Income Tax Act, 1962 (Act No. 58 of 1962)Chapter II : The TaxesPart III : Special rules relating to asset-for-share transactions, substitutive share-for-share transactions, amalgamation transactions, intra-group transactions, unbundling transactions and liquidation distributions41. General |
| (1) | For the purposes of this Part, unless the context otherwise indicates, any word or expression that has been defined in section 1, shall bear the same meaning so defined, and— |
"allowance asset"
means—
| (a) | a capital asset in respect of which a deduction or allowance is allowable in terms of this Act for purposes other than the determination of any capital gain or capital loss; or |
| (b) | any debt contemplated in section 11(i) or (j); |
"asset"
means an asset as defined in paragraph 1 of the Eighth Schedule;
"associated group of companies"
[Definition deleted by section 54(a) of the Taxation Laws Amendment Act, 2014 (Act No. 43 of 2014)]
"base cost"
means the base cost as defined in paragraph 1 of the Eighth Schedule: Provided that where the base cost of an asset as at a specific date is to be determined as contemplated in paragraph 26 or 27 of the Eighth Schedule, the amount thereof must, for purposes of section 42 or 44, be determined as if that asset had been disposed of on that date for an amount received or accrued equal to the market value of that asset as at that date;
"capital asset"
means an asset as defined in paragraph 1 of the Eighth Schedule, which does not constitute trading stock;
"company"
does not include a headquarter company and, for the purposes of sections 42 and 44, includes any portfolio of a collective investment scheme in securities or any portfolio of a hedge fund collective investment scheme;
[Definition substituted by section 61(1)(a) of the Taxation Laws Amendment Act, 2015 (Act No. 25 of 2015)]
"date of acquisition"
means the date of acquisition as determined in accordance with paragraph 13 of the Eighth Schedule or, where a person acquires an asset in terms of a transaction subject to the provisions of this Part, the deemed date of acquisition of that asset by that person as contemplated in this Part;
includes any contingent liability;
[Definition inserted by section 50(a) of the Taxation Laws Amendment Act, 2017 (Act No. 17 of 2017)]
"domestic financial instrument holding company"
[Definition deleted by section 54(a) of the Taxation Laws Amendment Act, 2014 (Act No. 43 of 2014)]
"disposal"
means a disposal as defined in paragraph 1 of the Eighth Schedule and any deemed disposal in terms of this Part;
"equity share"
for the purposes of sections 42 and 44, includes a participatory interest in a portfolio of a collective investment scheme in securities or in a portfolio of a hedge fund collective investment scheme;
[Definition substituted by section 61(1)(b) of the Taxation Laws Amendment Act, 2015 (Act No. 25 of 2015)]
"foreign financial instrument holding company"
[Definition deleted by section 54(a) of the Taxation Laws Amendment Act, 2014 (Act No. 43 of 2014)]
"group of companies"
means a group of companies as defined in section 1: Provided that for the purposes of this definition—
| (i) | any company that would, but for the provisions of this definition, form part of a group of companies shall not form part of that group of companies if— |
| (aa) | that company is a company contemplated in paragraph (c), (d) or (e) of the definition of "company"; |
| (bb) | that company is a non-profit company as defined in section 1 of the Companies Act; |
| (cc) | any amount constituting gross income of whatever nature would be exempt from tax in terms of section 10 were it to be received by or to accrue to that company; |
| (dd) | that company is a public benefit organisation or recreational club that has been approved by the Commissioner in terms of section 30 or 30A; |
| (ee) | that company is a company contemplated in paragraph (b) of the definition of "company", unless that company has its place of effective management in the Republic; or |
| (ff) | that company has its place of effective management outside the Republic; and |
| (ii) | any share that would, but for the provisions of this definition, be an equity share shall be deemed not to be an equity share if— |
| (aa) | that share is held as trading stock; or |
| (bb) | any person is under a contractual obligation to sell or purchase that share, or has an option to sell or purchase that share unless that obligation or option provides for the sale or purchase of that share at its market value at the time of that sale or purchase; |
"hold"
[Definition deleted by section 54 of the Taxation Laws Amendment Act, 2016 (Act No. 15 of 2016)]
means a company as contemplated in paragraph (a) of the definition of "listed company" in section 1;
"market value"
in relation to an asset means the price which could be obtained upon a sale of that asset between a willing buyer and a willing seller dealing at arm’s length in an open market; and
[Definition deleted by section 54(a) of the Taxation Laws Amendment Act, 2014 (Act No. 43 of 2014)]
[deleted by the Taxation Laws Amendment Act, 2008 (Act No. 3 of 2008)];
"resident"
[Definition deleted by the Taxation Laws Amendment Act, 2011 (Act No. 24 of 2011)];
"shareholder"
[Definition deleted by section 54(a) of the Taxation Laws Amendment Act, 2014 (Act No. 43 of 2014)]
"trading stock"
for purposes of sections 42, 44, 45 and 47, includes any livestock or produce contemplated in the First Schedule and any reference to an amount taken into account in respect of an asset in terms of section 11(a) or 22(1) or (2) shall, in the case of such livestock or produce, be construed as a reference to the amount taken into account in respect thereof in terms of paragraph 5(1) or 9 of the First Schedule, as the case may be;
[Definition substituted by section 54(b) of the Taxation Laws Amendment Act, 2014 (Act No. 43 of 2014)]
"unlisted company"
means any company which is not a listed company as defined in this subsection.
