(1) For the purposes of this section–
"intra-group transaction"
means any transaction—
(a)
| (i) | in terms of which any asset is disposed of by one company (hereinafter referred to as the "transferor company") to another company that is a resident (hereinafter referred to as the "transferee company") and both companies form part of the same group of companies as at the end of the day of that transaction; and |
| (ii) | as a result of which that transferee company acquires that asset from that transferor company— |
| (aa) | as a capital asset, where that transferor company holds it as a capital asset; or |
| (bb) | as trading stock, where that transferor company holds it as trading stock; or |
(b)
| (i) | in terms of which any asset that constitutes an equity share held by a transferor company as a capital asset in a foreign company is disposed of by that transferor company to a transferee company in exchange for the issue of debt or shares other than equity shares by that transferee company; |
| (ii) | as a result of which that transferee company acquires that asset from that transferor company as a capital asset; and |
| (iii) | if, immediately before and as at the end of the day of that transaction- |
| (aa) | that transferor company and that transferee company form part of the same group of companies (as defined in section 1); |
| (bb) | that transferor company is a resident or is a controlled foreign company in relation to one or more residents that form part of that group of companies; and |
| (cc) | that transferee company is a resident or is a controlled foreign company in relation to one or more residents that form part of that group of companies. |
(2) Where a transferor company disposes of–
| (a) | a capital asset in terms of an intra-group transaction to a transferee company which acquires it as a capital asset— |
| (i) | the transferor company must be deemed to have disposed of that asset for an amount equal to the base cost of that asset on the date of that disposal; and |
| (ii) | that transferor company and that transferee company must, for purposes of determining any capital gain or capital loss in respect of a disposal of that asset by that transferee company, be deemed to be one and the same person with respect to – |
| (aa) | the date of acquisition of that asset by that transferor company and the amount and date of incurral by that transferor company of any expenditure in respect of that asset allowable in terms of paragraph 20 of the Eighth Schedule; and |
| (bb) | any valuation of that asset effected by that transferor company as contemplated in paragraph 29(4) of the Eighth Schedule: |
Provided that in the case of an intra-group transaction contemplated in paragraph (b) of the definition of "intra-group transaction", this paragraph does not apply to any asset that constitutes an equity share disposed of by a transferor company to a transferee company in terms of that intra-group transaction if—
| (B) | that transferee company is a resident; and |
| (C) | the base cost of that equity share exceeds the market value of that equity share at the time of that disposal; |
| (b) | an asset held by it as trading stock in terms of an intra-group transaction contemplated in paragraph (a) of the definition of "intra-group transaction" to a transferee company which acquires it as trading stock – |
| (i) | that transferor company must be deemed to have disposed of that asset for an amount equal to the amount taken into account by that transferor company in respect of that asset in terms of section 11(a) or 22(1) or (2); and |
| (ii) | that transferor company and that transferee company must, for purposes of determining any taxable income derived by that transferee company from a trade carried on by it, be deemed to be one and the same person with respect to the date of acquisition of that asset by that transferor company and the amount and date of incurral by that transferor company of any cost or expenditure incurred in respect of that asset as contemplated in section 11(a) or 22(1) or (2). |
(3) Where a transferor company transfers—
| (a) | an asset that constitutes an allowance asset for that transferor company to a transferee company in terms of an intra-group transaction contemplated in paragraph (a) of the definition of "intra-group transaction" and that transferee company acquires that asset as an allowance asset or that transferee company is a REIT or a controlled company, as defined in section 25BB(1), that acquires that asset as a capital asset or an allowance asset— |
[Words preceding section 45(3)(a)(i) substituted by section 57(1)(a) of the Taxation Amendment Act, 2018 (Act No. 23 of 2018), GG 42172, dated 17 January 2019 - deemed to have come into operation on 18 December 2017 (section 57(2)]
| (i) | no allowance allowed to that transferor company in respect of that asset must be recovered or recouped by that transferor company or included in that transferor company’s income for the year of that transfer; and |
| (ii) | that transferor company and that transferee company must be deemed to be one and the same person for purposes of determining the amount of any allowance or deduction– |
| (aa) | to which that transferee company may be entitled in respect of that asset; or |
| (bb) | that is to be recovered or recouped by or included in the income of that transferee company in respect of that asset; |
[Section 45(3)(a)(ii)(bb) substituted by section 57(1)(b) of the Taxation Amendment Act, 2018 (Act No. 23 of 2018), GG 42172, dated 17 January 2019 - deemed to have come into operation on 18 December 2017 (section 57(2)]
| (b) | a contract to a transferee company as part of a disposal of a business as a going concern in terms of an intra-group transaction contemplated in paragraph (a) of the definition of "intra-group transaction" and an allowance in terms of section 24, 24C or 24P was allowable to that transferor company in respect of that contract for the year preceding that in which that contract is transferred or would have been allowable to that transferor company for the year of that transfer had that contract not been so transferred – |
