Page 612 - Juta's Indirect Tax

IN 22 (3) TRANSFER DUTY ACT IN 22 (3)
Act. Section 10(1)(f) and section 10(1)(cF) were repealed with effect from 15 July 2001 when legislation was introduced to regulate the tax-exempt status of PBOs. These activities were included as PBAs and section 9(1)(c)* of the Transfer Duty Act was accordingly amended and section 9(1)(j)† was deleted. The discussion that follows will therefore be focused on these activities which were speci cally affected by the above legislative amendments.
(a) Provision of residential care for retired persons
Residential care provided to retired persons under a life-right scheme may form part of PBA 3(c) if – • residential care is provided to retired persons;
• more than 90% of the persons to whom the residential care is provided are over the age of 60;
• nursing services are provided by the organisation carrying on the activity; and
• residential care for retired persons who are poor and needy is actively provided by that organisation without full recovery of cost. The extent to which the residential care must be provided to poor and needy persons is not prescribed in the Act. The requirement is merely that the PBO must actively cross-subsidise poor and needy persons.‡
Example 1 – Provision of residential care for retired persons
Facts:
Sunset Hills Retirement Village is a non-pro t company incorporated under the Companies Act which has been approved by the TEU as a PBO carrying on PBA 3(c).
Property 1
This property was acquired on 1 August 2014 and will be developed as follows:
• Ten self-contained single units for needy pensioners whose only source of income is a social pension. • 20 units to be sold under the life-right scheme.
• 20 cottages sold as life-right units.
• 15 semi-furnished single rooms for occupation by persons with no income.
• A frail-care centre that will provide nursing services to all residents.
• A community centre for all residents.
• Dining room and kitchen facility providing meals and refreshments to all residents.
All the accommodation will be for occupation by persons over the age of 60. The rentals charged for accommodation provided to the persons with no income and those whose only source of income is a social pension are not market- related and are below cost-recovery. Income received from selling the life-right accommodation will be used to subsidise the accommodation to poor and needy persons.
Property 2
This property was acquired on 1 November 2014 and will be developed by constructing residential units to be sold under the life-right scheme to persons over the age of 60 years. No cross-subsidisation of poor and needy persons will be provided on the property. Declarations have been submitted for the acquisition of both properties (see 5).
Result:
Property 1
The acquisition of this property will qualify for exemption from the payment of transfer duty because –
• the company is a PBO;
• by developing the property in the manner contemplated above the company will be carrying on PBA 3(c); and • the whole of the property will be used to carry on the PBA.
Property 2
The acquisition of this property will not qualify for the exemption from the payment of transfer duty since the whole or substantially the whole (see 4.3) of the property will be used to sell units under the life-right scheme. No residential care will be provided for poor and needy retired persons over the age of 60 and the PBO will therefore not carry on a PBA on this property.
(b) Residential accommodation acquired to carry on religious or educational public bene t activities
The acquisition of a property which is used as the of cial residence (manse) of the pastor or minister of a PBO carrying on activities of the promotion or practice of religion contemplated in PBA 5(a) will qualify for the exemption from the payment of transfer duty provided the whole or substantially the whole (see 4.3) of the property is used for that purpose. It is accepted in such cases that the manse is acquired by the PBO for use in carrying on the PBA. See Example 5. The same principal applies to educational institutions (see 4.1.4) for the acquisition of a residence for occupation by teaching staff.
(c) Provision of assets to another public bene t organisation or statutory body
A PBO that provides funds, assets or other resources§ to another PBO or statutory body (see 4.2.1) will qualify for exemption from the payment of transfer duty provided the whole or substantially the whole (see 4.3) of the property acquired by the PBO is used by another PBO or statutory body in the carrying on of a PBA.
* Section 3(1)(b) of the Taxation Laws Amendment Act No. 30 of 2000. † Section 3(1)(c) of the Taxation Laws Amendment Act No. 30 of 2000. ‡ PBA 3(c)(ii).
§ PBA 10.
604 Juta’s IndIrect tax 2016