Q: I have a client
that satisfies the requirements of a SBC (Small Business Corporation) but is
considering incorporating a company in the UK for related activities. Does
ownership of a foreign company restrict the application of the SBC tax rates?
A: You are correct that proviso (ii) in the definition of "small business
corporation” ("SBC”) in section 12E of the Income Tax Act (ITA) does not allow
an interest in the equity of another "company” or the holding of shares in
another "company” as defined in section 1 of the ITA. Paragraph (b) of the
definition of "company” in s 1 ITA includes a foreign incorporated company.
of an interest in a foreign company by the shareholder of the SA company/CC
would therefore disqualify such SA company from being an SBC.
Disclaimer: 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.
Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.