[Section 24O heading substituted by section 46(1) of the Taxation Laws Amendment Act, 2015 (Act No. 25 of 2015)]
(1) For the purposes of this section—
"acquisition transaction"
means any transaction in terms of which a company acquires an equity share in another company from a person that does not form part of the same group of companies as that company, if—
| (a) | that other company is— |
| (i) | an operating company on the date of acquisition of that share; and |
| (ii) | as a result of which, at the end of the day of that transaction— |
| (aa) | that company is a controlling group company in relation to that other company; and |
| (bb) | that company and that other company form part of the same group of companies as defined in section 41(1); or |
| (b) | that other company is— |
| (i) | a controlling group company in relation to a company that is an operating company on the date of acquisition of that share and that forms part of the same group of companies, as defined in section 41(1), as that controlling group company; and |
| (ii) | as a result of which, at the end of the day of that transaction— |
| (aa) | that company is a controlling group company in relation to that other controlling group company; and |
| (bb) | that company and that other controlling group company form part of the same group of companies as defined in section 41(1); |
[Definition substituted by section 31(1)(a) of the Taxation Laws Amendment Act, 2019 (Act No. 34 of 2019), GG 42951, dated 15 January 2020 - deemed to have come into operation on 1 January 2019 and applies in respect of years of assessment ending on or after that date (section 31(2)]
"operating company"
means a company of which—
| (a) | at least 80 per cent of the aggregate amount received by or that accrued to that company during a year of assessment constitutes income in the hands of that company; and |
[Definition substituted by section 46(1)(a) of the Taxation Laws Amendment Act, 2018 (Act No. 23 of 2018), GG 42172, dated 17 January 2019 - effective 1 January 2019 (section 46(2)]
| (b) | the income contemplated in paragraph (a) is derived— |
| (i) | from a business carried on continuously by that company; and |
| (ii) | in the course or furtherance of which goods or services are provided or rendered by that company for consideration. |
[Definition substituted by section 46(1)(b) of the Taxation Laws Amendment Act, 2018 (Act No. 23 of 2018), GG 42172, dated 17 January 2019 - effective 1 January 2019 (section 46(2)]
| (2) | Subject to subsection (3), where during any year of assessment any interest is incurred by a company in respect of a debt issued, assumed or used by that company— |
| (a) | for the purpose of financing the acquisition by that company, in terms of an acquisition transaction, of an equity share; or |
| (b) | in substitution for a debt issued, assumed or used as contemplated in paragraph (a), |
the interest incurred by that company in respect of that debt must, to the extent to which the amount thereof relates to a period during which—
| (i) | that company held that equity share; and |
| (ii) | that equity share constituted a qualifying interest in an operating company, as determined— |
| (aa) | in the case of an equity share held by that company at the end of that year, at the date on which that year ends; or |
| (bb) | if that equity share was disposed of by that company during that year, at the date of that disposal, |
be deemed to have been so incurred in the production of the income of that company and laid out or expended by that company for the purposes of trade.
[Section 24O(2) substituted by section 46(1)(c) of the Taxation Laws Amendment Act, 2018 (Act No. 23 of 2018), GG 42172, dated 17 January 2019 - effective 1 January 2019 (section 46(2)]
| (3) | An equity share in a company constitutes a qualifying interest in an operating company if that equity share is an equity share on the date referred to in subsection (2) in— |
| (a) | a company that qualified as an operating company in its latest year of assessment that ended prior to or on the date referred to in subsection (2); or |
| (b) | any other company, to the extent that the value of that equity share is derived from an equity share or equity shares held by that company in a company or companies described in paragraph (a)— |
| (ii) | that form part, with that company, of a group of companies, as defined in section 41(1): |
Provided that if at least 90 per cent of the value of that equity share is so derived, that equity share must be treated as an equity share in an operating company.
[Section 24O(3) substituted by section 31(1)(b) of the Taxation Laws Amendment Act, 2019 (Act No. 34 of 2019), GG 42951, dated 15 January 2020 - deemed to have come into operation on 1 January 2019 and applies in respect of years of assessment ending on or after that date]
| (4) | [Section 24O(4) deleted by section 46(1)(g) of the Taxation Laws Amendment Act, 2018 (Act No. 23 of 2018), GG 42172, dated 17 January 2019 - effective 1 January 2019 (section 46(2)] |
| (5) | Where a company that acquired equity shares in a controlling group company in relation to an operating company as contemplated in paragraph (b) of the definition of ‘acquisition transaction’ acquires the equity shares held by that controlling group company in that operating company in terms of— |
| (a) | an unbundling transaction as defined in section 46(1)(a) in respect of which section 46 was applied; or |
| (b) | a liquidation distribution as defined in section 47(1)(a) in respect of which section 47 was applied, |
those equity shares must for purposes of subsection (2) be treated—
| (i) | as having been acquired by that company in terms of paragraph (a) of the definition of ‘acquisition transaction’; and |
| (ii) | as constituting a qualifying interest in an operating company to the extent to which the value of the equity shares in the controlling group company from which the equity shares in the operating company were acquired was derived from the value of the equity shares in the operating company so acquired. |
[Section 24O(5) inserted by section 31(1)(c) of the Taxation Laws Amendment Act, 2019 (Act No. 34 of 2019), GG 42951, dated 15 January 2020 - deemed to have come into operation on 1 January 2019 and applies in respect of years of assessment ending on or after that date]
[Section 24O inserted by section 46(1) of the Taxation Laws Amendment Act, 2015 (Act No. 25 of 2015)]
