subject to paragraph 10 of the Eighth Schedule for purpose of determining an amount of taxable capital gain derived from that gain, which taxable capital gain may not be set off against any assessed loss or balance of assessed loss of that holding company; or
(ii) so much of any capital loss determined in respect of the disposal of that asset as does not exceed the amount that would have been determined had that asset been disposed of at the beginning of that period of 18 months for proceeds equal to the market value of that asset as at that date must be disregarded in determining the aggregate capital gain or aggregate capital loss of that holding company for purposes of the Eighth Schedule: Provided that the amount of any capital loss so disregarded may be deducted from the amount of any capital gain determined in respect of the disposal during that year or any subsequent year of assessment of any other asset acquired by that holding company from the liquidating company in terms of that liquidation distribution; or
[Paragraph (a) amended by section 43 of Act 34 of 2019 and by section 29 of Act 20 of 2021]
(b) that asset constitutes-
(i) trading stock in the hands of that holding company, so much of the amount received or accrued in respect of the disposal of that trading stock as does not exceed the market value of that trading stock as at the beginning of that period of 18 months and so much of the amount taken into account in respect of that trading stock in terms of section 11(a) or 22(1) or (2) as is equal to the amount so taken into account in terms of subsection (2)(b); or
: Provided that this subparagraph does not apply to any asset that constitutes trading stock that is regularly and continuously disposed of by that holding company
(ii) an allowance asset in the hands of that holding company, so much of any allowance in respect of that asset that is recovered or recouped by or included in the income of that holding company, other than a holding company that is a REIT or a controlled company, as defined in section 25BB(1), as a result of that disposal as does not exceed the amount that would have been recovered had that asset been disposed of at the beginning of that period of 18 months for an amount equal to the market value of that asset as at that date,
[Subparagraph (ii) substituted by section 55 of Act 17 of 2017 effective on 18 December 2017]
must be deemed to be attributable to a separate trade carried on by that holding company, the taxable income or assessed loss from which trade may not be set off against or added to any assessed loss or balance of assessed loss of that holding company.
(5) Where-
(a) a holding company disposes of any equity share in a liquidating company as a result of the liquidation, winding up or deregistration of that liquidating company; or
(b) in anticipation of or in the course of the liquidation, winding up or deregistration of a liquidating company, a return of capital by way of a distribution of cash or an asset in specie by that company is received by or accrues to a holding company,
the holding company must disregard that disposal or return of capital for purposes of determining its taxable income, assessed loss, aggregate capital gain or aggregate capital loss.
(6) The provisions of this section do not apply where –
(a) the holding company is-
(i) a public benefit organisation as defined in section 30 that has been approved by the Commissioner in terms of that section;
(ii) a recreational club as defined in section 30A that has been approved by the Commissioner in terms of that section; or
(iii) a person contemplated in section 10(1)(cA), (cP), (d), (e) or (t);
(b) the holding company and the liquidating company agree in writing that this section does not apply; or
(c) the liquidating company-
(i) has not, within a period of 36 months after the date of the liquidation distribution, or such further period as the Commissioner may allow, taken the steps contemplated in section 41(4) to liquidate, wind up or deregister; or
(ii) has at any stage withdrawn any step taken to liquidate, wind up or deregister that company, as contemplated in paragraph (i), or does anything to invalidate any step so taken, with the result that the company will not be liquidated, wound up or deregistered:
Provided that any tax which becomes payable as a result of the application of this paragraph shall be recoverable from the holding company or, where the holding company is a controlled foreign company, from any resident who directly or indirectly holds any participation rights in that controlled foreign company as contemplated in section 9D(2).
