PwC Budget and Tax Update. PricewaterhouseCoopers 2 What we will cover Budget speech Taxation Laws...

transcript

BudgetBudgetandandTax Tax

UpdateUpdate

PricewaterhouseCoopers2

What we will cover

•Budget speech

•Taxation Laws Amendment Act (no 30 of 2002)

•Revenue Laws Amendment Act (no 74 of 2002)

BUDGET

BEGROTING KNOWING

THE SCORE

Taxation Proposals

General comment

Changes proposed Individuals Other changes Business

International Tax

BUDGET 2003KNOWING

THE SCORE

Overview

“The right thing to do”

- Trevor Manuel, Minister of Finance

Administration 01/02 02/03 03/04

• Net Revenue Gain/(loss) (13 213) (15 889) (15 057)

BUDGET 2003KNOWING

THE SCORE

Proposed changes

Individuals

02/03 03/04

Rebates

Primary 4 860 5 400

Secondary 3 000 3 100

Threshold

Below 65 27 000 30 000

65 and over 42 640 47 222

BUDGET 2003KNOWING

THE SCORE

Individuals

Taxation reduction (under 65 years old)

INCOME REDUCTION

30 000 Per year R540

50 000 Per year R1 240

80 000 Per year R2 640

150 000 Per year R5 640

500 000 Per year R6 240

BUDGET 2003KNOWING

THE SCORE

Individuals

Spread of Relief

Income Group R0 – R150 000 56% R150 001 – R250 000 23% R250 001 and above 21%

BUDGET 2003KNOWING

THE SCORE

Individuals

Effective tax burden on households

Income Group 30 000 R5 400 50 000 R9 000 100 000 R20 100 200 000 R53 200

BUDGET 2003KNOWING

THE SCORE

Individuals – Interest income exemption

02/03 03/03

Under 65 6 000 10 000

Over 65 10 000 15 000

Foreign dividends and interest limited to R1 000

BUDGET 2003KNOWING

THE SCORE

IndividualsTransfer duty

Exempt level increased from R100 000 to R140 000

Value of property Reduction

R140 000 – R320 000 R2 000

R320 000 and above R2 600

Effective 1 March 2003

BUDGET 2003KNOWING

THE SCORE

Individuals

What was not included? Structuring of Salary packages Car allowances Lower maximum marginal rate

BUDGET 2003KNOWING

THE SCORE

Retirement fund tax

1996 17%

1998 25%

2003 18%

Detailed discussion document

BUDGET 2003KNOWING

THE SCORE

Stamp duties

Insurance policies Removes interpretation problems

BUDGET 2003KNOWING

THE SCORE

Fixed deposits

Effective 1 April 2003

Other Changes

Secondary trades Ring-fenced

BUDGET 2003KNOWING

THE SCORE

PAYE for directors Transfer duty

Nominee transactions PAYE, VAT and UIF Plastic bags

Environmental duty

Secrecy provisions Collections

Liquidations Shareholder liability

Small businesses

Pre-incorporation expenses

Transfer payment Public-Private-Partnerships VAT invoices

Customer VAT number

Export definition

BUDGET 2003KNOWING

THE SCORE

Public Benefit Organisations

List of activities to be extended to include : Low-income housing Regeneration of urban areas

BUDGET 2003KNOWING

THE SCORE

Business

Companies

Tax rate unchanged

STC unchanged

BUDGET 2003KNOWING

THE SCORE

Taxation of foreign dividends

Designated country list

Companies (cont.)

