Q: According to
Notes on South African Income Tax 2015 by Phillip Haupt the definition of
"Companies Act” was introduced into the Income Tax Act with effect from 1
January 2015 and the definition makes it clear the when the term is used, the
2008 Companies Act is being referred to. Further according to Haupt this has a
knock on effect on the definition of "small business corporation” in section
12E(4) of the Income Tax Act, because the definition of "private company” in
the 2008 Companies Act is different from the definition of "private companies”
in the 1973 Companies Act.
Are these changes applicable to a firm of attorneys
incorporated as a company, which will result in the incorporated not qualifying
as a "small business corporation” in terms of the Income Tax Act and if so,
with effect from which tax year (firm tax year end is 28 February)?
A: The definition
of Companies Act as referred to in s12E ITA was inserted from 1 January 2014
and refers to Companies Act 2008. It is however arguable that the Companies Act
2008 applied since it replaced the 1973 Act, per s12(1) of the Interpretation
Act, from 1 May 2011. The definition of Private Company in the Companies Act
2008 excludes personal liability companies which seemingly excludes such
companies from s12E. However we are addressing the matter and have not seen
SARS exclude companies on this technical basis.
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.
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