| (i) | no allowance allowed to that transferor company under those sections must be included in that transferor company’s income for the year of that transfer; and |
| (ii) | that transferor company and that transferee company must be deemed to be one and the same person for purposes of determining the amount of any allowance – |
| (aa) | to which that transferee company may be entitled under those sections; or |
| (bb) | that is to be included in the income of that transferee company under those sections. |
[Section 45(3)(b) substituted by section 53(b) of the Taxation Laws Amendment Act, 2017 (Act No. 17 of 2017)]
(3A)
| (a) | This subsection applies where an asset is acquired by a transferee company from a transferor company in terms of an intra-group transaction and— |
| (i) | any amount incurred by that transferee company as consideration for the acquisition of that asset from that transferor company is funded directly or indirectly by the issue of any debt or share other than an equity share; and |
| (aa) | is issued by a company that forms part of the same group of companies as the transferee company or the transferor company; and |
| (bb) | is issued or used for the purposes of directly or indirectly facilitating or funding that intra-group transaction. |
| (b) | The holder of any debt or share contemplated in paragraph (a) who is part of the same group of companies as the issuer of that debt or share must, for the purposes of— |
| (i) | paragraph 20 of the Eighth Schedule, be deemed to have acquired that debt or share for an amount of expenditure of nil; and |
| (ii) | section 11(a) or 22(1) or (2), be deemed to have acquired that debt or share for an amount of expenditure or cost of nil. |
| (c) | Where an amount, other than an amount of interest or an amount previously taken into account as interest, is received by or accrues to a holder in respect of a debt contemplated in paragraph (a) from any company that forms part of the same group of companies, as defined in section 1, as that holder and that amount is applied by the holder in settlement of the amount outstanding in respect of that debt, that amount must be disregarded in determining the aggregate capital gain or the taxable income of that holder to the extent that that amount reduces the liability of the issuer of that debt to that holder. |
[Section 45(3A)(c) substituted by section 64(b) of the Taxation Laws Amendment Act, 2015 (Act No. 25 of 2015)]
| (d) | Where an amount, other than an amount that constitutes a dividend or an amount previously taken into account as a dividend, is received by or accrued to a holder in respect of a share contemplated in paragraph (a) from any company that forms part of the same group of companies as that holder and that amount is applied in reduction of the capital subscribed for that share, that amount must be disregarded in determining the aggregate capital gain or the taxable income of that holder. |
(3B)
| (a) | This subsection applies where a debt or a share is issued or used for purposes of directly or indirectly facilitating or funding the acquisition of an asset that is acquired as contemplated in subsection (3A), and subsequent to that acquisition— |
| (i) | the transferee company, within a period of six years after the acquisition, ceases in relation to the transferor company or a controlling group company in relation to the transferor company, as contemplated in subsection (4), or the transferee company and the transferor company are deemed to have ceased in terms of subsection (4B), to form part of any group of companies as contemplated in subsection (4); |
| (ii) | the transferee company and the transferor company still form part of the same group of companies on the sixth anniversary of that acquisition; or |
| (iii) | the transferee company disposes of an asset in terms of any transaction other than a transaction contemplated under this Part. |
[Section 45(3B)(a) substituted by section 16(1)(a) of the Taxation Laws Amendment Act, 2022 (Act No. 20 of 2022), Notice No. 1541, GG47826, dated 5 January 2023 - deemed to have come into operation on 1 January 2022 and apply in respect of years of assessment commencing on or after that date (section 16(2))]
| (b) | Where the holder of a debt or the holder of a share acquired that debt or share as a result of the issue or use of a debt or share as contemplated in paragraph (a), the holder of that debt or the holder of that share must, on the day on which the circumstances contemplated in paragraph (a) occur, be deemed to have incurred expenditure— |
[Words preceding paragraph (i) of Section 45(3B)(b) substituted by section 16(1)(a) of the Taxation Laws Amendment Act, 2022 (Act No. 20 of 2022), Notice No. 1541, GG47826, dated 5 January 2023 - deemed to have come into operation on 1 January 2022 and apply in respect of years of assessment commencing on or after that date (section 16(2))]
| (i) | in respect of a debt, in an amount equal to the face value of that debt immediately after the acquisition of an asset as contemplated in paragraph (a) less any amount, other than an amount of interest or an amount previously taken into account as interest, that was received by or accrued to that holder in respect of that debt and was applied by that holder as settlement of the amount outstanding in respect of that debt; or |
| (ii) | in respect of a share, in an amount equal to the price at which that share was subscribed for by that holder of that share less any amount, other than an amount that constitutes a dividend or an amount previously taken into account as a dividend, that was received by or accrued to that holder in respect of that share if that amount so taken into account was previously applied in reduction of the amount of expenditure incurred in respect of the acquisition of that share: |
Provided that the determination of any expenditure deemed to have been incurred shall be limited to the extent to which a debt or share facilitated the funding of the acquisition of an asset in respect of which the provisions of this section are applied.
