Is a tax directive needed for paragraph 57, 8th Schedule purposes?
17 April 2015
Posted by: Author: SAIT Technical
Author: SAIT Technical
Q: One of my
clients is preparing to sell their small business and I was wondering how I
should go about using the small business exemption of R1.8Mil in practise. The
2 members 50% share each.
Assets less than R10Mil
Business is being sold in one piece as a going
Must I first apply for a tax directive from SARS? Must I
then show it on the final return for the year and where do I fill this in?
The exclusion provided for in paragraph 57 of the Eighth
Schedule to the Income Tax Act applies to ‘small business’ which means a
business of which the market value of all its assets, as at the date of the
disposal of the asset or interest contemplated in subparagraph (2), does not
exceed R10 million.
You state that the business is being sold as a going
concern, but the two members hold 50%. From those facts it is not clear
if the business is in a company (or close corporation). If that is the
case, the paragraph 57 exclusion will not apply.
The Act does not require that a directive be obtained from
SARS for purposes of paragraph 57. If the parties need confirmation from
SARS regarding the interpretation of the Act in this regard they can request a
binding ruling from SARS or ask for a non-binding opinion.
The tax practitioner can also provide an opinion in this
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.