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Income Tax Act, 1962 (Act 58 of 1962)

Chapter II: The Taxes

Part I: Normal Tax

8G. Determination of contributed tax capital in respect of shares issued to a group company

 

(1) For the purposes of this section ‘group of companies’ means two or more companies in which one company (hereinafter referred to as the ‘controlling group company’) directly or indirectly holds shares or voting rights in at least one other company (hereinafter referred to as the ‘controlled group company’), to the extent that—
(a) at least 50 per cent of the equity shares or voting rights in each controlled group company are directly held by the controlling group company, one or more other controlled group companies or any combination thereof; and
(b) the controlling group company directly holds at least 50 per cent of the equity shares or voting rights in at least one controlled group company.

 

(2) Where a company issues shares (hereinafter referred to as the ‘issuing company’) to any company that is not a resident (hereinafter referred to as the ‘subscribing company’) that forms, after that transaction, part of the same group of companies as the issuing company, the amount of the contributed tax capital in relation to those shares will, to the extent that the consideration for those shares—
(a) consists of; or
(b) is used, directly or indirectly to acquire,

any shares in another company that is a resident (hereinafter referred to as the ‘target company’) and that forms part of a group of companies in relation to the subscribing company, be equal to so much of the total contributed tax capital attributable to shares of that class in that target company so acquired, determined in terms of subsection (3), as bears the same ratio that the number of shares so acquired bears to the total number of shares of that class.

 

(3) The contributed tax capital in relation to the shares in that target company must be determined—
(a) in terms of paragraph (b) of the definition of ‘contributed tax capital’ in section 1; and
(b) with reference to the date from which that target company formed part of a group of companies in relation to the subscribing company.

 

(4) Paragraph (a) of the definition of ‘contributed tax capital’ in section 1 does not apply in respect of any shares of a class that were issued, as contemplated in subsection (2), by an issuing company before that issuing company became a resident.

 

[Section 8G inserted by section 13(1) of Act No. 17 of 2017]