Page 266 - SAIT Compendium 2016 Volume1

s 45 INCOME TAX ACT 58 OF 1962 s 45
(a) from any company that forms part of the same group of companies as that holder and that amount is applied in reduction of the capital subscribed for that share, that amount must be disregarded in determining the aggregate capital gain or the taxable income of that holder.
[Para. (d) substituted by s. 77 (1) (k) of Act 22 of 2012 – date of commencement deemed to have been 1 January 2012; this substituted paragraph applies in respect of years of assessment commencing on or after that date.]
[Sub-s. (3A) inserted by s. 70 (1) (a) of Act 24 of 2011 – date of commencement deemed to have been
30 August 2011; this subsection applies in respect of debt instruments and shares issued on or after that date, other than debt instruments and shares issued in terms of intra-group transactions which, but for any suspensive conditions contained in such agreements, would have been entered into before that date (NB: The initial wording of the said s. 70 (1) (a) ‘on or after that date’ was retrospectively replaced with ‘before that date’ by s. 190 of Act 31 of 2013)).]
(4) (a) This subsection applies in respect of a transferee company which has acquired an asset—
(i) in terms of a disposal by a transferor company by means of an intra-group transaction; or
(ii) in terms of one or more disposals subsequent to the disposal contemplated in subparagraph (i) and no capital gain or capital loss was determined in respect of any of those disposals as a result of the application of this Part:
Provided that this subsection does not apply to any asset that constitutes trading stock that is regularly and continuously disposed of by the transferee company.
[Para. (a) amended by s. 64 (1) (a) of Act 7 of 2010.]
(b) Where a transferee company contemplated in paragraph (a) of the de nition of ‘intra-group transaction’ which has acquired an asset as contemplated in paragraph (a) ceases within a period of six years after the acquisition to form part of any group of companies in relation to the transferor company contemplated in paragraph (a) (i) or a controlling group company in relation to the transferor company, and the
transferee company has not disposed of that asset—
[Words in sub-s. (4) (b) preceding sub-para. (i) substituted by s. 77 (1) (m) 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.]
(i) an amount equal to the lesser of—
(aa) the greatest capital gain that would have been
determined in respect of any disposal of the asset in terms of an intra-group transaction within the period of six years preceding the date on which the transferee company ceased to form part of the group of companies, had subsection (2) not applied in respect of that disposal; or
(bb) the capital gain that would be determined if the asset was disposed of on the date on which the transferee company ceases to form part of the group of companies for an amount equal to the market value of the asset on that date,
is deemed to be a capital gain of the transferee company for the current year of assessment and the base cost of the asset must be increased by that amount and, where the asset is an allowance asset, the cost or value of the asset must be increased by 50 per cent of that amount;
(ii) an amount equal to the greater of—
(aa) the greatest amount contemplated in paragraph
(j) or (n) of the de nition of ‘gross income’ that would have been included in income as a result of any disposal of the asset in terms of an intra-group transaction within the period of six
years preceding the date on which the transferee company ceases to form part of the group of companies, had subsection (3) not applied in respect of that disposal; or
[Item (aa) substituted by s. 64 (1) (b) of Act 7 of 2010.] (bb) the amount contemplated in paragraph (j) or (n) of the de nition of ‘gross income’ that would be included in income if the asset was disposed of on the date on which the transferee company ceases to form part of the group of companies for an amount
equal to the market value of the asset on that date, must be included in the gross income of the transferee company for the current year of assessment and the cost or value of the asset for purposes of any deductions allowable in respect of that asset (other than deductions allowable in terms of section 12G or 12I) must be increased by that amount: Provided that where an amount contemplated in paragraph (j) of the de nition of ‘gross income’ is so included, the cost or value is deemed to be so increased immediately before any subsequent disposal of the asset; and
(iii) an amount equal to the lesser of—
(aa) the greatest amount of taxable income (other than
any taxable capital gain and any taxable income derived as a result of an amount being included in gross income in terms of paragraph (j) or (n) of the de nition of ‘gross income’) that would have been determined in respect of any disposal of the asset in terms of an intra-group transaction within the period of six years preceding the date on which the transferee company ceases to form part of the group of companies, had subsection (2) not applied in respect of that disposal; or
(bb) the taxable income (other than any taxable capital gain and any taxable income derived as a result of an amount being included in gross income in terms of paragraph (j) or (n) of the de nition of ‘gross income’), that would be determined if the asset was disposed of on the date on which the transferee company ceases to form part of the group of companies for an amount equal to the market value of the asset on that date,
must be included in the taxable income of the transferee company for the current year of assessment and the cost of the asset must be increased by that amount;
[Para. (b) amended by s. 41 (1) (a) of Act 31 of 2005 and by s. 28 (1) (a) of Act 3 of 2008 and substituted by s. 56 (1) (a) of Act 35 of 2007 and by s. 51 (1) (d) of Act 60 of 2008.]
(bA) Where a transferee company contemplated in paragraph (b) of the de nition of ‘intra-group transaction’ which has acquired an asset that constitutes an equity share as contemplated in paragraph (a)—
(i) ceases within a period of six years after the acquisition— (aa)to form part of any group of companies (as
de ned in section 1) in relation to—
(A) the transferor company contemplated in
paragraph (a) (i); or
(B) any controlling group company of a group
of companies (as de ned in section 1) in
relation to that transferor company; or
(bb) to be a controlled foreign company in relation to any resident that is part of any group of
companies contemplated in item (aa); and
(ii) has not disposed of that equity share at the time of so
ceasing,
[Sub-para. (ii) substituted by s. 94 (1) (e) 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.]
258 SAIT CompendIum oF TAx LegISLATIon VoLume 1