SARS’ Final Word on Section 45
31 January 2012
Posted by: Author: Monique Vanek
SARS’ Final Word On Section 45
Groups can again move around assets tax-free—but there's a catch
The Brouhaha over Section 45, which allows groups of companies to move
around assets tax free, appears to be over.Treasury has responded to
public outrage over its moratorium on Section 45—with a slight caveat.
last year’s release of its interim Mini-Budget, Treasury revealed that
things are "back to normal” with regards to Section 45,unless the
transaction you engage in looks "suspicious”, according to Prof Osman
Mollagee, the deputy chair of SAICA’s National Tax Committee. In such
cases, SARS will have a closer look at these transactions before it allows
you to deduct interest from your taxable income. Should you be
found wanting, SARS will deny the interest deduction, which will increase
the company's tax liability.
Treasury initially put a halt to
Section 45, as it was being used to facilitate tax-free reorganisations
to increase deductible debt. Mollagee cites the manufacturing of
interest deductions as an example of a suspicious transaction that it
will look at. Furthermore, no deduction will be allowed for interest to
facilitate liquidations undertaken in terms of Section 47,
unless approved by SARS, according to SAICA’s project director,
Muneer Hassan, adding that regulations are still to be introduced which
will provide further clarity of how the approval process will function.
adds that this compromise has left corporate taxpayers pretty happy,
but from SARS’ perspective it is going to be a mountain of paper
work.Now that Section 45 is back it will be interesting to see if Mustek's management buyout is back on the cards.
Source: By Monique Vanek (Tax breaks)