Page 258 - SAIT Compendium 2016 Volume1

s 42
(b)
INCOME TAX ACT 58 OF 1962 s 43
any business undertaking as a going concern to a company in terms of an asset-for-share transaction and that disposal includes any amount of debt that is attributable to, and arose in the normal course of that business undertaking,
into operation on 1 April 2013 and applies in respect of transactions entered into on or after that date.]
‘equity share interest’, ‘non-equity share’ and ‘non- equity share interest’ . . .
[De nitions of ‘equity share interest’, ‘non-equity share’ and ‘non-equity share interest’ deleted by s. 92 (1) (b), (c) and (d), respectively, of Act 31 of 2013 – deletions deemed to have come into operation on 24 October 2013 (‘4 July 2013’ retrospectively replaced by ‘24 October 2013’ by s. 124 (1) of Act 43 of 2014) and apply in respect of transactions entered into on or after that date.]
‘property linked unit’ . . .
[De nition of ‘property linked unit’ deleted by s. 92 (1) (e) of Act 31 of 2013 – deletion deemed to have come
into operation on 1 April 2013 and applies in respect of transactions entered into on or after that date.]
‘share interest’ . . .
[De nition of ‘share interest’ deleted by s. 92 (1) (f) of Act
31 of 2013 – deletion deemed to have come into operation on 24 October 2013 (‘4 July 2013’ retrospectively replaced by ‘24 October 2013’ by s. 124 (1) of Act 43 of 2014) and applies in respect of transactions entered into on or after that date.]
‘substitutive share-for-share transaction’ means a transaction between a person and a company in terms of which that person disposes of an equity share in the form of a linked unit in that company and acquires an equity share other than a linked unit in that company.
[De nition of ‘substitutive share-for-share transaction’ substituted by s. 92 (1) (g) of Act 31 of 2013 – substitution deemed to have come into operation on 24 October 2013 (‘4 July 2013’ retrospectively replaced by ‘24 October 2013’ by s. 124 (1) of Act 43 of 2014) and applies in respect of transactions entered into on or after that date.]
(1A) Where a person disposes of an equity share in a company that constitutes a pre-valuation date asset and acquires another equity share in that company in terms of a substitutive share-for-share transaction, for the purposes of determining the date of acquisition of that equity share and the expenditure in respect of the cost of acquisition of that equity share, that person must be treated as having— (a) disposed of that equity share at the time immediately
before that substitutive share-for-share transaction, for an amount equal to the market value of that equity share at that time; and
(b) immediately reacquired that equity share at that time at an expenditure equal to that market value—
(i) less any capital gain, and
(ii) increased by any capital loss,
that would have been determined had that equity share
been disposed of at market value at that time,
which expenditure must be treated as an amount of expenditure actually incurred at that time for the purposes of paragraph 20 (1) (a) of the Eighth Schedule.
[Sub-s. (1A) inserted by s. 92 (1) (h) of Act 31 of 2013 – insertion deemed to have come into operation on
24 October 2013 (‘4 July 2013’ retrospectively replaced by ‘24 October 2013’ by s. 124 (1) of Act 43 of 2014) and applies in respect of transactions entered into on or after that date.]
(2) Subject to subsection (4), where a person disposes of an equity share in a company and acquires another equity share in that company in terms of a substitutive share-for- share transaction, that person must be deemed to have— (a) disposed of that equity share so disposed of for an
amount equal to the expenditure incurred by that person in respect of that equity share so disposed of which is or was allowable in terms of paragraph 20 of the Eighth Schedule or taken into account in terms of section 11 (a) or 22 (1) or (2), as the case may be;
[Para. (b) substituted by s. 38 (1) (e) of Act 31 of 2005 and by s. 53 (1) (v) of Act 35 of 2007.]
that person must, upon the disposal of any equity share acquired in terms of that asset-for-share transaction and notwithstanding the fact that that person may be liable as surety for the payment of the debt referred to in subparagraph (a) or (b), treat so much of the face value of that debt as relates to that equity share—
(A) where that equity share is held as a capital asset, as an amount received or accrued in respect of that equity share that accrues to that person in respect of the disposal by that person of that equity share; or
(B) where that equity share is held as trading stock, as income to be included in that person’s income for the year of assessment during which that equity share is disposed of by that person.
[Words in sub-s. (8) following para. (b) substituted by s. 68 (1) (g) of Act 24 of 2011 (date of commencement: 1 April 2012) and by s. 74 (1) (e) of Act 22 of 2012 – date of commencement deemed to have been 1 April 2012.]
[Sub-s. (8) amended by s. 50 (1) (i) of Act 45 of 2003 and by s. 53 (1) (w) of Act 35 of 2007.]
(8A) This section does not apply to the disposal of an asset by a person to a company if—
(a) the person and the company agree in writing that this
section does not apply;
[Para. (a) substituted by s. 62 (1) (g) of Act 7 of 2010.] (b) the disposal would not be taken into account for
purposes of determining—
(i) any taxable income or assessed loss of that
person; or
(ii) any proportional amount of the net income of a
controlled foreign company which is included in
the income of any resident in terms of section 9D; or
[Sub-para. (ii) substituted by s. 74 (1) (g) 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.]
(c) that asset constitutes a debt owing by or a share in that company.
[Para. (c) added by s. 74 (1) (h) of Act 22 of 2012 – date of commencement: 1 January 2013; this paragraph applies in respect of transactions entered into on or after that date.]
(9) . . .
[Sub-s. (9) amended by s. 50 (1) (j) of Act 45 of 2003 and by s. 33 (1) of Act 32 of 2004 and deleted by s. 53 (1) (x) of Act 35 of 2007.]
(10) . . .
[Sub-s. (10) deleted by s. 38 (1) (f) of Act 31 of 2005.]
[S. 42 amended by s. 21 (b) of Act 88 of 1965, by s. 17 of Act 95 of 1967, by s. 29 (1) of Act 89 of 1969, by s. 19 of Act 52 of 1970, by s. 23 of Act 88 of 1971, by s. 18 (1) of Act 90 of 1972, by s. 22 (1) of Act 65 of 1973, by s. 32 of Act 85 of 1974, by s. 22 of Act 69 of 1975, by s. 18 (1) of Act 103 of 1976, by s. 19 (1) of Act 113 of 1977, by s. 20 of Act 91 of 1982, by s. 28 of Act 94 of 1983, by s. 31 (1) of Act 129 of 1991, by s. 27 of Act 141 of 1992 and by s. 23 of Act 21 of 1994, repealed by s. 25 (1) of Act 21 of 1995, inserted by s. 44 (1) of Act 60 of 2001 and substituted by s. 34 (1) of Act 74 of 2002.]
43 Substitutive share-for-share transactions
(1) For the purposes of this section— ‘equity share’ includes a linked unit;
[De nition of ‘equity share’ substituted by s. 92 (1) (a) of Act 31 of 2013 – substitution deemed to have come
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SAIT CompendIum oF TAx LegISLATIon VoLume 1