Accelerated depreciation for urban development

Excon relaxation

BUDGET 2003KNOWING

THE SCORE

Small Businesses

Start-up expense

Double deduction first R20 000

Increased turnover limit – increased to R5m (prev R3m)

Compliance still the issue

BUDGET 2003KNOWING

THE SCORE

Business assets

Rollover relief for moveable business assets:

• Re-investment of sale proceeds

• Within “an 18-month period”

Loss relief for sale of devalued short life business assets

• Replaces scrapping allowance

BUDGET 2003KNOWING

THE SCORE

International Tax

Introduction

• Encouraging capital inflows– Tax exemption for qualifying dividends– Abolition of “designated country” exemption

• Other proposed amendments– Emigrating tax residence– International Headquarter Companies

• Remaining concerns

• Exchange control

• Conclusion

BUDGET 2003KNOWING

THE SCORE

Tax exemption for qualifying foreign dividends

• SA foreign policy, tax legislation and exchange control finally aligned!

• What was the problem?

• Abolition of the designated country exemption

• Participation exemption for qualifying foreign dividends (“meaningful interest”)– No indirect foreign tax credits for non-qualifying shareholdings– Anti-avoidance measures to eliminate possible return of round-tripping

transactions

• Simplify administration and compliance

• Expansion of reporting requirements for Controlled Foreign Companies

BUDGET 2003KNOWING

THE SCORE

Tax exemption for qualifying foreign dividends

• Uncertainties:– STC credits for exempt dividends?– Effective date of legislation?– Meaningful interest?? Other requirements?– Special rules limiting or eliminating remaining forms of excess foreign

tax credits?– What about CFC provisions?

• Critisism– Disruptive and regular changing of national tax policy– Hybrid tax system (partly imputation, partly classical)

• Strategy for SA multinationals– Await detailed legislation – assess tax efficiency of structure– CFC: Increased focus on business establishments and inter group

exemptions?

BUDGET 2003KNOWING

THE SCORE

Sundry amendments

• Residence migration:– Deemed disposal for CGT– STC

• Abolition of International Headquarter Company regime (harmful tax practice)

• Increased disclosure requirements (CFC, tax structures)

• Exchange of information between SARS and the Reserve Bank

• More targeted audits

• Advance rulings

BUDGET 2003KNOWING

THE SCORE

Remaining concern: CGT for foreign groups

• No re-organisation, share-for-share, intra-froup rules/relief as for residents

• Limited exemptions, especially for holding companies

• Even if relief is available, potential 30% effective tax rate on capital gains

• No cash

BUDGET 2003KNOWING

THE SCORE

Remaining concern: Transfer Pricing

• Focused approach from SARS

• Provision of service or finance

• Structured finance arrangements

• Inbound multinationals with losses

• Sophisticated risk analysis - Industry focus

• Detailed questionnaires sent out by SARS

• Transfer Pricing Audit team at SARS

• Settlement

• CFC look-though

BUDGET 2003KNOWING

THE SCORE

Exchange control

• Relaxation of exchange controls – move toward prudential system

• Institutional investors– Invest up to foreign asset limit of:

– 15% of total assets (long term insurers, pension funds and fund managers)

– 20% for unit trusts

• Investment into Africa – R2bn; Investment elsewhere – R1bn

• Exchange control “credit” for qualifying foreign dividends from subsidiaries – re-export on application for approved projects

BUDGET 2003KNOWING

THE SCORE

Exchange control

Abolished for emigrants (ie blocked Rands)

Any amount above R750 000

Subject to 10% exit charge

Amnesty period 5% charge applied to funds repatriated (if funds held illegally) 10% charge on foreign assets remaining offshore (if funds held illegally)

BUDGET 2003KNOWING

THE SCORE

Any questions re the Budget?