[Proviso substituted by section 16(1)(c) of the Taxation Laws Amendment Act, 2022 (Act No. 20 of 2022), Notice No. 1541, GG47826, dated 5 January 2023 - deemed to have come into operation on 1 January 2022 and apply in respect of years of assessment commencing on or after that date (section 16(2))]
(4)
| (a) | This subsection applies in respect of a transferee company which has acquired an asset— |
| (i) | in terms of a disposal by a transferor company by means of an intra-group transaction; or |
| (ii) | in terms of one or more disposals subsequent to the disposal contemplated in subparagraph (i), |
and no capital gain or capital loss was determined in respect of any of those disposals as a result of the application of this Part:
[Section 45(4)(a)(ii) substituted by section 16(1)(d) of the Taxation Laws Amendment Act, 2022 (Act No. 20 of 2022), Notice No. 1541, GG47826, dated 5 January 2023]
Provided that this subsection does not apply to any asset that constitutes trading stock that is regularly and continuously disposed of by the transferee company.
| (b) | Where a transferee company contemplated in paragraph (a) of the definition of "intra-group transaction" which has acquired an asset as contemplated in paragraph (a) ceases within a period of six years after the acquisition to form part of any group of companies in relation to the transferor company contemplated in paragraph (a)(i) or a controlling group company in relation to the transferor company, and the transferee company has not disposed of that asset— |
| (i) | an amount, in the case of an asset other than an asset contemplated in section 25BB(5), equal to the lesser of— |
[Words preceding section 45(4)(b)(i)(aa) substituted by section 42(a) of the Taxation Laws Amendment Act, 2019 (Act No. 34 of 2019), GG 42951, dated 15 January 2020]
| (aa) | the greatest capital gain that would have been determined in respect of any disposal of the asset in terms of an intra-group transaction within the period of six years preceding the date on which the transferee company ceased to form part of the group of companies, had subsection (2) not applied in respect of that disposal; or |
| (bb) | the capital gain that would be determined if the asset was disposed of on the date on which the transferee company ceases to form part of the group of companies for an amount equal to the market value of the asset on that date, |
is deemed to be a capital gain of the transferee company for the current year of assessment and the base cost of the asset must be increased by that amount and, where the asset is an allowance asset, the cost or value of the asset must be increased by 80 per cent of that amount;
[Words following section 45(4)(b)(i)(bb) substituted by section 42(b) of the Taxation Laws Amendment Act, 2019 (Act No. 34 of 2019), GG 42951, dated 15 January 2020]
| (ii) | an amount equal to the greater of— |
| (aa) | the greatest amount contemplated in paragraph (j) or (n) of the definition of "gross income" that would have been included in income as a result of any disposal of the asset in terms of an intra-group transaction within the period of six years preceding the date on which the transferee company ceases to form part of the group of companies, had subsection (3) not applied in respect of that disposal; or |
| (bb) | the amount contemplated in paragraph (j) or (n) of the definition of "gross income" that would be included in income if the asset was disposed of on the date on which the transferee company ceases to form part of the group of companies for an amount equal to the market value of the asset on that date, |
must be included in the gross income of the transferee company for the current year of assessment and the cost or value of the asset for purposes of any deductions allowable in respect of that asset (other than deductions allowable in terms of section 12G or 12I) must be increased by that amount: Provided that where an amount contemplated in paragraph (j) of the definition of "gross income" is so included, the cost or value is deemed to be so increased immediately before any subsequent disposal of the asset;
and
| (iii) | an amount equal to the lesser of— |
| (aa) | the greatest amount of taxable income (other than any taxable capital gain and any taxable income derived as a result of an amount being included in gross income in terms of paragraph (j) or (n) of the definition of "gross income") that would have been determined in respect of any disposal of the asset in terms of an intra-group transaction within the period of six years preceding the date on which the transferee company ceases to form part of the group of companies, had subsection (2) not applied in respect of that disposal; or |
| (bb) | the taxable income (other than any taxable capital gain and any taxable income derived as a result of an amount being included in gross income in terms of paragraph (j) or (n) of the definition of "gross income"), that would be determined if the asset was disposed of on the date on which the transferee company ceases to form part of the group of companies for an amount equal to the market value of the asset on that date, |
must be included in the taxable income of the transferee company for the current year of assessment and the cost of the asset must be increased by that amount;
