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PN 5/1999 Income Tax acT: PracTIce noTes PN 7/1999 be indicated at the time the agreement is entered into. Failing a split into the separate elements, the full amount will be
subject to VAT.
6 Uncerti cated Securities Tax Act 31 of 1998 (UST Act)
The UST Act will come into operation on a date to be determined by the President by proclamation in the Gazette. The purpose of imposing this tax is to provide for the dematerialisation of securities listed on the JSE in a Central Securities Depository (CSD).
In terms thereof all share certi cates which are deposited in the CSD will be cancelled and shareholding will be represented by entries in the accounts maintained by participants who act on behalf of the shareholders. From a tax point of view it was necessary to introduce a duty on the transfer of uncerti cated securities, as the issue of securities and the transfer of bene cial and legal ownership thereof will occur without the ling of any paper.
‘bene cial ownership’, is de ned in the UST Act as—:
’ in relation to a security, includes any one or more of the following:
(a) the right or entitlement to receive any dividend or interest payable in respect of that security; or
(b) the right to exercise or cause to be exercised in the ordinary course of events, any or all of the voting, conversion,
redemption or other rights attaching to such security.’.
In terms of section 6(1)(b)(iv) of the UST Act an exemption will apply to a change in bene cial ownership in securities in relation to lending arrangements:
‘if the change in bene cial ownership is from a lender to a borrower, or vice versa, in terms of a lending arrangement and the lender or borrower, as the case may be, who has acquired bene cial ownership has certi ed to the participant that the change is in terms of such a lending arrangement’.
7 Conclusion
It has come to the attention of this Of ce that practices have developed whereby instruments are, for example, endorsed as exempt from stamp duty, in circumstances where not all the elements of a lending arrangement as contemplated in terms of the SD Act are present. The purpose of this Practice Note is therefore to provide taxpayers with clear guidelines regarding the tax consequences of lending arrangements.
Persons who are responsible for the endorsement of these types of instruments must, therefore, ensure that all the relevant requirements have been met, in order to qualify for the relief provided for, as outlined in this Practice Note.
SARS, however, would like to emphasise that, should the relevant unacceptable practices not cease, SARS will have no alternative than to request the Minister of Finance to recommend to Parliament that the relevant relief and facilitating provisions be withdrawn.
PRACTICE NOTE 6 OF 1999 – GAME FARMING
General Notice 1746 published in Government Gazette 20337 of 30 July 1999 Withdrawn and replaced by Income Tax Interpretation Note 69 of 12 February 2013.
PRACTICE NOTE 7 OF 1999 – DETERMINATION OF THE TAXABLE INCOME OF CERTAIN PERSONS FROM INTERNATIONAL TRANSACTIONS: TRANSFER PRICING
Issued by:
THE COMMISSIONER FOR THE SOUTH AFRICAN REVENUE SERVICE
Acknowledgement
The kind assistance of the Policy Advice Division of the Inland Revenue Department in New Zealand, in permitting the use of material published by the Department, is gratefully appreciated.
CONTENTS
1. De nitions and terminology
2. Introduction
3. The Commissioner’s approach to the practice note
4. Section 31 of the Act
5. Financial transactions
6. Tax treaties
7. The arm’s length principle
8. Principles of comparability
9. Acceptable methods for determining an arm’s length price
10. Documentation
11. Practical considerations
12. The Commissioner’s approach to transfer pricing reviews, audits and investigations
13. Interest and penalties
14. Secondary tax on companies (STC)
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