Taxation Laws Amendment Act

•Donations tax:– Levied @ 20%– Annual allowance: R20 000 to R30 000 (wef 1/3/2002)– Incidental allowance: R5 000 to R10 000 (wef 1/3/2002)

• Estate Duty: R1m to R1.5m (wef 1/3/2002)

• IP minimum R3 000 to R5 000 (s11gA)

• Bravery and long service awards: R2 000 to R5 000

• Medical aid: R1 000 minimum scrapped

Skills Development Levies

•Implemented 1 April 2000 @0.5%

•Increased to 1% on 1 April 2001

•Now spend – granting of tax allowances (Learnership Agreements)

Learnership agreements (s12G)

Allowance at commencement of contract post 1 October 2002

•Existing employees (if learnership agreement) – lesser of 70% of remuneration or R17 500

•New employee (if learnership agreement) – lesser of 70% of remuneration or R25 000

Allowance on completion of contract post 1 October 2002

•New/existing employee – lesser of 70% of remuneration or R25 000

Revenue Laws Amendment ActOverview of changes

•Transfer duty on transfer of shares/members’ interest

•Amendments to dividend definition

•Amendments to sections 9D,9E and 6 quat

•Amendments to section 24I

•Corporate restructuring rules – revamp

•CGT amendments esp individuals

•Various other amendments

•Date of promulgation: 13 December 2002

Revenue Laws Amendment Act

Transfer duty amendment

•Defintion of property now includes share or member’s interest in a residential property company

•“Residential property” includes any dwelling, house, holiday home, apartment or similar abode zoned for residential use other than:

– Apartment etc consisting of 5 or more units for rent to 5 or more persons (not connected persons); or

– Fixed property of a vendor

Transfer duty (cont)

•“Residential property company” defined as any company that holds residential property (including a CC), where the fair value of such property >50% of the aggregate fair value of the all the assets

•“Transaction” includes disposal of shares or member’s interest and includes substituion or addition of beneficiaries with a contingent right to the property

•Dutiable value – fair market value of the share or member’s interest (loans may not be taken into account)

•Effective date: 13 December 2002

Dividend definition

•Previously– Dividends paid from capital reserves on

liquidation/deregistration exempt from STC – not a dividend per definition

• Amendment– With effect from 1 January 2003– Capital reserves on or after 1 October 2001 subject to STC– Now part of the definition of a dividend

Liquidation dividends (cont)

Summary:

•Pre 1993 reserves – STC free

•Post 1993 revenue reserves - STC

•Pre 1 October 2001 capital reserves – STC free

•Post 1 October 2001 capital reserves distributed prior to 1 January 2003 – STC free

•Post 1 October 2001 capital reserves distributed on/after 1 January 2003 – STC

Sections 9D, 9E and 6 quat

Taxation of Foreign Dividends -Definition

1. a foreign company as defined in S 9D, or

2. a resident company - dividend declared out of profits before the company became resident

3. dividends deemed to have been distributed by a CFC in terms of s.64C

Calculation of the amount included in gross income

• Shareholding of at least 10 percent

– Proportionate amount of profits from which dividend is declared

– LIFO– Different forms of income

Calculation of the amount included in gross income

• Shareholding of at least 10 percent

– Amount of dividend declared

Proportionate allocation of income from affected companies

– LIFO

– Different types of income

Election net income

At least 10 per cent

– Profits after foreign corporate and withholding tax

Less than 10 per cent

– Dividend after withholding tax

Deductions allowed against foreign dividend income

– Interest incurred, limited to amount of foreign dividends included

– Excess: reduced by amount of exempt dividends

– Balance of deductible interest carried forward

Exempt foreign dividends

– By companies listed on the JSE

– From designated countries (temporarily)

– From profits taxed otherwise in SA

– From profits derived from exempt foreign dividends

– By unbundling company

Conversion of dividends in foreign currencies

– Appears to be regulated by Section 25D

Controlled Foreign Companies - Definitions

– CFC: any foreign company, 50% participation by residents

– Net income: as if CFC was a taxpayer

– Business establishment

– Foreign Financial Instrument Holding company: market assets or market value more than 50% financial instruments

Net income taxable in SA

– Proportional amount in relation to participation held

– Election if held as CFC for part of year

Exemptions

– Holdings of less than 10%

– Designated country: taxed at qualifying statutory rate

– Dividends received by CFC from another CFC, if it relates to a taxable amount

– Interest, rents & royalties from a company in the same group

– Capital gains attributable to a business establishment or group CFC

– Participation exemption: - dividends

- capital gains

Business establishment exemption

– Net income attributable to a business establishment outside SA exempt

Business establishment exemption - Exceptions:

– Goods & services between CFC and connected resident at non-arm’s length

– Sale of goods to connected resident by CFC, unless:– purchased from unconnected

person– more than minor assembly etc– sells goods at comparable prices

Business establishment exemption - Exceptions (continued):

– Goods purchased from connected residents, unless:– insignificant portion– more than minor assembly– sold for delivery in CFC country

– Services by CFC to connected resident, unless:– relates to creation, assembly,

repair etc outside SA– relate to sale & marketing in

CFC country

Business establishment exemption - Exceptions (continued):

– Dividends etc, capital gains & currency gains, unless:– not more than 5%– principal trading activity of bank

Reporting requirements

– Exemptions do not apply unless adhered to

– Any resident who:– holds more than 10% – 50% together with

connected persons must submit information to:– Commissioner– Connected resident who

holds at least 10%

Double Taxation Relief

Credits for foreign tax on foreign income taxed in SA

– Rebate against normal tax, not STC

Qualifying income

Only income included in ‘taxable income’:

– Foreign source income – CFC proportional income – Foreign dividends – Capital gains on assets outside SA– Income/capital gains attributed to another person– Trust distributions deemed income or capital gains

Sum of foreign taxes

– Any taxes on income

– proved to be payable

– to any sphere of government

– without right of recovery (excluding loss carry back)

Foreign trusts or partnerships

– If taxed as separate entity in foreign jurisdiction

– SA members deemed to suffer portion of foreign tax

Qualifying foreign taxes

– Paid by SA resident on:– foreign source income– foreign dividends – capital gains on asset outside

– Paid by CFC

– Underlying foreign tax paid by declaring company – taxed as foreign dividend – dividend received by CFC

Qualifying foreign taxes (continued)

– By Collective Investment Scheme where dividends on-declared to resident

– Foreign tax on income or capital gains attributed to a resident

– Underlying foreign tax of a Trust re deemed income or capital gains distributions

Calculation of DTR credit

– Total credit may not exceed SA total normal tax on attributable income – excess carried forward, up to

seven years

– Terms ‘aggregate’ (rebate) and ‘total’ (taxable income) confirms mixing of credits

– Subsequent foreign tax on previous CFC income, claimed against any SA normal tax

Exclusions

– No credit for underlying taxes unless:– SA shareholder– together with group of companies

holds at least 10% or ‘qualifying interest’

– Shareholder elects to be taxed on ‘net’ basis

– No credit in addition to Tax Treaty relief, may be ‘in substitution’ to

Foreign exchange rates

– On last day of assessment

– At average exchange rate for that year

Subsequent changes to credit

– If prior year claim for credit is – understated (onus taxpayer)– overstated (onus Commissioner)

– may be re-opened

– 6 year limit

Foreign currency differences

New Tax Dispensation on Currency Differences

Introduction

• One of the most complex features of the Income Tax Act

• All-encompassing because foreign currency gains and losses involve all forms of foreign related transactions

• Introduces complex currency pooling system for currency assets for individuals

• Extends rules for capital assets, introducing relative currency tests

• Interpretation complicated by different implementation dates

Real gain vs full gain

Mr A buys an asset 10 October 2001 - $ 100. He sells asset on 30 November 2003 for $150

Average exchange rates:

10 October 2001 : $1 / R9

30 November 2003: $1 / R10

Translate expenditure on date of incurral of expenditure

Gain = ($150x10) - ($100x9) = R600 – full gain ie taxed on forex difference

vs ($150x10) - ($100 x 10) = R 500 – real gain ie not taxed on forex difference

Types of Foreign Currency Gains

• Section 25D governs translation of directly earned income / expenditure

• Section 9D(6) governs CFC net income

• Section 24I deals with all differences on foreign debt, currency and derivatives as held by companies and trading trusts (capital and revenue)

