Page 255 - SAIT Compendium 2016 Volume1

s 42
INCOME TAX ACT 58 OF 1962 s 42
a person disposes of an equity share in a listed company or in a portfolio of a collective investment scheme in securities to any other company and after that disposal, together with any other asset-for-share transaction that is concluded—
(i) on the same terms as that asset-for-share transaction; and
(ii) within a period of 90 days after that disposal, that other company holds—
(aa) at least 35 per cent of the equity shares of that
listed company or portfolio; or
(bb) at least 25 per cent of the equity shares of that
listed company or portfolio if no person other than that other company holds an equal or greater amount of equity shares in the listed company or portfolio;
[Para. (b) amended by s. 53 (1) (g) of Act 35 of 2007 and by s. 62 (1) (b) and (c) of Act 7 of 2010.]
(bA). . .
[Para. (bA) inserted by s. 53 (1) (i) of Act 35 of 2007 and
substituted by s. 26 (1) (e) of Act 3 of 2008, by s. 49 (1) (f) of Act 60 of 2008 and by s. 62 (1) (d) of Act 7 of 2010 and deleted by s. 62 (1) (e) of Act 7 of 2010]
(c) any valuation of that asset effected by that person within the period contemplated in paragraph 29 (4) of the Eighth Schedule must be deemed to have been effected in respect of the equity shares in that company acquired in terms of that asset-for-share transaction.
[Para. (c) added by s. 50 (1) (d) of Act 45 of 2003 and substituted by s. 53 (1) (j) of Act 35 of 2007.]
[Sub-s. (2) amended by s. 53 (1) (d) of Act 35 of 2007.]
(3) Subject to subsection (4) or (8), where a person disposes of—
(a) an asset that constitutes an allowance asset in that
person’s hands to a company as part of an asset-for- share transaction and that company acquires that asset as an allowance asset—
(i) no allowance allowed to that person in respect of that asset must be recovered or recouped by that person or included in that person’s income for the year of that transfer; and
(ii) that person and that company must be deemed to be one and the same person for purposes of determining the amount of any allowance or deduction—
(aa) to which that company may be entitled in respect of that asset; or
(bb) that is to be recovered or recouped by or included in the income of that company in respect of that asset;
[Sub-para. (ii) amended by s. 33 of Act 8 of 2007.] [Para. (a) amended by s. 53 (1) (k) of Act 35 of 2007.] (b) an asset that constitutes an allowance asset in that
person’s hands to a company as part of an asset-for- share transaction and that company acquires that asset as trading stock, no allowance allowed to that person in respect of that asset must be recovered or recouped by that person or included in that person’s income for the year of that transfer; or
[Para. (b) substituted by s. 53 (1) (l) of Act 35 of 2007.] (c) a contract to a company as part of a disposal of a business as a going concern in terms of an asset-for- share transaction and an allowance in terms of section 24 or 24C was allowable to that person in respect of that contract for the year preceding that in which that contract is transferred or would have been allowable to that person for the year of that transfer had that
(i) no allowance allowed to that person under those sections must be included in that person’s income for the year of that transfer; and
(ii) that person and that company must be deemed to be one and the same person for purposes of determining the amount of any allowance— (aa)to which that company may be entitled
under those sections; or
(bb) that is to be included in the income of that
company under those sections.
[Para. (c) substituted by s. 53 (1) (m) of Act 35 of 2007 and by s. 62 (1) (c) of Taxation Laws Amendment Act, 2015 – date of commencement: 1 January 2016; the substitution applies iro years of assessment ending on or after that date.]
(i) SAIT CompendIum oF TAx LegISLATIon VoLume 1
contract not been so transferred—
(3A) For the purposes of the de nition of ‘contributed tax capital’, if an asset is disposed of by a person to a company in terms of an asset-for-share transaction contemplated in paragraph (a) of the de nition of ‘asset- for share transaction’ and that person at the close of the day on which that asset is disposed of holds a qualifying interest in that company as contemplated in paragraph (a) (iii) of the de nition of ‘qualifying interest’, or is a natural person who will be engaged on a full-time basis in the business of that company or a controlled group company in relation to that company of rendering a service, the amount received by or accrued to the company for the issue of the shares is deemed to be equal to—
[Words in sub-s. (3A) preceding para. (a) substituted by s. 68 (1) (d) of Act 24 of 2011 – date of commencement: 1 January 2012. This substituted words apply in respect of transactions entered into on or after that date.]
(a) if the asset is trading stock, the amount taken into account by that person in respect of the asset in terms of section 11 (a) or 22 (1) or (2); or
(b) if the asset is an asset other than trading stock, the base cost of that asset determined at the time of that disposal in relation to the person disposing of that asset:
Provided that this subsection does not apply in respect of any asset-for-share transaction in terms of which a person disposes of—
an equity share in a listed company or in a portfolio of a collective investment scheme in securities to any other company and after that disposal, together
247
Prelex
Wording of para. (c) in force until 1 January 2016 (c) a contract to a company as part of a disposal of a
business as a going concern in terms of an asset- for-share transaction and that contract imposes an obligation on that person in respect of which an allowance in terms of section 24C was allowable to that person for the year preceding that in which that contract is transferred or would have been allowable to that person for the year of that transfer had that contract not been so transferred—
(i) no allowance allowed to that person in respect of that obligation must be included in that person’s income for the year of that transfer; and
(ii) that person and that company must be deemed to be one and the same person for purposes of determining the amount of any allowance— (aa) to which that company may be entitled in
respect of that obligation; or
(bb) that is to be included in the income of that
company in respect of that obligation.
INCOME TAX ACT – SECTIONS