GLOBAL LEGAL INSIGHTS – CORPORATE TAX

By Alan Keep Thursday, July 24, 2014
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The corporate tax work of the past year has been mixed. There have been a number of corporate restructuring transactions, refinancing of debt push down transactions and a number of transactions involving share repurchases by companies as a means of enabling shareholders to exit companies. We have also seen an increasing number of enquiries by the South African Revenue Service (“SARS”) based on the General Anti-Avoidance Rules.

Significant deals and highlights illustrating aspects of corporate tax

As stated above, there have also been a number of transactions involving share repurchases by companies as a means of enabling shareholders to exit companies. The share repurchase became a favoured way of exiting a company, particularly for South African resident company shareholders, where the proceeds of the share repurchase were treated as a dividend for the purposes of the Income Tax Act (“ITA”). The motivation behind this seems to have been, in part, the fact South African resident companies are not subject to Dividends Tax. In addition, dividends paid by South African resident companies are generally not subject to income tax or capital gains tax. This enabled shareholders to dispose of their shareholding without paying tax on the proceeds. As will be seen below, the tax authorities have identified these types of transactions for possible inclusion in the list of transactions that must be reported in terms of the Tax Administration Act No. 28 of 2011 (“Tax Administration Act”).

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