Types of Foreign Currency Gains (continued)

• Section 24I now includes currency and debt instruments held by individuals as trading stock and currency derivatives held by trusts and individuals

• Part XIII of the Eighth Schedule deals with foreign currency and debt of individuals and partnerships, mainly on capital account

Types of Foreign Currency Gains (continued)

• Foreign equity instruments are covered under Section 9G (trading) and par. 43(4) of the Eighth Schedule (capital)

• Intention: paragraph 43(1) and (2) of the Eighth Schedule covers the remainder of foreign capital assets BUT includes ef trading stock (seems as if they will change this again – Budget 2003)

• Note the amended definitions, for example local / foreign currency

Translations of Directly Earned Foreign Income

• Rationalises the currency rules into one basic system (section 25D)

• All foreign denominated income / expenditure is translated into Rands at the “average exchange rate” for the tax year – see next slide

• Taxpayers with branches can now use the financial reporting currency of that branch

Average Exchange Rate

• Translation at the average exchange rate for the year, not the spot rate on the transaction date (Section 1)

• The average exchange rate allows a choice between:– Average daily, weekly or monthly rate for the year– A daily weighted average (based on net income or net

Foreign Cash and Debt: Companies (1)

• Section 24I subjects differences on foreign cash and debt (plus currency forwards and option contracts) on a mark-to-market system if held by:– Companies– Trusts carrying on trade– Natural persons with foreign

currency items held as trading stock (revised)

– Individuals and trusts who hold currency derivatives (new)

Foreign Cash and Debt: Companies (2)

• Exchange differences with CFC in same company group deferred for both the holding company and the CFC until realisation (Section 24I(10) (effective 1 October 2001)

• Exchange differences not recognised on loans / debts and derivatives to fund p 43(1) and (2) assets not exposed to full gains (intention but includes trading stock for example)

• Uncertainty on the impact of the average rate on Section 24I applications

Foreign Cash and Debt: Individuals (1)

• All foreign cash and debt (assets and liabilities) are al taxed on a “pooling system” if held by– Individuals and partnerships

that do not hold exchange items as trading stock

– Non-trading trusts

• Currency gains and losses are only triggered for currency items converted out of the pool into a different currency

• Transfers within the same currency are ignored

• Foreign currency gain / loss not recognised for– All domestic or private

expenses (other than for immovable property such as homes)

– All travelling or maintenance expenses

– All involuntary disposals (such as theft)

– One personal checking account of taxpayer’s choice

• Averaging system for measuring currency gains fully applies

• An average system of applying base cost to disposals is used based on the relative value of disposals to the asset portfolio value before disposal

• Effectively full differences are subjected to CGT on a realisation basis using average rates

• All these rules will apply prospectively, i.e. from 1 March 2003

Liquid Foreign Equity Shares

• The currency gain / loss remains taxable, regardless of whether the shares are held as capital assets or as trading stock

• Definition was clarified to include shares on– Any listed exchange, regardless of whether that exchange is

national, regional or local– Any interdealer quotation system

Basic Capital Gains for Foreign Assets

• Taxpayers that purchase and sell foreign assets with the same foreign currency determine all gains and losses in that currency and then translate those gains and losses at the “average exchange rate” (Section 43(1))

• Certain South African sourced assets are included

Basic Capital Gains for Foreign Assets (continued)

• Special rules for conversion apply when a taxpayer purchases an asset in one foreign and sells in another (Section 43(2))

Basic Capital Gains for Foreign Assets (continued)

• Generally speaking only the real gain on these assets is recognised, subject to relative currency position except for the following:– Foreign equity instruments– South African fixed property– Movables of non-residents linked

to a South African permanent establishment

• Amendments are effective for disposals after 13 December 2002

Capital Gains Tax

•Effective from 1 October 2001

•Inclusion rates:– 25% for individual and special trust– Other taxpayers – 50%

• Definition of a disposal very wide

• Capital losses are ring-fenced

• Rollover relief may apply in certain instances

Capital Gains Tax

Practical issues:

•Valuation on or before 30 September 2003

•Which assets to value

•Sale of business/business units – think about goodwill element

•Liquidations – in hands of shareholder potential CGT

•Write-off of loans – potential CGT as well as income tax consequences

Corporate Restructuring Rules

General

Specific tax relief measures in the following qualifying circumstances:

•Company formations (s 42)

•Share for share transactions (s 43)

•Amalgamation transactions (s 44)

•Transfers between group companies (s 45)

•Unbundling transactions (s 46)

•Transactions re liquidation, winding-up or deregistration (s 47)

Definitions

Definitions:

•Allowance asset = capital asset qualifying for a deduction or allowance

•Qualifying interest = equity shares in a company:– If listed company/listed within 12 months – any # of shares– In any other case > 25% of the equity shares

Definitions (cont)

•Group of companies: 2 or more companies in which one company (“controlling group company”) directly or indirectly holds shares in at least one other company (“controlled group company”) to the extent that:

– At least 75% of the equity shares of each controlled group company are directly held by the controlling group company, one or more controlled group companies or any combination thereof; and

– The controlling group company directly holds 75% or more of the equity in at least one controlled group company

Definitions (cont)

Group of companies

Parent

Sub 1 Sub 2

Sub 3 Sub 4

All companies qualify as one group

Definitions (cont)

50% 50%

Group of companies

All companies qualify as one group

Definitions (cont)

•Domestic financial instrument holding company (“DFIHC”) :– Resident company– >50% MV or cost of own assets + assets of controlled group

companies in relation to that co = financial instruments EXCLUDES:

– Debt due iro goods/services included in income, integral part of business as going concern

– FI of certain other companies eg regulated ito Banks Act, Long Term Insurance Act etc

– Provided that, in determining 50% ratio, the following will be disregarded:

– Share of controlled group company (in relation to that company)– FI = loan, advance or debt if both debtor and creditor are

members within same group

Definitions (cont)

•Foreign financial instrument holding company (“FFIHC”) (as defined in s 9D):

– Foreign company where > 50% of MV or actual cost of own assets + asset of controlled group company in relation to that foreign co = FI

– Excludes:– Debt due to foreign co or controlled group company in relation to

foreign company iro goods or services. Debt is or was included in income and debt integral part of business as conitnuing independent operation

– FI of banks, insurers, dealers, brokers (local/ unconnected party trading requirement)

– Provided that indetermining 50% ratio, the following must be disregarded:

– Shares in other co in the same group of companies– FI – loan, advance or debt if both creditor and debtor form part of

same group of companies

Company formations (s 42)

Person (not a trust) Resident company

Equity shares(qualifying interest)

Elective

Market value of asset > base cost (only inherent gain assets)

Person must hold qualifying interest in company (ie if company listed, one share, if unlisted > 25%)

If consideration other than shares – part disposal

Anti-avoidance rules

Company formations (s 42) cont

Person (not a trust) Resident company

Equity shares(qualifying interest)

No election if FI unless:

•Debt due iro goods/services carrying on business

•Total MV of FI < 5% total MV of all assets transferred

•Transfer to regulated industries eg banks

N/A if asset acquired within 18 months ito s42

Registration of share transfer exempt from stamp duty (not original issue)

Transfer duty applies unless acquirer is VAT vendor

Share for share transactions (s43)

Before

Person (not a trust) Target co

Share for share transactions (s43)

Person (not a trust)

Acquiring co(resident)

Target co

If target co listed: >25% or 35%

If target co unlisted: >50%

•Mandatory

•Part disposal if non-shares received

•Only inherent gain assets

•Certain anti-avoidance rules

•N/A if target = DFIHC/FFIHC

•N/A if share acquired ito s43 within 18 months

•Stamp duty exemption on transfer of shares (not issueby acquiring co)