(1) For the purposes of this section ‘liquidation distribution’ means any transaction-
(a) in terms of which any company (hereinafter referred to as the ‘liquidating company) which is a resident disposes of all of its assets (other than assets it elects to use to settle any debts incurred by it in the ordinary course of its trade) to its shareholders in anticipation of or in the course of the liquidation, winding up or deregistration of that company and other than assets required to satisfy any reasonably anticipated liabilities to any sphere of government of any country and costs of administration relating to the liquidation or winding up, but only to the extent to which those assets are so disposed of to another company (hereinafter referred to as the ‘holding company’) which is a resident and which on the date of that disposal forms part of the same group of companies as the liquidating company; or
[Paragraph (a) amended by section 37 of Act 32 of 2004, section 43 of Act 31 of 2005, section 37 of Act 8 of 2007, section 58 of Act 35 of 2007, section 53 of Act 60 of 2008, section 50 of Act 17 of 2009 and section 72 of Act 24 of 2011, substituted by section 79 of Act 22 of 2012 and section 59 of Act 43 of 2014 effective on 20 January 2015]
(b) in terms of which a liquidating company which is a controlled foreign company in relation to any resident disposes of all of its assets (other than assets it elects to use to settle any debts incurred by it in the ordinary course of its trade) to its shareholders in anticipation of or in the course of the liquidation, winding up or deregistration of that company –
(i) to the extent that those assets are so disposed of to a holding company which-
(aa) is a resident and which forms part of the same group of companies (as defined in section 1) as the liquidating company immediately before that distribution; or
(bb) is a controlled foreign company in relation to any resident;
(ii) if, immediately before that transaction, each of the shares held by the holding company in the liquidating company is held as a capital asset; and
(iii) if, immediately after that transaction, where that holding company is a controlled foreign company as contemplated in subparagraph (i)(bb), more than 50 per cent of the equity shares in the holding company are directly or indirectly held by a resident (whether alone or together with any other resident that forms part of the same group of companies as that resident).
46A. Limitation of expenditure incurred in respect of shares held in an unbundling company
(1) Notwithstanding any other provision of this Act, if a taxpayer acquires a share in an unbundled company from an unbundling company in terms of an unbundling transaction defined in section 46 and a share in that unbundling company was within a period of two years preceding the acquisition held by a person who was a connected person in relation to the taxpayer at any time during that period, and any amount received by or accrued to that person in respect of the disposal of the share at any time during that period would not have been subject to normal tax or would not have been taken into account for purposes of determining the net income, as defined in section 9D, of that person, the expenditure incurred by the taxpayer in respect of any share held in that company as a result of that unbundling transaction shall not for purposes of this Act exceed an amount determined in accordance with subsection (2).
[Subsection (1) substituted by section 28(1) of Act 20 of 2021 effective on 1 January, 2022 and applicable in respect of the allocation of expenditure to unbundled shares acquired on or after that date]
(2) The amount to be determined for purposes of subsection (1) is the sum of-
(a) the cost of the equity share to the connected person contemplated in subsection (1) that first held that share less the sum of all deductions that have been allowed in respect of the share to any connected person that held that share during that period;
(b) any amount contemplated in paragraph (n) of the definition of ‘gross income’ in section 1 that is required to be included in the income of any connected person that held that share during that period that arises as a result of the disposal of the share by any such person; and
(c) any capital gain of any connected person that held that share during that period that arises as a result of the disposal of the share by any such person.
(3A) If shares are distributed in terms of an unbundling transaction, the contributed tax capital of-
(a) the unbundling company immediately after the distribution is deemed to be an amount which bears to the contributed tax capital of that company immediately before distribution the same ratio as the aggregate market value, immediately after the distribution, of the shares in that company bears to the aggregate market value of the shares immediately before distribution; and
(b) the unbundled company immediately after the distribution is deemed to be an amount equal to the sum of-
(i) an amount which bears to the contributed tax capital of the unbundling company immediately before the distribution the same ratio as the aggregate market value of the distributed shares before the distribution bears to the aggregate market value of the shares in the unbundling company immediately before the distribution; and
(ii) an amount which bears to the contributed tax capital of the unbundled company immediately before the distribution the same ratio as the shares held in that company immediately before the distribution by persons other than the unbundling company bear to all shares held in that company immediately before the distribution.
(4) Where those shares are distributed by an unbundling company to a shareholder in terms of an unbundling transaction and that shareholder held the unbundling shares as a result of the exercise, by that shareholder, of a right contemplated in section 8A, a portion of any gain made by that shareholder in the exercise of that right to acquire those unbundling shares must be included in the income of that shareholder –
(a) in the year of assessment during which that shareholder becomes entitled to dispose of those shares, which portion shall be an amount which bears to such gain the same ratio as that contemplated in subsection (3)(a); and
(b) in the year of assessment during which that person becomes entitled to dispose of unbundling shares, which portion shall be calculated by reducing such gain by the amount which has been determined or is to be determined in terms of paragraph (a).
