Page 88 - SAIT Compendium 2016 Volume1

s 9D INCOME TAX ACT 58 OF 1962 s 9D
9D Net income of controlled foreign companies
(1) For the purposes of this section—
‘business establishment’ . . .
[De nition of ‘business establishment’ deleted by s. 9 (1)
(a) of Act 20 of 2006.]
‘controlled foreign company’ means any foreign
company where more than 50 per cent of the total participation rights in that foreign company are directly or indirectly held, or more than 50 per cent of the voting rights in that foreign company are directly or indirectly exercisable, by one or more persons that are residents other than persons that are headquarter companies: Provided that—
(a) no regard must be had to any voting rights in any foreign company—
(i) which is a listed company; or
(ii) if the voting rights in that foreign company are
exercisable indirectly through a listed company;
(b) any voting rights in a foreign company which can be exercised directly by any other controlled foreign company in which that resident (together with any connected person in relation to that resident) can directly or indirectly exercise more than 50 per cent of the voting rights are deemed for purposes of this de nition to be
exercisable directly by that resident; and
(c) a person is deemed not to be a resident for purposes of
determining whether residents directly or indirectly hold more than 50 per cent of the participation rights or voting rights in a foreign company, if—
(i) in the case of a listed company or a foreign company the participation rights of which are held by that person indirectly through a listed company, that person holds less than ve per cent of the participation rights of that listed company; or
(ii) in the case of a scheme or arrangement contemplated in paragraph (e) (ii) of the de nition of ‘company’ in section 1 or a foreign company the participation rights of which are held and the voting rights of which may be exercised by that person indirectly through such a scheme or arrangement, that person— (aa)holds less than ve per cent of the
participation rights of that scheme or
arrangement; and
(bb) may not exercise at least ve per cent of the
voting rights in that scheme or arrangement, unless more than 50 per cent of the participation rights or voting rights of that foreign company or other foreign company are held by persons who are connected persons in relation to each other;
[De nition of ‘controlled foreign company’ substituted by s. 14 (1) (a) of Act 31 of 2005 and amended by s. 16 (1) (a) of Act 7 of 2010.]
‘country of residence’, in relation to a foreign company, means the country where that company has its place of effective management;
[De nition of ‘country of residence’ inserted by s. 9 (1) (b) of Act 20 of 2006 and substituted by s. 9 (1) (a) of Act 8 of 2007.]
‘foreign business establishment’, in relation to a controlled foreign company, means—
(a) a xed place of business located in a country other
than the Republic that is used or will continue to be used for the carrying on of the business of that controlled foreign company for a period of not less than one year, where—
(i) that business is conducted through one or more of ces, shops, factories, warehouses or other structures;
(ii) that xed place of business is suitably staffed with on-site managerial and operational employees of that controlled foreign company who conduct the primary operations of that business;
(iii) that xed place of business is suitably equipped for conducting the primary operations of that business;
(iv) that xed place of business has suitable facilities for conducting the primary operations of that business; and
(v) that xed place of business is located outside the Republic solely or mainly for a purpose other than the postponement or reduction of any tax imposed by any sphere of government in the Republic:
Provided that for the purposes of determining whether there is a xed place of business as contemplated in this de nition, a controlled foreign company may take into account the utilisation of structures as contemplated in subparagraph (i), employees as contemplated in subparagraph (ii), equipment as contemplated in subparagraph (iii), and facilities as contemplated in subparagraph (iv) of any other company—
(aa) if that other company is subject to tax in the country in which the xed place of business of the controlled foreign company is located by virtue of residence, place of effective management or other criteria of a similar nature;
(bb) if that other company forms part of the same group of companies as the controlled foreign company; and
(cc) to the extent that the structures, employees, equipment and facilities are located in the same country as the xed place of business of the controlled foreign company;
[Para. (a) substituted by s. 12 (1) (a) of Act 17 of 2009.]
(b) any place outside the Republic where prospecting or exploration operations for natural resources are carried on, or any place outside the Republic where mining or production operations of natural resources are carried on, where that controlled foreign company carries on those prospecting, exploration, mining or
production operations;
(c) a site outside the Republic for the construction or
installation of buildings, bridges, roads, pipelines, heavy machinery or other projects of a comparable magnitude which lasts for a period of not less than six months, where that controlled foreign company carries on those construction or installation activities;
(d) agricultural land in any country other than the Republic used for bona de farming activities directly carried on by that controlled foreign company;
(e) a vessel, vehicle, rolling stock or aircraft used for the purposes of transportation or shing, or prospecting or exploration for natural resources, or mining or production of natural resources, where that vessel, vehicle, rolling stock or aircraft is used solely outside the Republic for such purposes and is operated directly by that controlled foreign company or by any other company that has the same country of residence as that controlled foreign company and that forms part of the same group of companies as that controlled foreign company;
(f) a South African ship as de ned in section 12Q engaged in international shipping as de ned in that section; or
[Para. (f) added by s. 19 (1) (b) of Act 31 of 2013 – date of commencement: 1 April 2014; this new paragraph applies in respect of years of assessment commencing on or after that date.]
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SAIT CompendIum oF TAx LegISLATIon VoLume 1