Page 257 - SAIT Compendium 2016 Volume1

s 42
INCOME TAX ACT 58 OF 1962 s 42
(b)
(aa) disposed of all the equity shares acquired in terms of that asset-for-share transaction that are still held immediately after that person ceased— (A) to hold the qualifying interest contemplated
in subparagraph (i); or
(B) to be engaged as contemplated in
subparagraph (ii),
for an amount equal to the market value of those equity shares as at the date of the disposal in terms of the asset-for-share transaction; and
(bb)immediately reacquired all the equity shares contemplated in item (aa) at a cost equal to the amount contemplated in that item:
Provided that this paragraph does not apply where the person ceases to hold a qualifying interest in that company as a result of—
(a)an intra-group transaction contemplated in section 45, an unbundling transaction contemplated in section 46 or a liquidation distribution contemplated in section 47;
(b) an involuntary disposal contemplated in paragraph 65 of the Eighth Schedule or a disposal that would have constituted an involuntary disposal contemplated in that paragraph had that asset not been a nancial instrument; or
(c) the death of that person; or
disposed of an equity share in a foreign company to another foreign company in terms of an asset-for- share transaction contemplated in paragraph (b) of the de nition of ‘asset-for-share transaction’ and, at any time within a period of 18 months after the date of that disposal and whether or not as a result of the disposal of shares in that foreign company—
(i) where that asset-for-share transaction was constituted as a result of compliance with the requirement prescribed by paragraph (b) (ii) (aa) of that de nition, that requirement is no longer met; or
(ii) where that asset-for-share transaction was constituted as a result of compliance with the requirement prescribed by paragraph (b) (ii) (bb) of that de nition, that requirement is no longer met,
that person is for purposes of subsection (5), section 22 or the Eighth Schedule deemed to have—
(aa) disposed of all the equity shares acquired in
terms of that asset-for-share transaction that are still held immediately after the applicable requirement is no longer met, for an amount equal to the market value of those equity shares as at the date of the disposal in terms of the asset- for-share transaction; and
(bb)immediately reacquired all the equity shares contemplated in item (aa) at a cost equal to the amount contemplated in that item:
Provided that this paragraph does not apply where any requirement prescribed by paragraph (b) (ii) (aa) or (bb) of the de nition of ‘asset-for-share transaction’ is no longer met as a result of—
(a) an intra-group transaction contemplated in section 45, an unbundling transaction contemplated in section 46 or a liquidation distribution contemplated in section 47; or
(b) an involuntary disposal contemplated in paragraph 65 of the Eighth Schedule or a disposal that would have constituted an involuntary disposal contemplated in that paragraph had that asset not been a nancial instrument.
(f) of Act 24 of 2011 and substituted by s. 74 (1) (d) 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.]
(7) Where a company disposes of an asset within a period of 18 months after acquiring that asset in terms of an asset-for-share transaction, and—
(a) that asset constitutes a capital asset, so much of any
capital gain determined in respect of the disposal of that asset as does not exceed the amount that would have been determined had that asset been disposed of at the beginning of that period of 18 months for proceeds equal to the market value of that asset as at that date, may not be taken into account in determining any net capital gain or assessed capital loss of that company but is subject to paragraph 10 of the Eighth Schedule for purpose of determining an amount of taxable capital gain derived from that gain, which taxable capital gain may not be set off against any assessed loss or balance of assessed loss of that company; or
(b) that asset constitutes—
(i) trading stock in the hands of that company, other
than an asset that constitutes trading stock that is regularly and continuously disposed of by that company, so much of the amount received or accrued in respect of the disposal of that trading stock as does not exceed the market value of that trading stock as at the beginning of that period of 18 months and so much of the amount taken into account in respect of that trading stock in terms of section 11 (a) or 22 (1) or (2) as is equal to the amount so taken into account in terms of subsection (2) (b); or
[Sub-para. (i) amended by s. 62 (1) (f) of Act 7 of 2010 and substituted by s. 54 (1) (b) of Act 43 of 2014 – date of commencement: 20 January 2015.]
(ii) an allowance asset in the hands of that company, so much of any allowance in respect of that asset that is recovered or recouped by or included in the income of that company as a result of that disposal as does not exceed the amount that would have been recovered had that asset been disposed of at the beginning of that period of 18 months for an amount equal to the market valve of that asset as at that date,
must be deemed to be attributable to a separate trade carried on by that company, the taxable income from which trade may not be set off against any assessed loss or balance of assessed loss of that company.
[Sub-s. (7) amended by s. 53 (1) (t) of Act 35 of 2007.]
(8) Where a person disposes of—
(a) any asset which secures any debt to a company in
terms of an asset-for-share transaction and that debt was incurred by that person—
(i) more than 18 months before that disposal; or (ii) within a period of 18 months before that
disposal—
(aa) and that debt was incurred at the same time
as that asset was acquired by that person; or (bb)to the extent that debt constitutes the re nancing of any debt in respect of that asset incurred as contemplated in subparagraph
(i) or item (aa) of subparagraph (ii),
and that company assumes that debt or an equivalent amount of debt that is secured by that asset; or
[Para. (a) amended by s. 38 (1) (d) of Act 31 of 2005 and by s. 53 (1) (u) of Act 35 of 2007.]
[Sub-s. (6) amended by s. 50 (1) (h) of Act 45 of 2003, by s. 38 (1) (c) of Act 31 of 2005, by s. 53 (1) (r) and (s) of Act 35 of 2007, by s. 26 (1) (f) of Act 3 of 2008 and by s. 68 (1)
SAIT CompendIum oF TAx LegISLATIon VoLume 1
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INCOME TAX ACT – SECTIONS