| (2) | The provisions of this Part must, subject to subsection (3), apply in respect of an asset-for-share transaction, a substitutive share-for-share transaction, an amalgamation transaction, an intra-group transaction, an unbundling transaction and a liquidation distribution as contemplated in sections 42, 43, 44, 45, 46 and 47, respectively, notwithstanding any provision to the contrary contained in the Act, other than sections 24BA, 24I, 25BB(5), 40CA(b) and 103, Part IIA of Chapter III and paragraph 11(1)(g) of the Eighth Schedule and any adjusted gain on transfer or redemption of an instrument, as defined in section 24J(1) and any adjusted loss on transfer or redemption of an instrument as defined in section 24J(1). |
[Section 41(2) substituted by section 24 of the Taxation Laws Amendment Act, 2021 (Act No. 20 of 2021), Notice No. 770, GG45787, dated 19 January 2022]
| (3) | The provisions of this Part shall not apply in respect of any transaction in terms of which any asset is disposed of to an insurer as defined in section 29A if the asset is to be held in the insurer's untaxed policyholder fund as contemplated in subsection (4)(a) of that section. |
| (4) | A company must for the purposes of this Part, be deemed to have taken steps to liquidate, wind up or deregister, where— |
(a) in the case of a liquidation or winding-up—
| (i) | that company has lodged a resolution authorising the voluntary winding-up of that company in terms of – |
| (aa) | section 80(2) of the Companies Act in the case of a company to which that section applies; |
| (bb) | Regulation 21 of the Regulations under the Co-operatives Act, 2005 (Act No. 14 of 2005), published under section 95 of that Act in Government Notice R. 366 of 30 April 2007, in the case of a co-operative; or |
| (cc) | a similar provision contained in any foreign law relating to the liquidation of companies, in the case where that company is incorporated in a country other than the Republic, if such foreign law so requires; and |
| (ii) | that company has disposed of all assets and has settled all liabilities (other than assets required to satisfy any reasonably anticipated liabilities to any sphere of government of any country and costs of administration relating to the liquidation or winding-up); and |
| (iii) | the manager, trustee or custodian of the portfolio of the collective investment scheme in property has in terms of section 102(1) or (2) of the Collective Investment Schemes Control Act applied for the winding up of that portfolio; |
| (b) | in the case of a deregistration of a company, |
| (i) |
| (aa) | a request for the deregistration of that company has in terms of section 82(3)(b)(ii) of the Companies Act been lodged; or |
| (bb) | a notice of amalgamation or merger has in terms of section 116 of the Companies Act been filed in respect of that company, |
in the prescribed form and manner with the Companies and Intellectual Property Commission; or
| (ii) | in the case where that company is incorporated in a country other than the Republic, a request or notice a person who, in terms of any similar provision contained in any foreign law, exercises the powers and performs the duties assigned to the Commission contemplated in subparagraph (i), if such foreign law so requires; |
[Section 41(4)(b)(c) substituted by section 39(b) of the Taxation Laws Amendment Act, 2019 (Act No. 34 of 2019), GG 42951, dated 15 January 2020]
| (c) | that company has submitted a copy of the resolution contemplated in paragraph (a)(i) or the request or notice contemplated in paragraph (b) to the Commissioner; and |
[Section 41(4)(b)(c) substituted by section 39(b) of the Taxation Laws Amendment Act, 2019 (Act No. 34 of 2019), GG 42951, dated 15 January 2020]
| (d) | all the returns or information required to be submitted or furnished to the Commissioner in terms of any Act administered by the Commissioner by the end of the relevant period within which the steps contemplated in this subsection must be taken, have been submitted or furnished or arrangements have been made with the Commissioner for the submission of any outstanding returns or furnishing of information. |
| (5) | [Section 41(5) deleted by the Revenue Laws Amendment Act, 2007 (Act No. 35 of 2007)]. |
| (6) | The Commissioner may prescribe the circumstances under which a person entering into any asset-for-share transaction, amalgamation transaction, intra-group transaction, unbundling transaction or liquidation distribution contemplated in sections 42, 44, 45, 46 and 47, respectively, must furnish a return to the Commissioner of that transaction or distribution. |
| (7) | An amount contemplated in paragraph (j) of the definition of "gross income" in section 1 and an amount to be included in gross income in terms of paragraph 14 of the First Schedule must for purposes of this Part be deemed to be an allowance that must be recovered or recouped. |
| (8) | [Section 41(8) was deleted by the Taxation Laws Amendment Act, 2013 (Act No. 31 of 2013), GG 37158, dated 12 December 2013] |
| (9) | Where a person has made an election in respect of an asset under paragraph 65 or 66 of the Eighth Schedule and disposes of or distributes any replacement asset in relation to that asset in terms of section 42, 44, 45 or 47— |
| (a) | the person so disposing of or distributing that replacement asset must disregard any capital gain or amount recovered or recouped which was apportioned to that asset under paragraph 65 or 66 of the Eighth Schedule or section 8(4)(e) and (eA), as the case may be, and which otherwise would have had to be brought to account at the time of that disposal or distribution; and |
| (b) | the company acquiring that replacement asset and the person referred to in paragraph (a) must be treated as one and the same person for the purposes of section 8(4)(eB), (eC) or (eD) and paragraphs 65 and 66 of the Eighth Schedule. |
| (10) | For the purposes of this Part, a contingent liability is deemed to be a debt actually incurred. |
[Section 41(10) inserted by section 50(c) of the Taxation Laws Amendment Act, 2017 (Act No. 17 of 2017)]