Qualifying interest

Amalgamation transactions (s44)

Shareholder

Amalgamated coResultant co

(resident)Assets

Shares

Before and whentransaction takes place

Amalgamated co disposes of all its assets to resultant co by way of Amalgamation, conversion or merger

PricewaterhouseCoopers

Shareholder

Amalgamated coResultant co

(resident)Assets

Shares

Amalgamated co disposes of investment in resultant co with correspondingSTC exemption (Dt Reserves, Ct Investment in resultant co)Amalgamated co liquidated

•Mandatory

•Qualifying interest requirement if person needs exemption

•Part-disposal of non-shares received

•N/A if asset = FI unless:– Debt due ordinary course of business– FI = Equity share in or debt owed by a controlled group co in

relation to amalgamated co and controlled group co is not a DFIHC or FFIHC

– Total market value of all FI <5% of MV of all assets– Specific industries– Tax exempt

•Amalgamated co must take steps to liquidate within 6 months after amalgamation transaction

•STC exemption when transferring shares in resultant co to shareholder

•No other STC exemption ie normal rules apply

•Stamp duty exemption on transfer of shares (not issue)

Intra-group transactions (s45)

Company (transferor)

Company (resident Transferee)

Asset(s)

•Elective•Transferor and transferee must form part of the same group of co’s (ie 75% shareholding)•Applies iro capital assets, trading stock and allowance assets•N/A if asset = FI unless:

•Debt due ordinary course of business•Total MV of FI transferred < 5% of MV if all assets transferred•Specific industries•FI= equity share in controlled group co in relation to transferor company and controlled group co not a DFIHC or FFIHC

Intra-group transactions (s45)

Company (transferor)

Company (resident Transferee)

Asset(s)

•If transferee disposes of asset within 18 months: ring-fencing of capital gainsor losses•If asset = trading stock/depreciable asset and disposal within 18 months: deemed to be attributable to a separate trade (ie ring-fencing)•Infinite claw back if transferee and transferor cease to form part of the same group of companies except if liquidated ito s 47•Transfer duty exemption •Stamp duty exemption on transfer

Unbundlings (s46)

Shareholders

Unbundling co

Unbundled co(Resident)

•If unbundled co listed: > 25% if no other shareholder holds 25% or more otherwise 35%•If unbundled co unlisted: >50%

•If unbundling co listed: disposal of all the equity shares to shareholders as long as shares of unbundled co listed within 12 months after disposal•If unbundling co unlisted: disposal to any shareholder of unbundling co which forms part of the same group of co’s as unbundling co

Unbundlings (s46)

Shareholders

Unbundling co

Unbundled co(Resident)

•Mandatory•Only shares in residents•Disposal of distributable shares not a dividend for s 64B(3) purposes for both unbundling co and company acquiring shares•Distribution deemed to take place first from share premium •N/A if unbundled co is DFIHC or where shareholder is a non-resident where shareholder acquires >5% of the shares•Stamp duty exemption on transfer of shares

Liquidation, winding-up or deregistrations (s47)

Holding co(resident)

Liquidating co

75% or moreshareholding

•Elective•Must be a 75% holding company•18 month holding period for acquirer – otherwise ring-fencing•Normal STC rules apply•N/A if liquidating co = DFIHC or FFIHC•N/A if holdco exempt from tax•N/A if liquidating co has not, within 6 months, taken such steps to liquidate etc•Stamp duty exemption on transfer•Transfer duty exemption

Any questions?

Disclaimer

Although we have taken great care in preparing this presentation, we do not accept any responsibility for any inaccuracies that may exist. We suggest you use it as a guide only and do not accept any responsibility for any loss or damage that may arise out of the reliance by a person upon any of the information contained herein.

PwC Budget and Tax Update. PricewaterhouseCoopers 2 What we will cover Budget speech Taxation Laws...

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