Page 416 - SAIT Compendium 2016 Volume1

Eighth Schedule INCOME TAX ACT 58 OF 1962 Eighth Schedule
that shareholder must be deemed to have disposed of part of that share on the date that the return of capital or foreign return of capital is received by or accrues to the shareholder.
[Sub-para. (1) amended by s. 61 (1) (b) of Act 3 of 2008 and substituted by s. 120 (1) (a) of Act 24 of 2011 (retrospective date of commencement: 1 January 2011) and by s. 133 (1) (a) of Act 22 of 2012 – date of commencement deemed to have been 1 January 2011.]
(1A) Subject to paragraph 76 (2), where—
(a) a return of capital or foreign return of capital by way of a distribution of cash or an asset in specie (other than a
share distributed in terms of an unbundling transaction contemplated in section 46 (1)) is received by or accrues to
a shareholder in respect of a share;
(b) that return of capital or foreign return of capital is received by or accrues to that shareholder on or after valuation
date but before 1 October 2007; and
(c) that share is not disposed of before 1 April 2012,
that return of capital or foreign return of capital must be treated as having been distributed on 1 April 2012.
[Sub-para. (1A) inserted by s. 120 (1) (b) of Act 24 of 2011 (retrospective date of commencement: 1 January 2011) and by
s. 133 (1) (b) of Act 22 of 2012 – date of commencement deemed to have been 1 January 2011.]
(2) If paragraph 76 (2) applies and the base cost of those shares is a negative amount at the end of 31 March 2012—
(a) that shareholder must be treated as having a capital gain on 31 March 2012 equal to that negative amount; and
(b) the base cost of those shares at the end of 31 March 2012 must be treated as nil.
[Sub-para. (2) substituted by s. 61 (1) (c) of Act 3 of 2008 and by s. 120 (1) (c) of Act 24 of 2011 – date of commencement
deemed to have been 1 January 2011.]
(3) For purposes of paragraph 33 (1) the market value of the part disposed of under this paragraph must be treated as
being equal to the amount of the cash or the market value of the asset received or accrued by way of a return of capital or foreign return of capital.
[Sub-para. (3) substituted by s. 120 (1) (d) of Act 24 of 2011 (retrospective date of commencement: 1 January 2011) and by s. 133 (1) (b) of Act 22 of 2012 – date of commencement deemed to have been 1 January 2011.]
[Para. 76A inserted by s. 85 (1) of Act 35 of 2007.]
76B Reduction in base cost of shares as result of distributions
(1) Where—
(a) a return of capital or foreign return of capital by way of a distribution of cash or an asset in specie is received by or
accrues to a holder of a share in respect of that share;
(b) that return of capital or foreign return of capital is received by or accrues to the holder of that share on or after
1 April 2012 and prior to the disposal of that share; and
(c) that share constitutes a pre-valuation date asset in relation to the holder of that share,
for purposes of determining the date of acquisition of that share and the expenditure in respect of the cost of acquisition of that share, the holder of that share must be treated as—
[Words in sub-para. (1) preceding item (i) substituted by s. 134 (1) (a) of Act 22 of 2012 – date of commencement deemed
to have been 1 April 2012; this substitution applies iro years of assessment commencing on or after that date.]
(i) having disposed of that share at a time immediately before the return of capital or foreign return of capital is
received or accrues for an amount equal to the market value of the share at that time; and
(ii) having immediately reacquired that share at that time at an expenditure equal to that market value—
(aa) less any capital gain that would have been determined had the share been disposed of at market value at that time; and
(bb) increased by any capital loss that would have been determined had the share been disposed of at market value at that time,
which expenditure must be treated as an amount of expenditure actually incurred for the purposes of paragraph
20 (1) (a).
(2) Where—
(a) a return of capital or foreign return of capital by way of a distribution of cash or an asset in specie is received by or accrues to a holder of a share in respect of that share; and
(b) that return of capital or foreign return of capital is received by or accrues to the holder of that share on or after 1 April 2012 and prior to the disposal of that share,
the holder of that share must reduce the expenditure in respect of the share by the amount of that cash or the market value of that asset on the date that the asset or that cash is received by or accrues to the holder of that share.
[Words following item (b) substituted by s. 122 of Taxation Laws Amendment Act, 2015 (‘or that cash’ inserted) – date of
commencement: date of promulgation of Taxation Laws Amendment Act, 2015.]
[Sub-para. (2) substituted by s. 134 (1) (b) of Act 22 of 2012 – date of commencement deemed to have been 1 April 2012;
this substitution applies iro years of assessment commencing on or after that date.]
(3) Where the amount of a return of capital or foreign return of capital contemplated in subparagraph (2) exceeds the expenditure in respect of the share in respect of which that return of capital or foreign return of capital is received or accrues, the amount of the excess must be treated as a capital gain in determining the aggregate capital gain or aggregate capital loss of the holder of that share for the year of assessment in which that return of capital or foreign return of capital
is received by or accrues to the holder of that share.
[Sub-para. (3) substituted by s. 134 (1) (c) of Act 22 of 2012 – date of commencement deemed to have been 1 April 2012; this substitution applies iro years of assessment commencing on or after that date.]
[Para. 76B inserted by s. 121 (1) of Act 24 of 2011 – date of commencement: 1 January 2012. This paragraph applies iro returns of capital and foreign returns of capital received or accrued on or after that date (s. 121 (2) amended by s. 171 (1) of Act 22 of 2012).]
408 SAIT CompendIum oF TAx LegISLATIon VoLume 1