(5) Subject to subsection (7), where shares are distributed by an unbundling company to a shareholder in terms of an unbundling transaction, the distribution by that unbundling company of the shares must be disregarded in determining any liability for dividends tax.
[Subsection (5) substituted by section 54(1)(g) of Act 45 of 2003, by section 42(1)(g) of Act 31 of 2005, by section 71(1)(c) of Act 24 of 2011, by section 78(1)(b) of Act 22 of 2012 and by section 34(1)(b) of Act 23 of 2020 deemed effective on 28 October, 2020 and applicable to unbundling transactions entered into on or after that date]
(5A) Where shares are distributed by an unbundling company to a shareholder in terms of an unbundling transaction, paragraph 76B of the Eighth Schedule does not apply to that distribution.
(6) ……….
(6A) This section does not apply in respect of an unbundling transaction where the unbundling company is a REIT or a controlled company as defined in section 25BB(1).
[Subsection (6A) added by section 58 of Act 43 of 2014, substituted by section 65 of Act 25 of 2015 effective on 8 January 2016]
(7)
(a) In the case of an unbundling transaction contemplated in subsection (1)(a), this section does not apply in respect of any equity share that is distributed by an unbundling company to any shareholder that-
(i) is a disqualified person; and
(ii) holds at least 5 per cent of the equity shares in the unbundling company immediately before that unbundling transaction.
[Paragraph (a) substituted by section 95(1)(h) of Act 31 of 2013 and by section 34(1)(c) of Act 23 of 2020 deemed effective on 28 October, 2020 and applicable to unbundling transactions entered into on or after that date]
(b) For the purposes of paragraph (a), a ‘disqualified person’ means-
(i) a person that is not a resident;
(ii) the government of the Republic in the national, provincial or local sphere, contemplated in section 10(1)(a);
(iii) a public benefit organisation as defined in section 30 that has been approved by the Commissioner in terms of that section;
(iv) a recreational club as defined in section 30A that has been approved by the Commissioner in terms of that section;
(v) a company or trust contemplated in section 37A;
(vi) a fund contemplated in section 10(1)(d)(i) or (ii); or
(vii) a person contemplated in section 10(1)(cA) or (t).
(8) Where an unlisted unbundling company disposes of shares in an unlisted unbundled company in terms of an unbundling transaction to a shareholder and that unbundled company is a controlled group company in relation to that shareholder immediately before and after that disposal, the provisions of this section will not apply to that disposal if that shareholder and that unbundling company agree in writing that this section does not apply to that disposal.
‘market value’ in relation to unbundling shares acquired prior to the valuation date as defined in paragraph 1 of the Eighth Schedule, means any market value adopted or determined by the shareholder in respect of those shares within the period contemplated in paragraph 29(4) of the Eighth Schedule.
(3)
(a) If a shareholder acquires equity shares (hereinafter referred to as ‘unbundled shares’) in terms of an unbundling transaction –
(i) that shareholder must –
(aa) allocate a portion of the expenditure and any market value attributable to the equity shares held in the unbundling company (hereinafter referred to as the ‘unbundling shares’) to the unbundled shares in accordance with subparagraph (v); and
(bb) reduce the expenditure and market value attributable to the unbundling shares by the amount so allocated to the unbundled shares;
(ii) the unbundled shares must, other than for purposes of determining whether a share has been held for at least three years for the purposes of section 9C(2), be deemed to have been acquired on the same date as the unbundling shares;
[Subparagraph (ii) substituted by section 57 of Act 35 of 2007 and section 54 of Act 17 of 2017 effective on 1 January 2016]
(iii) the unbundled shares must be deemed to have been acquired as –
(aa) trading stock, if the unbundling shares were held as trading stock;
(bb) capital assets, if the unbundling shares were held as capital assets;
(iv) any expenditure allocated to the unbundled shares must be deemed to have been incurred on the date on which the expenditure was incurred in respect of the unbundling shares; and
(v) the proportionate amount of the expenditure and market value to be allocated to the unbundled shares in terms of subparagraph (i)(aa) must be determined in accordance with the ratio that the market value of the unbundled shares, as at the end of the day after that distribution, bears to the sum of the market value, as at the end of that day, of the unbundling shares and of the unbundled shares: Provided that a shareholder that acquires unbundled shares in terms of an unbundling transaction shall, in addition to any expenditure allocated to unbundled shares in accordance with this subparagraph, be treated as having incurred an amount equal to any amount of tax payable by the unbundling company arising in respect of all equity shares to which this section does not apply as contemplated in subsection (7) the same ratio as the number of equity shares held by that shareholder in that unbundled company bears to the number of all the issued equity shares in that unbundled company immediately after that unbundling transaction.
