Page 735 - SAIT Compendium 2016 Volume2

BGR 9 INCOME Tax aCT: BINdINg gENERaL RuLINgS BGR 20
• Diamond export levy
• Donations tax*
• Estate duty
• Royalty levied on the transfer of a mineral resource extracted from within South Africa
• Securities transfer tax
• Skills development levy
• Transfer duty
• Unemployment insurance contributions
• Value-added tax
The above list is not exhaustive.
4. Period for which this ruling is valid
This BGR applies with effect from the date of publication and will apply for an inde nite period.
Group Executive: Interpretation and Rulings Legal and Policy Division
SOUTH AFRICAN REVENUE SERVICE Date of rst issue: 19 September 2011
DATE: ACTS: SECTIONS:
SUBJECT:
Preamble
BINDING GENERAL RULING (INCOME TAX): NO. 20
10 December 2013
INCOME TAX ACT 58 OF 1962 AND TRANSFER DUTY ACT 40 OF 1949
SECTIONS 10 (1) (cN), 10 (1) (cO) AND 30B OF THE ACT; PARAGRAPH 63A OF THE EIGHTH SCHEDULE TO THE ACT; SECTION 9 (1) (c) OF THE TRANSFER DUTY ACT
INTERPRETATION OF THE EXPRESSION ‘SUBSTANTIALLY THE WHOLE’
For the purposes of this ruling —
• ‘PBO’ means a public bene t organisation approved by the Commissioner under section 30(3); • ‘section’ means a section of the Act;
• ‘the Act’ means the Income Tax Act 58 of 1962;
• ‘Transfer Duty Act’ means the Transfer Duty Act 40 of 1949; and
• any word or expression bears the meaning ascribed to it in the Act.
1. Purpose
This binding general ruling provides clarity on the interpretation of the expression ‘substantially the whole’ as referred to in sections 10 (1) (cN), 10 (1) (cO), 30B, and paragraph 63A of the Eighth Schedule to the Act and section 9(1)(c) of the Transfer Duty Act.
2. Background
Under the partial taxation system a PBO is permitted to conduct a business undertaking or trading activity within certain prescribed parameters and becomes taxable on receipts and accruals derived from those activities in excess of prescribed limits while at the same time retaining exemption for its public bene t activities. In view of their partially exempt status PBOs should not enjoy an unfair tax advantage over other taxpaying entities.
The legislature recognised that it was not possible for an organisation to carry on separate activities that were completely independent of one another. The concept of ‘substantially the whole’ was accordingly introduced into the legislation to ensure that the sole or principal object of the PBO remains the carrying on of public bene t activities, while at the same time allowing certain parameters within which the PBO can carry on its trading operations.
The concept of ‘substantially the whole’ was later also introduced into legislation affecting the exemption of approved recreational clubs and membership based organisations.
As the PBOs and approved recreational clubs effectively use assets to carry on trading activities to produce exempt and non-exempt income, the legislation dealing with capital gains and losses as well as transfer duty was also amended to give effect to the concept of ‘substantially the whole’.
3. The law
Set out below are the relevant provisions of the Act and the Transfer Duty Act which refer to the expression ‘substantially the whole’.
* Under section 54 donations tax is only levied on a donation made by a resident. Consequently, donations tax will never be a creditable tax for tax treaty purposes.
SAIT CompendIum oF TAx LegISLATIon VoLume 2 727