Page 186 - SAIT Compendium 2016 Volume1

s 23K INCOME TAX ACT 58 OF 1962 s 23K
de nition applies in respect of any amount of interest incurred in terms of a debt instrument where that debt instrument was issued or used for the purpose of procuring, enabling, facilitating or funding the acquisition by an acquiring company of an asset in terms of a reorganisation transaction entered into on or after that date and on or before 31 March 2014 added by s. 211 of Act 31 of 2013).]
(2) Subject to subsections (3), (9) and (10), no deduction is allowed in respect of interest incurred by an acquiring company in terms of—
[Words preceding para. (a) substituted by s. 59 (1) (a) of Act 31 of 2013 – date of commencement: 1 April 2014.]
(a) a debt if that debt was issued, assumed or used directly or indirectly—
(i) for the purpose of procuring, enabling, facilitating or funding the acquisition by that acquiring company of any asset in terms of a reorganisation transaction; or
(ii) in substitution for any debt issued, assumed or used as contemplated in subparagraph (i) ; or
(b) a debt if that debt was issued, assumed or used— [Words preceding sub-para. (i) substituted by s. 59 (1) (b)
of Act 31 of 2013 – substitution deemed to have come into operation on 1 January 2013; the substituted wording applies in respect of acquisition transactions entered into on or after that date.]
(i) for the purpose of nancing the acquisition of an equity share in a company in terms of an acquisition transaction; or
(ii) in substitution for any other debt issued, assumed or used as contemplated in subparagraph (i).
[Sub-s. (2) substituted by s. 49 (1) (g) of Act 22 of 2012 – date of commencement: 1 January 2013; this substitution applies in respect of acquisition transactions entered into on or after that date.]
(3) Subject to subsection (5), the Commissioner may, on application by an acquiring company, issue a directive that subsection (2) does not apply in respect of an amount of interest incurred as contemplated in that subsection.
(4) In considering an application for a directive contemplated in subsection (3), the Commissioner—
(a) must take into account—
(i) the amount of interest incurred as contemplated in subsection (2) by an acquiring company in terms of a debt contemplated in that subsection; and
[Sub-para. (i) substituted by s. 49 (1) (h) of Act 22 of 2012 – date of commencement: 1 January 2013.]
(ii) all amounts of interest incurred, received or accrued in respect of all debts issued, assumed or used directly or indirectly to fund a debt in respect of which any amount of interest is incurred by an acquiring company as contemplated in subsection (2); and
[Sub-para. (ii) substituted by s. 49 (1) (h) of Act 22 of 2012 – date of commencement: 1 January 2013.]
any debt contemplated in subparagraphs (i) and (ii) of
paragraph (a):
[Words following sub-para. (ii) and preceding the proviso
substituted by s. 49 (1) (i) of Act 22 of 2012 – date of commencement: 1 January 2013.]
Provided that in determining whether a reduction of taxable income is signi cant for the purpose of this subsection, the Commissioner must have regard to the criteria prescribed by the regulations contemplated in subsection (7).
(5) Any directive issued by the Commissioner in terms of subsection (3) may be made subject to such conditions and limitations as may be determined by the Commissioner.
(6) A directive issued by the Commissioner in terms of subsection (3) in respect of an amount of interest incurred in terms of a debt must be effective from—
(b)
may only issue a directive contemplated in subsection (3) if and to the extent that the Commissioner is, having regard to the criteria prescribed by the Regulations contemplated in subsection (7), satis ed that the issuing of that directive will not lead nor be likely to lead to a signi cant reduction of the aggregate taxable income of all parties who incur, receive or accrue interest—
(i) in respect of; and
(ii) for all periods during which any amounts are
[Sub-s. (6) substituted by s. 49 (1) (j) of Act 22 of 2012 and by s. 49 (1) (k) of Act 22 of 2012 – date of commencement: 1 January 2013.]
(7) The Minister must make regulations that prescribe criteria that the Commissioner must, in terms of subsection (4) (b), have regard to in considering any application made in terms of subsection (3) by an acquiring company in respect of any amount of interest incurred by such an acquiring company in terms of any debt, which criteria must relate to—
[Words in sub-s. (7) preceding para. (a) substituted by s. 49 (1) (l) of Act 22 of 2012 – date of commencement: 1 January 2013.]
(a) all amounts of debt in relation to total equity of such an acquiring company;
[Para. (a) substituted by s. 49 (1) (m) of Act 22 of 2012 – date of commencement: 1 January 2013.]
(b) total amounts of interest to be incurred by such an acquiring company in relation to total income of such an acquiring company;
(c) terms of such a debt, including the economic effect of such a debt, having regard to any debt or equity features of such a debt;
[Para. (c) substituted by s. 49 (1) (n) of Act 22 of 2012 – date of commencement: 1 January 2013.]
(d) the direct or indirect holding of shares in such an acquiring company by any holder (or any company that forms part of the same group of companies as the holder) of such a debt; and
[Para. (d) substituted by s. 49 (1) (n) of Act 22 of 2012 – date of commencement: 1 January 2013.]
(e) any other factor prescribed by the Minister.
(8) (a) If, subsequent to the date on which a directive is issued by the Commissioner pursuant to an application made by an acquiring company in terms of subsection
(3)—
outstanding in terms of,
(a)
(b)
the date on which that debt was issued or assumed if the application for that directive is made—
(i) on or before 31 December 2011, where that debt was issued or assumed before 25 October 2011; or
(ii) within 60 days of the date of issue of that debt, where that debt is issued or assumed on or after 25 October 2011; or
the date on which the application for that directive is made if—
(i) that debt was issued or assumed before 25 October 2011 and that application is made after 31 December 2011; or
(ii) that debt is issued or assumed on or after 25 October 2011 and that application is made later than 60 days after the date of issue or assumption of that debt.
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SAIT CompendIum oF TAx LegISLATIon VoLume 1