Page 269 - SAIT Compendium 2016 Volume1

s 46
INCOME TAX ACT 58 OF 1962 s 46
are all distributed by that unbundling company to any shareholder of that unbundling company in accordance with the effective interest of that shareholder in the shares of that unbundling company—
(aa) if that shareholder is a resident and that shareholder forms part of the same group of companies (as de ned in section 1); or
(bb) if that shareholder is not a resident and that shareholder is a controlled foreign company in relation to any resident that forms part of the same group of companies (as de ned in section 1),
as that unbundling company;
[Sub-para. (i) substituted by s. 95 (1) (b) of Act 31 of 2013 – substitution deemed to have come into operation on 4 July 2013 and applies in respect of unbundling transactions entered into on or after that date.]
(ii) if, immediately before the distribution of the equity shares of an unbundled company by an unbundling company to any shareholder of that unbundling company as contemplated in subparagraph (i)— (aa) the unbundling company holds more than
50 per cent of the equity shares of the
unbundled company; and
(bb) each of those equity shares of that unbundled
company are held by the unbundling
company as a capital asset.
(cc) . . .
[Item (cc) deleted by s. 95 (1) (e) of Act 31 of 2013 – deletion deemed to have come into operation on 4 July 2013 and applies in respect of unbundling transactions entered into on or after that date.]
(iii) . . .
[Sub-para. (iii) deleted by s. 95 (1) (f) of Act 31 of 2013 – deletion deemed to have come into operation on 4 July
2013 and applies in respect of unbundling transactions entered into on or after that date.]
[Sub-s. (1) substituted by s. 54 (1) (a) of Act 45 of 2003, amended by s. 42 (1) of Act 31 of 2005 and by s. 57 (1) (a) and (c) of Act 35 of 2007, substituted by s. 29 (1) of Act
3 of 2008, amended by s. 52 (1) (a) of Act 60 of 2008 and substituted by s. 71 (1) (a) and (b) of Act 24 of 2011 (date of commencement: 1 January 2013) and by s. 78 (1) (a) of Act 22 of 2012 – date of commencement: 1 January 2013 (s. 78 (1) (a) of Act 22 of 2012 therefore replaces s. 71 (1) (a) of Act 24 of 2011 although they both come into operation on 1 January 2013). The substituted subsection applies in respect of transactions entered into on or after that date.]
(2) Where an unbundling company distributes shares in terms of an unbundling transaction, that unbundling company must disregard that distribution for purposes of determining its taxable income or assessed loss, or its net income as contemplated in section 9D.
[Sub-s. (2) substituted by s. 54 (1) (b) of Act 45 of 2003, by s. 42 (1) (d) of Act 31 of 2005 and by s. 29 (1) of Act 3 of 2008.]
(3) (a) If a shareholder acquires equity shares (hereinafter referred to as ‘unbundled shares’) in terms of an unbundling transaction—
(i) that shareholder must—
(aa) allocate a portion of the expenditure and any
market value attributable to the equity shares held in the unbundling company (hereinafter referred to as the ‘unbundling shares’) to the unbundled shares in accordance with subparagraph (v); and
(bb) reduce the expenditure and market value attributable to the unbundling shares by the amount so allocated to the unbundled shares;
(ii) the unbundled shares must, other than for purposes of determining whether a share is a ‘qualifying share’ as de ned in section 9C, be deemed to have been acquired on the same date as the unbundling shares;
[Sub-para. (ii) substituted by s. 57 (1) (d) of Act 35 of 2007.]
(iii) the unbundled shares must be deemed to have been acquired as—
(aa) trading stock, if the unbundling shares were held as trading stock;
(bb) capital assets, if the unbundling shares were held as capital assets;
(iv) any expenditure allocated to the unbundled shares must be deemed to have been incurred on the date on which the expenditure was incurred in respect of the unbundling shares; and
(v) the proportionate amount of the expenditure and market value to be allocated to the unbundled shares in terms of subparagraph (i) (aa) must be determined in accordance with the ratio that the market value of the unbundled shares, as at the end of the day after that distribution, bears to the sum of the market value, as at the end of that day, of the unbundling shares and of the unbundled shares.
(b) For the purposes of this subsection—
‘expenditure’ means in relation to unbundled shares acquired as—
(i) trading stock, the amount taken into account prior to the unbundling transaction in respect of the unbundling shares for the purposes of section 11 (a) or 22 (1) or (2); and
(ii) capital assets, the expenditure incurred prior to the unbundling transaction in respect of the unbundling shares that is allowable in terms of paragraph 20 of the Eighth Schedule;
‘market value’ in relation to unbundling shares acquired prior to the valuation date as de ned in paragraph 1 of the Eighth Schedule, means any market value adopted or determined by the shareholder in respect of those shares within the period contemplated in paragraph 29 (4) of the Eighth Schedule.
[Sub-s. (3) amended by s. 54 (1) (c), (d) and (e) of Act 45 of
2003 and by s. 36 (1) (a) of Act 32 of 2004 and substituted by s. 42 (1) (e) of Act 31 of 2005.]
(3A) If shares are distributed in terms of an unbundling transaction, the contributed tax capital of—
(a) the unbundling company immediately after the
distribution is deemed to be an amount which bears to the contributed tax capital of that company immediately before distribution the same ratio as the aggregate market value, immediately after the distribution, of the shares in that company bears to the aggregate market value of the shares immediately before distribution; and
(b) the unbundled company immediately after the distribution is deemed to be an amount equal to the sum of—
(i) an amount which bears to the contributed tax capital of the unbundling company immediately before the distribution the same ratio as the aggregate market value of the distributed shares before the distribution bears to the aggregate market value of the shares in the unbundling company immediately before the distribution; and
(ii) an amount which bears to the contributed tax capital of the unbundled company immediately before the distribution the same ratio as the shares held in that company immediately before the distribution by persons other than the unbundling
SAIT CompendIum oF TAx LegISLATIon VoLume 1
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INCOME TAX ACT – SECTIONS