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Capital gains tax: Amalgamation transactions section 44 of the Income Tax Act

15 October 2014   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

Q: Does an amalgamation of collective investment scheme carried on in South Africa qualify for the CGT roll-over relief provided for in section 44 of the income tax act? 

A: A CIS in securities is not defined in s1 of the Income Tax Act (No. 58 of 1962) ("ITA”) as a "company” (repealed in 2009 to allow trust like taxation of investment flows), however, for the purposes of certain corporate rules (s42 & s44 of ITA) it will be a company as it is specifically included in the s41 definition of "company”. It should be noted that this specific extension of the "company” personality also applies to the definition of "connected person” (see proviso in the definition of "connected person” in s1 ITA) should this also be a necessary consideration. 

Therefore, for the purposes of paragraph (a) of the definition of "amalgamation transaction” in s44 of the ITA, if both CIS’s are residents and the existence of the amalgamated CIS will be terminated after the disposal of the assets, then in general the relief as envisaged in s44 will apply to the extent that all the other requirements are met for the relevant relief provision.


Nothing in this query and answer should be construed as constituting tax advice or a tax opinion. An expert should be consulted for advice based on the facts and circumstances of each transaction/case. Even though great care has been taken to ensure the accuracy of the answer, SAIT do not accept any responsibility for consequences of decisions taken based on this query and answer. It remains your own responsibility to consult the relevant primary resources when taking a decision.


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