| (bA) | Where a transferee company contemplated in paragraph (b) of the definition of "intra-group transaction" which has acquired an asset that constitutes an equity share as contemplated in paragraph (a)— |
| (i) | ceases within a period of six years after the acquisition- |
| (aa) | to form part of any group of companies (as defined in section 1) in relation to- |
| (A) | the transferor company contemplated in paragraph (a)(i); or |
| (B) | any controlling group company of a group of companies (as defined in section 1) in relation to that transferor company; or |
| (bb) | to be a controlled foreign company in relation to any resident that is part of any group of companies contemplated in item (aa); and |
| (ii) | has not disposed of that equity share at the time of so ceasing, an amount equal to the lesser of— |
| (AA) | the greatest capital gain that would have been determined in respect of any disposal of the equity share in terms of an intra-group transaction within the period of six years preceding the date on which the transferee company ceased to form part of the group of companies as contemplated in item (aa), had subsection (2) not applied in respect of that disposal; or |
| (BB) | the capital gain that would be determined if the asset was disposed of on the date on which the transferee company ceases to form part of the group of companies as contemplated in item (aa) or on the date before the day the transferee company ceases to be a controlled foreign company as contemplated in item (bb) for an amount equal to the market value of the equity share on that date, |
must be deemed to be a capital gain of the transferee company for the year of assessment in which the transferee company ceased to form part of the group of companies as contemplated in item (aa) or on the date before the day the transferee company ceases to be a controlled foreign company as contemplated in item (bb) and applied to increase the base cost of the equity share.";
[Words following section 45(4)(bA)(ii)(BB) substituted by section 42(c) of the Taxation Laws Amendment Act, 2019 (Act No. 34 of 2019), GG 42951, dated 15 January 2020]
| (c) | Where the transferor company or transferee company contemplated in paragraph (bA) is liquidated, wound up or deregistered at a time when a company (hereinafter referred to as the "holding company"), which is a resident or a controlled foreign company in relation to any resident, holds at least 70 per cent of the equity shares of that company which is liquidated, wound up or deregistered, the holding company and the company which is liquidated, wound up or deregistered must be deemed to be one and the same company for purposes of paragraph (bA). |
| (d) | Where the transferor company or transferee company contemplated in paragraph (bA) is liquidated, wound up or deregistered at a time when a company (hereinafter referred to as the "holding company"), which is a resident or a controlled foreign company in relation to any resident, holds at least 70 per cent of the equity shares of that company which is liquidated, wound up or deregistered, the holding company and the company which is liquidated, wound up or deregistered must be deemed to be one and the same company for purposes of paragraph (bA). |
| (4A) | Subsection (4)(b) does not apply in respect of any asset disposed of— |
| (a) | prior to 21 February 2008, where that transferee company and that transferor company contemplated in that subsection cease to form part of a group of companies by reason of the coming into operation of section 52(1)(c) of the Revenue Laws Amendment Act, 2007 (Act No. 35 of 2007); or |
| (b) | on or after 1 January 2011, where that transferee company and that transferor company contemplated in that subsection cease to form part of a group of companies by reason of the coming into operation of section 6(1)(g) of the Taxation Laws Amendment Act, 2010. |
| (4B) | A transferee company and a transferor company contemplated in subsection (b) must for purposes of subsection (4) be deemed to have ceased to form part of any group of companies in relation to each other if a disposal contemplated in subsection (4) forms part of any transaction, operation or scheme in terms of which— |
| (a) | any consideration received or accrued in respect of that disposal; or |
| (b) | more than 10 per cent of any amount derived directly or indirectly from such consideration, has, within two years of that disposal, been disposed of— |
| (i) | by that transferor company; or |
| (ii) | by any other company forming part of the same group of companies as the transferor company, |
to any person that does not form part of the same group of companies as the transferor company—
| (aa) | for no consideration; |
| (bb) | for a consideration which does not reflect an arm’s length price; or |
| (cc) | by means of a distribution. |
| (5) | Where a transferee company disposes of an asset, other than an asset contemplated in section 25BB(5) or in terms of an involuntary disposal as contemplated in paragraph 65 of the Eighth Schedule or a disposal that would have constituted an involuntary disposal as contemplated in that paragraph had that asset not been a financial instrument, within a period of 18 months after acquiring that asset in terms of an intra-group transaction and— |
[Words preceding section 45(5)(a) substituted by section 42(d) of the Taxation Laws Amendment Act, 2019 (Act No. 34 of 2019), GG 42951, dated 15 January 2020]
