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Does ownership of an interest in a foreign company disqualify a company from being a SBC?

16 February 2015   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

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.

The acquisition 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.


The Act requires that a minimum academic and practical requirments be set to register with a controlling body. Click here for the minimum requirements of SAIT.

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