Page 90 - SAIT Compendium 2016 Volume1

s 9D
INCOME TAX ACT 58 OF 1962
s 9D
if the day that foreign company ceased to be a controlled foreign company was the last day of its foreign tax year), of the net income of that company determined for the period commencing on the rst day of that foreign tax year and ending on the day before the company so ceased to be a controlled foreign company:
[Sub-para. (ii) substituted by s. 15 (1) (b) of Act 35 of 2007.]
Provided that this subsection shall not apply—
(A) where that resident (together with any connected
person in relation to that resident)—
(i) at the end of the last day of the foreign tax year
of the controlled foreign company; or
(ii) in the case where that foreign company ceased to be a controlled foreign company during the relevant foreign tax year, immediately before that foreign company so ceased to be a controlled
foreign company,
in aggregate holds less than 10 per cent of the participation rights and may not exercise at least 10 per cent of the voting rights in that controlled foreign company; or
[Para. (A) amended by s. 14 (1) (d) of Act 31 of 2005.] (B) to the extent that the participation rights are held by that resident indirectly through any company (other than a company that is a headquarter company) which
is a resident; or
[Para. (B) substituted by s. 15 (1) (c) of Act 35 of 2007 and by s. 16 (1) (e) of Act 7 of 2010.]
(C) to the extent that—
(i) the participation rights are held by an insurer
as de ned in section 29A in any policyholder fund as de ned in terms of that section, and are directly attributable to—
(aa) a linked policy as de ned in section 1 of the
Long-term Insurance Act; or
[Item (aa) substituted by s. 19 (1) (c) of Act 31 of 2013 – date of commencement: 12 December 2013.]
(bb) a policy as de ned in section 29A, other than a policy contemplated in item (aa), of which the amount of the policy bene ts as de ned in the Long-term Insurance Act is not guaranteed by the insurer and is to be determined wholly by reference to the value of particular assets or categories of assets; and
[Item (bb) substituted by s. 19 (1) (c) of Act 31 of 2013 – date of commencement: 12 December 2013.]
[Sub-para. (i) substituted by s. 12 (1) (b) of Act 17 of 2009.] (ii) the holding of the participation rights by the insurer does not form part of any transaction, operation or scheme entered into or effected solely or mainly for purposes of utilising the provisions of this paragraph in order to avoid the inclusion of an amount in the income of a
resident as contemplated in this subsection.
[Para. (C) added by s. 15 (1) (d) of Act 35 of 2007.] [Sub-s. (2) amended by s. 16 (1) (d) of Act 7 of 2010.]
(2A) For the purposes of this section the ‘net income’ of a controlled foreign company in respect of a foreign tax year is an amount equal to the taxable income of that company determined in accordance with the provisions of this Act as if that controlled foreign company had been a taxpayer, and as if that company had been a resident for purposes of the de nition of ‘gross income’, sections 7 (8), 10 (1) (h), 25B and paragraphs 2 (1) (a), 24, 70, 71, 72 and 80 of the Eighth Schedule: Provided that—
(a) any deductions or allowances which may be allowed, or any amounts which may be set off against, the income of that foreign company in terms of this Act shall be limited to the amount of that income;
(b) any amount whereby such deductions or allowances or amounts exceed the amount of such income, shall be carried forward to the immediately succeeding foreign tax year and be deemed to be a balance of assessed loss which may be set off against the income of such company in such succeeding year for the purposes of section 20;
(c) no deduction shall be allowed in respect of any—
(i) interest, royalties, rental, insurance premium or income of a similar nature which is paid or payable or deemed to be paid or payable by that company to any other controlled foreign company (including any similar amount adjusted
in terms of section 31);
[Sub-para. (i) substituted by s. 19 (1) (d) of Act 31 of 2013 – date of commencement: 1 April 2014; this substitution applies in respect of years of assessment commencing on or after that date.]
(ii) exchange difference determined in terms of section 24I in respect of any exchange item to which that company and any other controlled foreign company are parties;
(iii) exchange difference in respect of any forward exchange contract or foreign currency option contract entered into to hedge the exchange item referred to in subparagraph (ii); or
(iv) reduction or discharge by that company of a debt owed to that company by any other controlled foreign company for no consideration or for consideration less than the amount by which the face value of the debt has been so reduced or discharged,
where that controlled foreign company and that other controlled foreign company form part of the same group of companies, unless that interest, rental, royalty, insurance premium, other income, adjusted amount, exchange difference, reduction or discharge is taken into account to determine the net income of that other controlled foreign company;
[Words following sub-para. (iv) substituted by s. 19 (1) (e) of Act 31 of 2013 – date of commencement: 1 April 2014; this substitution applies in respect of years of assessment commencing on or after that date.]
[Para. (c) substituted by s. 22 (1) (e) of Act 45 of 2003, by s. 14 (1) (f) of Act 31 of 2005, by s. 9 (1) (f) of Act 20 of 2006 and by s. 13 (1) (b) of Act 60 of 2008 and amended by s. 25 (1) (d) of Act 24 of 2011 – date of commencement: 1 April 2012. This amendment applies in respect of foreign tax years of controlled foreign companies ending during years of assessment commencing on or after that date.]
(d) .. .
(e) where a foreign company becomes a controlled
foreign company after 1 October 2001, the valuation date for purposes of the determination of any taxable capital gain or assessed capital loss in terms of the Eighth Schedule, shall be the day before such company becomes a controlled foreign company;
[Para. (e) substituted by s. 15 (1) (e) of Act 35 of 2007.] 82 SAIT CompendIum oF TAx LegISLATIon VoLume 1
Pendlex
[NB: The words preceding the proviso in sub-s. (2A) have been substituted by s. 13 (1) (a) of Taxation Laws Amendment Act, 2015 (‘, 28’ inserted after ‘25B’), a provision that will come into operation on the date on which the Insurance Act, 2016, comes into operation.]