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Income Tax Act, 1962 (Act No. 58 of 1962)

Department of Finance

Practice Note No. 7

Moratorium: Exemption from Stamp Duty or Transfer Duty Relating to the Transfer of Marketable Securities or Property or of Rights or Obligations Under Bonds Under a Scheme for the Rationalization of a Group of Companies and the Assessment of Companies in any such Group for Income Tax Purposes in Certain Circumstances


Date: 4 August 1988


1) In order to facilitate the rationalization of groups of companies, provision has been made in the Taxation Laws Amendment Act, 1988 (Act 87 of 1988) (hereinafter referred to as the Amendment Act), for a moratorium on the payment of stamp duty and transfer duty in respect of rationalization schemes approved by the Commissioner for Inland Revenue. The provisions governing the operation of the moratorium are included in section 48 of the Amendment Act.

The purpose of this practice note is to inform groups of companies whose intention it is to make use of the moratorium as regards—

1.1 the information and documentation that should accompany an applicant's application and
1.2 the offices of the respective Receivers of Revenue with whom applications should be lodged.


2) Information and documentation

The agreement and a written statement providing details of the scheme and any subsequent variation thereof, must be submitted by the controlling company of the group or on behalf of it to the Commissioner on or before 30 June 1989. The controlling company or any person acting on its behalf must submit a mandate from each controlled company in the group of companies which is a party to the agreement, in terms of which the controlling company or such other person is authorised to act on behalf of the controlled company(ies), supported by a resolution of the directors or shareholders of each controlled company.

In the aforementioned statement the following information must inter alia be submitted—

2.1 Background information - brief history of the group of companies.
2.2 Flowcharts setting forth the structure of the group as at 17 June 1988, the date of the agreement and thereafter. The percentage holdings must be clearly indicated on the flowcharts. Details of all classes of shares issued by each company in the group, by whom the shares are held and the nature of the voting rights coupled to each class of share.
2.3 The income tax, sales tax and employees tax reference numbers of each company involved in the rationalization.
2.4 The reasons why the transaction should be regarded as a scheme for rationalization of the activities of the group.
2.5 Details of the savings and advantages which will be achieved within the group as a result of the scheme.
2.6 The nature of the consideration agreed upon between the seller and the purchaser in terms of the agreement and how it was determined as well as the following information in respect of all assets transferred—
2.6.1 original cost;
2.6.2 estimated market value as at the date of the agreement;
2.6.3 net book value as at the date of the agreement;
2.6.4 tax value as at the date of the agreement;
2.6.5 if the proposed transfer value is not market value, reasons for; selecting a different value for transfer purposes.
2.7 A certificate signed by a director of the controlling company in substantiation of the shareholdings within the group.
2.8 Full details of the income tax position of each company within the group before and after the rationalization, eg:
2.8.1 nature of all special tax allowances claimed, eg investment allowances, exporters allowance, etc;
2.8.2 cost on which annual allowances claimed;
2.8.3 accumulated tax allowances claimed to the date of the agreement; and
2.8.4 assessed loss/taxable income of transferee and transferor companies as per last year of assessment.
2.9 The following details regarding any marketable securities, property and rights and obligations under bonds transferred—
2.9.1 Marketable securities:
* Description of marketable securities transferred and the certificate numbers
* Name of transferor
* Name of transferee.
2.9.2 Property:
* Full title deed description of the property
* Name of transferor
* Name of transferee.
2.9.3 Bonds:
* Cession(s) of bonds
* (Full details of bond number, cedent and cessionary)
* Substitution of debtor
* (Full details of bond number, debtor and substituting debtor)
* (The registered and current values of cessions of bonds as well as substitutions of debtors).
2.9.4 Marketable securities, property and bonds held as trading stock should be listed separately.
2.10 Details of—
2.10.1 businesses transferred as going concerns;
2.10.2 the transfer of shares of operating companies;
2.10.3 the transfer of shares of holding or dormant companies;
2.10.4 the number of companies earmarked for ultimate liquidation/deregistration;
2.10.5 shareholdings held by nominees in and for the companies in the group; and
2.10.6 the proposed timing of the implementation of the scheme.
2.11 The rulings requested should be listed.
2.12 Documents to substantiate the aforementioned information should be attached.


3) With whom applications mast be lodged

The administration of section 48 of the Amendment Act has been delegated on a regional basis to certain offices of the Receiver of Revenue and exemption certificates will be issued by regional offices. Applications must be submitted to the Receiver of Revenue in whose area the controlling company is on register for income tax purposes.

The regional, and satellite offices which will be assisted by each regional office, are as follows:

Regional office

Satellite office

Receiver of Revenue Cape Town

Bellville, Paarl, Worcester and Beaufort-West

Receiver of Revenue Port Elizabeth

Uitenhage and East London

Receiver of Revenue Pretoria

Rustenburg, Pietersburg, Witbank, Standerton and Nelspruit

Receiver of Revenue Johannesburg

Vereeniging, Krugersdorp. Roodepoort, Randfontein and Klerksdorp

Receiver of Revenue Germiston

Brakpan, Benoni, Boksburg, Springs and Nigel

Receiver of Revenue Bloemfontein

Welkom, Kroonstad and Kimberley

Receiver of Revenue Durban