Page 408 - SAIT Compendium 2016 Volume1

Eighth Schedule INCOME TAX ACT 58 OF 1962 Eighth Schedule
(a) restitution of a right to land, an award or compensation in terms of the Restitution of Land Rights Act, 1994 (Act 22 of 1994).
(b) . . .
[Sub-para. (b) deleted by s. 121 (1) (b) of Act 22 of 2012 – date of commencement: 1 January 2013; this substitution
applies iro years of assessment commencing on or after that date.]
[Para. 64A inserted by s. 92 (1) of Act 74 of 2002 and substituted by s. 55 of Act 20 of 2006.]
64B Disposal of equity shares in foreign companies
(1) Subject to subparagraph (4), a person other than a headquarter company must disregard any capital gain or capital loss determined in respect of the disposal of any equity share in any foreign company (other than an interest contemplated in paragraph 2 (2)), if—
(a) that person (whether alone or together with any other person forming part of the same group of companies as that
person) immediately before that disposal—
(i) held an interest of at least 10 per cent of the equity shares and voting rights in that foreign company; and
(ii) held the interest contemplated in subitem (i) for a period of at least 18 months prior to that disposal, unless— (aa) that person is a company;
(bb) that interest was acquired by that person from any other company that forms part of the same group of
companies as that person; and
(cc) that person and that other company in aggregate held that interest for more than 18 months; and
(b) that interest is disposed of to any person that is not a resident (other than a controlled foreign company or any person that is a connected person in relation to the person disposing of that interest) for an amount that is equal to or exceeds the market value of the interest.
[Item (b) substituted by s. 117 (1) of Taxation Laws Amendment Act, 2015 (‘or any person that is a connected person in relation to the person disposing of that interest’ inserted) – date of commencement deemed to have been 5 June 2015; this substitution applies iro disposals made on or after that date.]
(2) Subject to subparagraph (4), a headquarter company must disregard any capital gain or capital loss determined in respect of the disposal of any equity share in any foreign company (other than an interest contemplated in paragraph 2 (2)) if that headquarter company (whether alone or together with any other person forming part of the same group of companies as that headquarter company) immediately before that disposal held at least 10 per cent of the equity shares and voting rights in that foreign company.
(3) Paragraph 8 (b) applies in respect of any capital gain determined in respect of any disposal of any equity share in any foreign company on or before 31 December 2012 by a person which is or was disregarded in terms of subparagraphs (1) and (4) in any year of assessment, if—
(a) the foreign company prior to that disposal was a controlled foreign company in relation to that person or in relation
to any other company in the same group of companies as that person;
(b) the equity share in that foreign company was disposed of to a connected person in relation to that person either
before or after that disposal;
(c) that person—
(i) disposed of that equity share for no consideration or for consideration which does not reflect an arm’s length price, other than a distribution contemplated in subitem (ii);
(ii) disposed of that equity share by means of a distribution made unless—
(aa) that distribution was made to a company that forms part of the same group of companies as that person; or (bb) the full amount of that distribution was included in the income of a holder of shares in that foreign company
or would, but for the provisions of section 10B (2) (a) or (b), have been so included; or [Subsubitem (bb) substituted by s. 144 (a) of Act 31 of 2013 – date of commencement: 12 December 2013.]
(iii) disposed of any consideration where that consideration was received or accrued from the disposal of that equity share (or any amount received in exchange therefor) in terms of any transaction, operation or scheme of which the disposal of the equity share forms part—
(aa) for no consideration or for consideration which does not reflect an arm’s length price (other than a
distribution contemplated in subsubitem (bb)); or
(bb) by means of a distribution by a company, unless the full amount of that distribution—
(A) was subject to or would, but for the provisions of section 64B (5) (f), have been subject to secondary tax on companies; or
(B) was included in the income of a holder of shares in that company or would, but for the provisions of section 10B (2) (a) or (b), have been so included; and
[Unit (B) substituted by s. 144 (b) of Act 31 of 2013 – date of commencement: 12 December 2013.]
(d) that foreign company ceased, in terms of any transaction, operation or scheme of which the disposal of the equity share forms part, to be a controlled foreign company in relation to that person or other company in the same group of companies as that person (having regard solely to any rights contemplated in paragraph (a) of the de nition of
‘participation rights’ in section 9D).
(4) A person must disregard any capital gain determined in respect of any foreign return of capital received by
or accrued to that person from a ‘foreign company’ as de ned in section 9D (other than an interest contemplated in paragraph 2 (2)) where that person (whether alone or together with any other person forming part of the same group of companies as that person) holds at least 10 per cent of the total equity shares and voting rights in that company.
(5) The provisions of this paragraph do not apply in respect of any capital gain or capital loss determined in respect of—
(a) the disposal of any equity share in any portfolio contemplated in paragraph (e) of the de nition of ‘company’ in section 1; and
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SAIT CompendIum oF TAx LegISLATIon VoLume 1