DLA Cliffe Dekker HofmeyrAndrew LewisSouth Africa Section 24B of the Act was initially introduced to deal with the acquisition of assets through the issue of shares. Pursuant to the judgment of CIR v Labat Africa Limited 72 SATC 75 a company would ordinarily not incur expenditure in connection with the issue of its own shares and thus the need for s24B. Section 24B of the Income Tax Act was recently amended to only deal with the issue of shares in exchange to the issue of shares (ie the cross-issue of shares), being an “anti-avoidance” provision. Section 24B(2) of the Income Tax Act provides that if a company acquires shares that are issued to that company “directly or indirectly in exchange for shares issued by that company“, that company incurs no expenditure for the acquisition of the shares issued to it. As a result, the subsequent disposal of the shares by Read More …
Category: Court Cases
SARS and your bank account
On 29 February 2012, the South African Revenue Service (SARS) issued a notice in Government Gazette No 35090 (Notice No 173) relating to the liability of certain institutions, most notably banks, to furnish SARS with financial information about taxpayers. The notice was issued in terms of s69 of the Income Tax Act, No 58 of 1962, which section has been superseded by s26 of the Tax Administration Act, No 28 of 2011 (TAA).
Anti-avoidance: share repurchases through subsidiaries
Judgment was handed down on 16 November 2012 by the Tax Court in the case of A Ltd v Commissioner for the South African Revenue Service. The facts were as follows. A Ltd was a company listed on the JSE
Avoidance as accepted practice – Commissioner for the South African Revenue Service v NWK Ltd 2011 (2) SA 67 (SCA)
Judgment was handed down in the important case of Bosch and McCleland v Commissioner for the South African Revenue Service on 20 November 2012 by a full bench of the Western Cape High Court (a case we have previously reported on).
High Court interprets NWK judgment
Judgment in the case of Mariana Bosch and Ian McClelland v Commissioner for the South African Revenue Service (case no A94/2012) was handed down on 20 November 2012 by a full bench of the Western Cape High Court. The main judgment was written by Davis J (Baartman J concurring) and a separate judgment was written by Waglay J. The matter was on appeal from the Tax Court.
Sent packing – Sent v Commissioner of Taxation [2012] FCA 382)
Mr Eduard Sent (Sent) was sent packing by the Federal Court of Australia (FCA) on 16 April 2012, in an appeal against a decision by the Administrative Appeals Tribunal (Tribunal) on whether some or all of a payment of $11,600,000 to an executive share trust (Trust) was assessable as income in the hands of Sent (Sent v Commissioner of Taxation [2012] FCA 382). While the taxation of share incentive schemes in Australia differs from the position in South Africa, the case does highlight certain principles that are equally applicable in South Africa.
The impact of statutory mergers on current tax legislation (part 2)
by Robert Gad and Janel Strauss We have previously written on the mismatch between the statutory merger provisions in section 113-116 of the new Companies Act 71 of 2008 (“Companies Act”) and the current tax legislation. In part 1 of this article we considered the interplay between statutory merger provisions and the tax rollover relief provisions contained in sections 41 to 47 of the Income Tax Act 58 of 1962 (“ITA”) and explained how a statutory merger transaction may not necessarily qualify for the tax rollover relief. We also considered the implications that the transfer of administrative tax obligations from a target company or companies (“TargetCo”) to the acquiring company or companies (“AcquireCo”) may have on parties entering into an “amalgamation or merger,” as this term is defined in the Companies Act.
company mergers and tax (part 1)
by Robert Gad and Janel Strauss In a series of articles we will consider the relationship between the merger and acquisition rules in the new Companies Act 71 of 2008 (“Companies Act”) read with the relevant provisions of the Income Tax Act 58 of 1962 (“ITA”) and of the new Tax Administration Bill. In this first article we focus on the application of the various tax “rollover” rules to merger and acquisition transactions, in particular with regards to the newly introduced statutory merger. We also consider the general ambit of the new statutory merger and its impact on the administrative tax obligations that the parties involved have in terms of the ITA.
Good intentions gone bad
Many taxpayers have over the years fallen into the trap of waiving a right in favor of a third party without considering the full extent of the tax consequences of their actions. Not only is it necessary for taxpayers to be aware of the potential donations tax implications, but it is also necessary to consider whether any capital gains tax (“CGT”) implications arise as a consequence of their actions.
Realization companies and nature of proceeds received for tax purposes
The Supreme Court of Appeal delivered judgment on 10 May 2011 in the case of Founders Hill (Pty) Ltd v the Commissioner for the South African Revenue Service (Case No. 509/10) (as yet unreported) which dealt with the capital versus revenue nature of proceeds received by a realization company that acquires land in order to dispose of it.