| (a) | that asset constitutes a capital asset in the hands of that transferee company – |
| (i) | so much of any capital gain determined in respect of the disposal of that asset as does not exceed the amount that would have been determined had that asset been disposed of at the beginning of that period of 18 months for proceeds equal to the market value of that asset as at that date, may not be taken into account in determining any net capital gain or assessed capital loss of that transferee company but is subject to paragraph 10 of the Eighth Schedule for purpose of determining an amount of taxable capital gain derived from that gain, which taxable capital gain may not be set off against any assessed loss or balance of assessed loss of that transferee company; or |
| (ii) | so much of any capital loss determined in respect of the disposal of that asset as does not exceed that amount that would have been determined had that asset been disposed of at the beginning of that period of 18 months for proceeds equal to the market value of that asset as at that date, must be disregarded in determining the aggregate capital gain or aggregate capital loss of that transferee company for purposes of the Eighth Schedule: Provided that the amount of any capital loss so disregarded may be deducted from the amount of any capital gain determined in respect of the disposal during that year or any subsequent year of assessment of any other asset acquired by that transferee company from the transferor company in terms of an intra-group transaction; or |
(b) that asset constitutes –
| (i) | trading stock in the hands of that transferee company, so much of the amount received or accrued in respect of the disposal of that trading stock as does not exceed the market value of that trading stock as at the beginning of that period of 18 months and so much of the amount taken into account in respect of that trading stock in terms of section 11(a) or 22(1) or (2) as is equal to the amount so taken into account in terms of subsection (2)(b): Provided that this subparagraph does not apply to any asset that constitutes trading stock that is regularly and continuously disposed of by that transferee company or |
| (ii) | an allowance asset in the hands of that transferee company other than a transferee company that is a REIT or a controlled company, as defined in section 25BB(1), so much of any allowance in respect of that asset that is recovered or recouped by or included in the income of that transferee company as a result of that disposal as does not exceed the amount that would have been recovered had that asset been disposed of at the beginning of that period of 18 months for an amount equal to the market value of that asset as at that date, must be deemed to be attributable to a separate trade carried on by that transferee company, the taxable income or assessed loss from which trade may not be set off against any assessed loss or balance of assessed loss of that transferee company. |
[Section 45(5)(b)(ii) substituted by section 52(c) of the Taxation Laws Amendment Act, 2017 (Act No. 17 of 2017)]
Provided that no regard must be had to the provisions of this subsection if the provisions of subsection (4) have, subsequent to the acquisition of an asset by a transferee company from a transferor company in terms of an intra-group transaction in the manner contemplated in paragraph (a), been applied in respect of that asset: Provided further that no regard must be had to the provisions of this subsection in the instance that—
| (a) | a capital gain is determined in respect of the disposal of an asset where a capital loss would have been determined had that asset been disposed of at the beginning of that period of 18 months; or |
| (b) | a capital loss is determined in respect of the disposal of an asset where a capital gain would have been determined had that asset been disposed of at the beginning of that period of 18 months. |
[Section 45(5) further proviso inserted by section 26(1)(b) of the Taxation Laws Amendment Act, 2021 (Act No. 20 of 2021), Notice No. 770, GG45787, dated 19 January 2022 - comes into operation on 1 January 2022 and applies in respect of the disposal of any asset on or after that date (section 26(3))]
| (6) | This section does not apply in respect of the disposal of an asset if— |
| (a) | [Section 45(6)(a) deleted by the Revenue Laws Amendment Act, 2007 (Act No. 35 of 2007)]; |
| (c) | the asset was disposed of by the transferor company in exchange for equity shares issued by the transferee company; |
| (d) | the asset constitutes a share that is distributed by the transferor company to the transferee company; |
| (e) | the asset was disposed of by the transferor company to the transferee company in terms of a liquidation distribution referred to in section 47 regardless of whether or not an election has been made for the provisions of that section to apply and regardless of whether or not that transferee company acquired that asset as a capital asset or as trading stock; |
| (f) | the asset constitutes a share in the transferee company; or |
| (g) | at the time of the disposal of the asset, the transferor company and the transferee company agree in writing that this section does not apply to that disposal. |
