Page 254 - SAIT Compendium 2016 Volume1

s 42 INCOME TAX ACT 58 OF 1962 s 42
31 of 2005, by s. 26 (1) (b) of Act 3 of 2008, by s. 49 (1) (b) and (c) of Act 60 of 2008 and by s. 62 (1) (a) of Act 7 of 2010 and substituted by s. 68 (1) (a) of Act 24 of 2011 – date of commencement: 1 January 2012. This substituted de nition applies in respect of transactions entered into on or after that date.]
‘equity share’ . . .
[De nition of ‘equity share’ added by s. 53 (1) (c) of Act 35
of 2007, substituted by s. 26 (1) (c) of Act 3 of 2008 and deleted by s. 48 (1) (a) of Act 17 of 2009.]
‘qualifying interest’ of a person means—
(a) an equity share held by that person in a company which is a listed company or will become a listed company within 12 months after the transaction as a
result of which that person holds that share;
(b) an equity share held by that person in a portfolio of a
collective investment scheme in securities;
(c) equity shares held by that person in a company that constitute at least 10 per cent of the equity shares and that confer at least 10 per cent of the voting rights in
that company;
(d) an equity share held by that person in a company
which forms part of the same group of companies as
that person; or
(e) any equity share held in a portfolio of a hedge fund
collective investment scheme.
[Para. (e) added by s. 62 (1) (b) of Taxation Laws
Amendment Act, 2015 – date of commencement deemed to have been 1 April 2015.]
[De nition of ‘qualifying interest’ added by s. 53 (1) (c) of Act 35 of 2007 and substituted by s. 26 (1) (d) of Act 3 of 2008, by s. 68 (1) (b) of Act 24 of 2011 and by s. 74 (1) (c) of Act 22 of 2012 – date of commencement: 1 January 2013; this substitution applies in respect of transactions entered into on or after that date.]
[Sub-s. (1) amended by s. 53 (1) (a) of Act 35 of 2007.]
(2) Subject to subsections (4) and (8), where a person disposes of an asset to a company in terms of an asset-for- share transaction—
allowable in terms of paragraph 20 of the Eighth Schedule and to have incurred such cost at the date of incurral by that person of such expenditure; or
(bb) where that asset is so disposed of as trading stock, the amount taken into account in respect of that asset in terms of section 11 (a) or 22 (1) or (2),
which cost must, where those equity shares are acquired as—
(A) capital assets, be treated as an expenditure
actually incurred and paid by that person in respect of those equity shares for the purposes of paragraph 20 of the Eighth Schedule; and
(B) trading stock, be treated as the amount to be taken into account by that person in respect of those equity shares for the purposes of section 11 (a) or 22 (1) or (2);
[Sub-para. (ii) substituted by s. 50 (1) (b) of Act 45 of 2003 and amended by s. 53 (1) (f) of Act 35 of 2007 and by s. 49 (1) (e) of Act 60 of 2008.]
(b) that person and that company must, for purposes of determining—
(i) any taxable income derived by that company from a trade carried on by it; or
(ii) any capital gain or capital loss in respect of a disposal of that asset by that company,
be deemed to be one and the same person with respect to—
(aa) where that asset is acquired by that company as a
capital asset from that person who disposes of it as a capital asset—
(A) the date of acquisition of that asset by
that person and the amount and date of incurral by that person of any expenditure in respect of that asset allowable in terms of paragraph 20 of the Eighth Schedule; and
(B) any valuation of that asset effected by that person within the period contem- plated in paragraph 29 (4) of the Eighth Schedule;
(bb) where that asset is acquired by that company as trading stock from that person who disposes of it as trading stock, the date of acquisition of that asset by that person and the amount and date of incurral by that person of any cost or expenditure incurred in respect of that asset as contemplated in section 11 (a) or 22 (1) or (2); or
(cc) where that asset is acquired by that company as trading stock from that person who disposes of it as a capital asset—
(A) the date of acquisition of that asset by that
person and the amount and date of incurral by that person of any expenditure allowable in terms of paragraph 20 of the Eighth Schedule; or
(B) where that person has valued that asset as contemplated in paragraph 29 (4) of the Eighth Schedule, the amount of the market value so determined,
which amount must, notwithstanding paragraph 25 of the Eighth Schedule, be treated as the amount to be taken into account by that company in respect of that asset for purposes of section 11 (a) or 22 (1) or (2):
Provided that this paragraph does not apply in respect of any asset-for-share transaction in terms of which
(a)
that person must be deemed to have— (i) disposed of that asset—
(aa) in the case of an asset-for-share transaction contemplated in paragraph (a) of the de nition of ‘asset-for-share transaction’, for an amount equal to the amount contemplated in item (aa) or (bb) of subparagraph (i) of that paragraph, as the case may be; or
(bb) in the case of an asset-for-share transaction contemplated in paragraph (b) of the de nition of ‘asset-for-share transaction’, for an amount equal to the base cost of that asset on the date of that disposal; and
[Item (bb) substituted by s. 91 (1) of Act 31 of 2013 – substitution deemed to have come into operation on 1 January 2013 and applies in respect of transactions entered into on or after that date.]
[Sub-para. (i) substituted by s. 53 (1) (e) of Act 35 of 2007 and by s. 68 (1) (c) of Act 24 of 2011 – date of commencement: 1 January 2012. This substituted subparagraph applies in respect of transactions entered into on or after that date.]
(ii) acquired the equity shares in that company on the date that such person acquired that asset (other than for purposes of determining whether that share is a ‘qualifying share’ as de ned in section 9C where that asset is not an equity share) and for a cost equal to—
(aa)where that asset is so disposed of as a capital asset, any expenditure in respect of that asset incurred by that person that is
246
SAIT CompendIum oF TAx LegISLATIon VoLume 1