Q: Company A buys Company
B. Company B has a huge assessed loss. The intention of the acquisition is to
get Company B’s employees and assets and then deregister Company B. Can Company
A transfer the assessed losses available from Company B?
A: Section 20 of the Income Tax Act
only allows the set-off of the loss from one trade to another for the same
taxpayer. An assessed loss or balance of assessed loss therefore cannot be
transferred from Company B to Company A and the amounts not utilised from the
disposal of the assets will be forfeited on liquidation or prolonged
deregistration (i.e. 1 year of assessment or more).
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.