26/2/2019 CORPORATE RULES: DISPOSAL OF ASSETS WITHIN 18 MONTHS OF ACQUISITION | South African Tax Guide

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 April 22, 2014  Nyasha Musviba

sars 1. Summary Subscribe to Blog via Email

This ruling deals with the e ect of section 42(7) on the disposal of assets in terms of an “intra-group transaction” as de ned
in section 45(1) when the disposal will take place within 18 months of the assets having been acquired in terms of an “asset- Enter your email address to subscribe
for-share transaction” as de ned in section 42(1). to this blog and receive noti cations of
new posts by email.
2. Relevant tax laws Join 4,292 subscribers!!!

This is a binding private ruling issued in accordance with section 78(1) and published in accordance with section 87(2) of the Tax Email Address
Administration Act No. 28 of 2011.

In this ruling references to sections are to sections of the Act applicable as at 14 May 2013 and unless the context indicates Subscribe
otherwise, any word or expression in this ruling bears the meaning ascribed to it in the Act.

This is a ruling on the interpretation and application of the provisions of sections 42(7) and 45(2) and (3).
SA Tax Guide – The Big
3. Parties to the proposed transaction
Day!!!!!!
The Applicant: A company incorporated in and a resident of South Africa

Company X: A company incorporated in and a resident of South Africa SA Tax Guide website is
5years old!!!!
Subco: A company incorporated in and a resident of South Africa and a subsidiary of the Applicant. October 23, 2017

4. Description of the proposed transaction

The big day is here. SA Tax Guide is
The Applicant acquired assets from Company X in exchange for equity shares in the Applicant in terms of an “asset-for-share celebrating 5 years. Thank you for
transaction” as de ned in section 42(1). As a result of this “asset-for-share transaction”, Company X holds 94% of the equity
being part of our journey as we share
shares in the Applicant.
taxation information in a simpli ed &
The Applicant intends disposing of the assets acquired to Subco in terms of an “intra-group transaction” as de ned in section
demysti ed way.
45(1). This disposal will take place within 18 months of the assets having been originally acquired by the Applicant.

The Applicant holds 74% of the equity shares in Subco. The purchase price will be

settled by Subco by means of an interest free loan account. Latest Tax News

5. Conditions and assumptions  SA Budget 2019/20 – Tax Budget

Proposals
This binding private ruling is subject to the additional condition and assumption
 The Tax Dos and Donts of SBCs
that:  Does a trust require an
independent trustee
ï‚· The disposal of the assets by Company X to the Applicant in exchange for
 Tax compliance is crucial for Public
equity shares in the Applicant does in fact constitute an “asset-for-share Bene t Organisations (PBOs) and
their donors
transaction” as de ned in section 42(1) and will qualify for relief as provided
 SA BUDGET 2019 – A Review
for in section 42(7).  SA Budget 2019/20 – Compulsory
retirement savings: a plan to help us
6. Ruling help ourselves

The ruling made in connection with the proposed transaction is as follows:  SA Budget 2019/20 – Foreign
employment income exemption
ï‚· The Applicant will not be subject to tax on any recoupment on the disposal of  SA Budget 2019/20 – Saving a habit
for growthTry this next time Tito
the assets it acquired from Company X disposed to Subco, including the
 The SA Budget 2019 budget plus ca
recoupment of any allowances claimed by Company X and the Applicant in change; plus ca meme chose.
 SA Budget 2019/20 – A further win
respect of such assets.
for the youth
ï‚· Section 42(7) will have a nil e ect on the disposal of the assets by the 
Applicant to Subco under section 45 notwithstanding the fact that the
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26/2/2019 CORPORATE RULES: DISPOSAL OF ASSETS WITHIN 18 MONTHS OF ACQUISITION | South African Tax Guide

disposal may take place within 18 months of having been acquired by the  Budget 2013/14 (36)
 Budget 2014/15 (42)
Applicant via an “asset-for-share transaction”.
 Budget 2015/16 (33)
ï‚· To the extent that Subco acquires the assets from the Applicant under  Budget 2016/17 (42)

section 45, the income tax value of such assets will be equal to the income  Budget 2017/18 (13)
 Budget 2018/19 (19)
tax value of the assets for the Applicant on the date of disposal to Subco.
 Budget 2019/20 (30)
This being the income tax value of the assets for Company X on the date of  Capital Gains Tax (55)
 Carbon Tax (44)
the disposal of the assets under section 42 to the Applicant less any
 Corporate Tax (186)
subsequent allowances claimed by the Applicant.  Court Cases (234)
 Davis Tax Committee (17)
7. Period for which this ruling is valid
 Dividend Tax (59)
This binding private ruling is valid for a period of 5 years from 14 May 2013.  Donations Tax (18)
 Employment Tax Incentive (10)
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26/2/2019 CORPORATE RULES: DISPOSAL OF ASSETS WITHIN 18 MONTHS OF ACQUISITION | South African Tax Guide

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