Page 580 - SAIT Compendium 2016 Volume2

IN 67 (2) Income Tax acT: InTeRPReTaTIon noTes IN 67 (2) INTERPRETATION NOTE: NO. 67 (ISSUE 2)
DATE: ACT: SECTION: SUBJECT:
CONTENTS
Preamble
1. Purpose
2. Background
3. The law and its application
3.1 Connected person in relation to a natural person
3.1.1 Paragraph (a)
3.1.2 A relative [paragraph (a)(i)]
3.1.3 A trust (other than a portfolio of a collective investment scheme in securities or a portfolio of a
collective investment scheme in property) of which the natural person or relative is a bene ciary
[paragraph (a)(ii)]
3.2 Connected person in relation to a trust (other than a portfolio of a collective investment scheme in securities or
a portfolio of a collective investment scheme in property)
3.2.1 Paragraph (b)
3.2.2 A bene ciary of the trust [paragraph (b)(i)]
3.2.3 A connected person in relation to the bene ciary of the trust [paragraph (b)(ii)]
3.3 Connected person in relation to a connected person in relation to a trust
3.3.1 Paragraph (bA)
3.3.2 A person who is a connected person in relation to the trust [paragraph (bA)]
3.4 Connected person in relation to a member of any partnership
3.4.1 Paragraph (c)
3.4.2 Any other member of the partnership [paragraph (c)(i)]
3.4.3 A connected person in relation to any member of the partnership or foreign partnership
[paragraph (c)(ii)]
3.5 Connected person in relation to a company
3.5.1 Paragraph (d)
3.5.2 A company that would form part of the same group of companies [paragraph (d)(i)]
3.5.3 A person that holds at least 20% of the equity shares or voting rights in the company
[paragraph (d)(iv)]
3.5.4 Any other company that holds at least 20% of the equity shares or voting rights in the company and
no holder of shares holds the majority voting rights [paragraph (d)(v)]
3.5.5 Any other company which is managed or controlled by a connected person [paragraph (d)(vA)] 3.5.6 Connected person in relation to a company that is a close corporation [paragraph (d)(vi)]
3.6 The reverse ‘connected person’ relationship 3.6.1 Paragraph (e)
3.6.2 The other person [paragraph (e)]
3.7 A portfolio of a collective investment scheme in securities
3.7.1 Proviso to the de nition of a ‘connected person’
3.7.2 A portfolio of a collective investment scheme in securities [proviso to the de nition of a ‘connected
person’]
3.8 A portfolio of a collective investment scheme in property
3.9 Timing of the ‘connected person’ test
3.10 Expanded or restricted de nition of a ‘connected person’
3.11 Application of the de nition of a ‘connected person’
4. Conclusion
Annexure – Diagram illustrating the rule for determining persons who are related within the third degree of consanguinity
Preamble
In this Note unless the context indicates otherwise –
• ’paragraph’ means a paragraph of the de nition of a ‘connected person’ in section 1(1);
• ‘Schedule’ means a Schedule to the Act;
• ‘section’ means a section of the Act;
• ‘the Act’ means the Income Tax Act 58 of 1962;
• ‘the TA Act’ means the Tax Administration Act 28 of 2011; and
• any word or expression bears the meaning ascribed to it in the Act.
1. Purpose
This Note provides guidance on the interpretation and application of the de nition of a ‘connected person’ in section 1(1). The Value-Added Tax Act contains a de nition of the term ‘connected persons’ in section 1(1) of that Act. Apart from the fact that the term is de ned in the plural, there are a number of other signi cant differences between the value-
14 FEBRUARY 2014
INCOME TAX ACT 58 OF 1962
SECTION 1 (1), DEFINITION OF A ‘CONNECTED PERSON’ CONNECTED PERSONS
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