Page 212 - SAIT Compendium 2016 Volume2

IN 9 (5) Income Tax acT: InTeRPReTaTIon noTes IN 9 (5)
Example 1 — Gross income limitation
Facts:
A company with a year of assessment ending 30 June started trading activities on 17 December 2007. Gross income for the six and a half-month period (17 December 2007 to 30 June 2008) amounted to R9 million.
Result:
As the company’s year of assessment commenced on 17 December 2007 which is after 1 January 2007, the limitation of R14 million applies. The R14 million must be reduced proportionately in order to determine whether the company’s gross income for the seven-month period would not have exceeded the R14 million limitation, had the company traded for the full 12-month period.
R14 million 3 full months actually traded
12 months
The gross income of the company may therefore not exceed the amount of R8.16 million for the seven-month period
in which it traded. The actual gross income for the seven-month period, however, amounts to R9 million. The non- compliance with the gross income limitation disquali es the company to be an SBC for the relevant year of assessment.
= R14 million 3 7
12 = R8.16 million
4.4 Limitation on shares held by shareholders — section 12E(4)(a)(ii)
The shareholders may not at any time during any year of assessment hold any shares or have any interest in the equity of any other company, except in those companies speci cally excluded, as mentioned below. A share or interest held in another company or close corporation as trustee or as nominee will generally not be regarded as the holding of any shares or interest in the equity of any other company for purposes of this section, provided the shareholder or member will not be entitled to any pro ts, income or capital in the other company, or close corporation.
Any shares or interest in any other company not speci cally excluded, even if for one day during the relevant year of assessment, will disqualify the company to be an SBC. In this regard, it is worthy to note the effective dates of the exclusions where it was previously a ground for disquali cation.
Permissible shareholding
A listed company [section 12E (4) (a) (ii) (aa)] (Note 1)
Any portfolio in a collective investment scheme in securities
[section 12E (4) (a) (ii) (bb)] (Note 2)
A body corporate as contemplated in section 10 (1) (e) (i) [section
12E (4) (a) (ii) (cc)]
A share block company as contemplated in section 10 (1) (e) (ii)
[section 12E (4) (a) (ii) (cc)] (Note 3)
A company incorporated under section 21 of the Companies Act 61 of 1973 or entity as contemplated in section 10 (1) (e) (iii) [section 12E (4) (a) (ii) (cc)] (Note 3)
Less than 5% interest in a social or consumer co- operative or co- operative burial society [section 12E (4) (a) (ii) (dd)] (Note 4)
Any ‘friendly society’ as de ned in the Friendly Societies Act 25 of 1956 [section 12E (4) (a) (ii) (ee)] (Note 5)
Less than 5% interest in a primary savings co-operative bank or a primary savings and loans co-operative bank that provides services as outlined in section 12E (4) (a) (ii) (ff) (Note 6)
A ‘venture capital company’ as de ned in section 12J [section 12E (4) (a) (ii) (gg)] (Note 7)
A dormant or shelf company subject to certain requirements [section 12E (4) (a) (ii) (hh)](Note 8)
Effective for years of assessment ending on or after
13 December 2002 13 December 2002
22 December 2003 22 December 2003 22 December 2003
1 January 2008 7 February 2007 8 January 2008
1 July 2009
1 January 2010
Note 1: Note 2:
A company of which the shares or depository receipts for its shares are listed on an ‘exchange’ as de ned in section 1 and licensed under section 10 of the Securities Services Act 36 of 2004 [section 12E (4) (a) (ii)(aa) read with paragraph (a) of the de nition of a ‘listed company’ in section 1].
Any portfolio comprised in any collective investment scheme in securities as contemplated in Part IV of the Collective Investment Schemes Control Act 45 of 2002 or any arrangement or scheme carried on outside the Republic of South Africa where investors hold a participatory interest through shares, units or any other form of participatory interest [section 12E (4) (a) (ii) (bb) read with paragraph (e) of the de nition of a ‘company’ in section 1];
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saIT comPendIum oF Tax LegIsLaTIon VoLume 2