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Taxation
Friday, August 1, 2008
Retrospective amendment.

Taxpayers who entered into an intra-group transaction in terms of section 45 of the Income Tax Act during the year of assessment, ending on or after 30 October 2007, which involved the intra-group transfer of assets should re-visit the details of the transaction. This is according to a recent taxmail note from Deneys Reitz

Ernie Lai King of Deneys Reitz says that where
• the transferor company transferred assets to the transferee company in return for shares issued by the transferee company. (This includes a transfer on inter-company loan account where the loan account was subsequently settled through an issue of shares by the transferee company); or
• the assets included shares that were distributed by the transferor company to the transferee company; or
• the assets were disposed of in terms of a liquidation distribution;

the parties may find that the transaction will not provide the tax roll-over relief as expected.
An amendment in Act 35 of 2007: Revenue Laws Amendment Act 2007, which was released on 30th October 2007, provides that the above intra-group transfers, entered into during any year of assessment ending on or after 30th October 2007, will not qualify for roll-over relief under section 45.
The disqualification therefore has retrospective effect to transactions entered into prior to 31st October 2007. For example, if a group company entered into such intra-group transactions and the transaction was concluded on 31st July 2007 and the companies have a year end of 31st December, the transaction will not qualify for roll-over relief under section 45 even though the section as it read at 31st July 2007, allowed such roll-over relief.
 

Copyright © Insurance Times and Investments® Vol:21.7 1st August, 2008
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