Page 594 - SAIT Compendium 2016 Volume2

IN 67 (2) Income Tax acT: InTeRPReTaTIon noTes IN 67 (2)
(e) in relation to any person who is a connected person in relation to any other person in terms of the foregoing provisions of this de nition, such other person:
3.6.2 The other person [paragraph (e)]
A person is a connected person in relation to another person, if the other person is considered to be a connected person in relation to the rst-mentioned person. Therefore, if a person is identi ed as a connected person in relation to a person under paragraphs (a) to (d), the other person is a connected person in relation to the person so identi ed.
3.7 A portfolio of a collective investment scheme in securities 3.7.1 Proviso to the de nition of a ‘connected person’
The proviso to the de nition of a ‘connected person’ reads as follows:
A ‘portfolio of a collective investment scheme in securities’ is de ned in section 1(1) as follows:
3.7.2 A portfolio of a collective investment scheme in securities [proviso to the de nition of a ‘connected person’]
A portfolio of a local collective investment scheme in securities normally operates in the form of a vesting trust, and retains its status as a trust for income tax purposes. However, for the purposes of the de nition of a ‘connected person’, a portfolio of a collective investment scheme in securities is treated as a company.* Accordingly, in determining whether a particular person is a connected person in relation to such a portfolio the provisions of paragraph (d) discussed in 3.5 must be considered. This rule also ensures that the bene ciaries of a collective investment scheme in securities are not made connected persons in relation to each other, which would otherwise have been the case under paragraph (bA).
3.8 A portfolio of a collective investment scheme in property
A ‘portfolio of a collective investment scheme in property’ is de ned in section 1(1) as follows:
A portfolio of a collective investment scheme in property normally operates in the form of a vesting trust, but is included in the de nition of a ‘company’ as de ned in section 1(1).† Accordingly, in determining whether a particular person is a connected person in relation to such a portfolio paragraph (d) discussed in 3.5 must be considered. This rule also ensures that the bene ciaries of a collective investment scheme in property are not made connected persons in relation to each other, which would otherwise have been the case under paragraph (bA).
* Proviso added with effect from the commencement of years of assessment commencing on or after 1 January 2010.
† A portfolio of a collective investment scheme in property is included in paragraph (e)(iii) of the de nition of a ‘company’ with effect from years of assessment commencing on or after 1 April 2013. Paragraph (e)(iii) was amended by section 4(1)(f) of the Taxation Laws Amendment Act No. 31 of 2013 with effect from years of assessment commencing on or after 1 January 2015 to restrict its ambit to a portfolio of a collective investment scheme in property that quali es as a REIT.
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Example 30 – Reverse ‘connected person’ relationship
Facts:
B holds 100% of the equity shares in ABC (Pty) Ltd. Is ABC (Pty) Ltd a connected person in relation to B?
Result:
B is a connected person in relation to ABC (Pty) Ltd under paragraph (d)(iv) because B holds at least 20% of the equity shares in ABC (Pty) Ltd. Under paragraph (e) ABC (Pty) Ltd is therefore a connected person in relation to B.
Provided that for the purposes of this de nition, a company includes a portfolio of a collective investment scheme in securities;
‘[P]ortfolio of a collective investment scheme in securities’ means any portfolio comprised in any collective investment scheme in securities contemplated in Part IV of the Collective Investment Schemes Control Act managed or carried on by any company registered as a manager under section 42 of that Act for the purposes of that Part;
Example 31 – Portfolio of a collective investment scheme in securities
Facts:
A portfolio of a collective investment scheme in securities holds 20% of the equity shares in XYZ (Pty) Ltd. No other holder of shares owns more than 50% of the voting rights in the company.
Result:
The portfolio is a connected person in relation to XYZ (Pty) Ltd under paragraph (d)(v) because – the portfolio is deemed to be a company for the purposes of the de nition of a ‘connected person’; it holds at least 20% of the equity shares in XYZ (Pty) Ltd; and no other holder of shares holds the majority voting rights in the company.
‘[P]ortfolio of a collective investment scheme in property’ means any portfolio comprised in any collective investment scheme in property contemplated in Part V of the Collective Investment Schemes Control Act managed or carried on by any company registered as a manager under section 51 of that Act for the purposes of that Part;