Deductibility of environmental expenditure in respect of assets
acquired under an asset for share transaction (BPR 093)
This ruling was issued on 25 January 2011 and involved an
"asset for share" transaction entered into pursuant to a
black empowerment transaction, in which a holding company disposed
of its entire business (including assets that need to be restored
and rehabilitated by the new company) to a new company (Newco) in
exchange for equity shares in Newco.
The ruling was made that, as Newco and the holding company are
regarded as one and the same person in terms of section 42 of the
Income Tax Act, No. 58 of 1962 (the Act), Newco will be allowed to
claim a deduction under section 37B(6) of the Act (the section
providing for the deduction of environmental expenditure) on the
allowance assets acquired, in respect of which there was an
obligation to undertake prescribed decommissioning, remediation and
Income tax implications for employees / senior executives in
relation to share option / appreciation rights plans (BCR 025)
This binding class ruling was issued on 25 January 2011 and is
applicable for a period of five years from 1 June 2010.
It involved a holding company which offered a long term
incentive scheme and appreciation rights plan to qualifying
employees and senior executives rendering services within and
outside of South Africa. In terms of the incentive plans the
options and rights became exercisable proportionally over a period
of five years, and had to be exercised before the expiry of a ten
year period in order to avoid forfeiture.
The ruling was made that non-residents are subject to income tax
in South Africa in terms of the sourced based tax regime. Therefore
gains made in terms of section 8A (on the exercising of rights
acquired on or before 26 October 2004) or section 8C (on the
vesting of an equity instrument acquired after the aforesaid date),
may lead to South African tax liabilities. The gains are determined
by regarding the number of days that a non-resident participant is
actually present in South Africa, in proportion to the total number
of days from the date that the option was granted until exercised.
Only the portion so calculated to relate to the days in South
Africa, will fall within the South African tax net.
Tax residents on the other hand, who are taxed on their
worldwide income, may be exempt from income tax, including section
8C gains, in South Africa in terms of section 10(1)(o)(ii) of the
Act, provided (and only in so far as) the services are actually
rendered by them whilst outside of South Africa. The individual
must be outside of South Africa for a continuous period exceeding
60 full days and 183 days in aggregate during any 12 month period
commencing during any year of assessment. The computation of the 12
month period commences on the first day of any particular month and
ends on the last day of the twelfth calendar month thereafter. This
period does not necessarily run concurrently with a year of
assessment, a financial year or even a calendar year.
Provided section 10(1)(o)(ii) applies, the gains, which are
deemed to accrue evenly over the period that the services are
rendered whether in or outside of South Africa, may be exempt. The
exemption will be determined based on the number of days that the
resident participant is outside of South Africa in proportion to
the total number of days from the date that the option was granted
It should be noted that should section 10(1)(o)(ii) apply, an
employer may elect not to deduct employees' tax, but UIF and
SDL will nevertheless remain payable.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The expansion of the West African regional market to foreign investors, and the search for emerging markets has led to a continuous increase in business mobility and cross border investments with Nigeria.
Effective collaboration amongst government agencies, automation of processes and capacity building by tax authorities have always been identified by stakeholders as strategies for achieving an efficient tax system.
The major objective of the waiver is to promote voluntary compliance and consequently generate revenue for government which otherwise, could have been lost.
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