[Subparagraph (v) amended by section 37(1)(b) of Act 17 of 2023 with effect from 1 January, 2024 and applicable in respect of the allocation of expenditure to unbundled shares acquired on or after that date]
(2) Subject to subsection (7), where an unbundling company distributes shares in terms of an unbundling transaction, that unbundling company must disregard that distribution for purposes of determining its taxable income or assessed loss, or its net income as contemplated in section 9D.
[Subsection (2) substituted by section 54(1)(b) of Act 45 of 2003, by section 42(1)(d) of Act 31 of 2005 and by section 29(1) of Act 3 of 2008 and by section 34(1)(a) of Act 23 of 2020 deemed effective on 28 October, 2020 and applicable to unbundling transactions entered into on or after that date]
(1) For the purposes of this section, ‘unbundling transaction’ means any transaction-
(a)
(i) in terms of which the equity shares in a company (hereinafter referred to as the ‘unbundled company’), which is a resident that are held by a company (hereinafter referred to as the ‘unbundling company’) , which is a resident, are all distributed by that unbundling company to any shareholder of that unbundling company in accordance with the effective interest of the shareholders in the shares of that unbundling company, and if-
(aa) all of the equity shares of the unbundled company are listed shares or will become listed shares within 12 months after that distribution;
(bb) that shareholder to which that distribution is made by that unbundling company forms part of the same group of companies as that unbundling company; or
(cc) that distribution is made pursuant to an order in terms of the Competition Act, 1998 (Act No. 89 of 1998), made by the Competition Tribunal or the Competition Appeal Court;
(ii) if the equity shares distributed as contemplated in subparagraph (i) constitute-
(aa) where that unbundled company is a listed company immediately before that distribution-
(A) and no shareholder of the unbundled company other than the unbundling company holds the same number of equity shares as or more equity shares than the unbundling company of that unbundled company, more than 25 per cent of the equity shares of the unbundled company; or
(B) and any shareholder of the unbundled company other than the unbundling company holds the same number of equity shares as or more equity shares than the unbundling company of that unbundled company, at least 35 per cent of the equity shares of that unbundled company; or
(bb) where that unbundled company is an unlisted company immediately before that distribution, more than 50 per cent of the equity shares of that unbundled company; or
(b)
(i) in terms of which all the equity shares in an unbundled company which is a foreign company that are held by an unbundling company which is a resident or a controlled foreign company are all distributed by that unbundling company to any shareholder of that unbundling company in accordance with the effective interest of that shareholder in the shares of that unbundling company –
(aa) if that shareholder is a resident and that shareholder forms part of the same group of companies (as defined in section 1); or
(bb) if that shareholder is not a resident and that shareholder is a controlled foreign company in relation to any resident that forms part of the same group of companies (as defined in section 1),
as that unbundling company; and
[Subparagraph (i) substituted by section 95(1)(b) of Act 31 of 2013 and amended by section 37(1)(a) of Act 17 of 2023]
(ii) if, immediately before the distribution of the equity shares of an unbundled company by an unbundling company to any shareholder of that unbundling company as contemplated in subparagraph (i)-
(aa) the unbundling company holds more than 50 per cent of the equity shares of the unbundled company; and
(bb) each of those equity shares of that unbundled company are held by the unbundling company as a capital asset.