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Can an assessed loss of a ‘purchased’ company be transferred to the ‘acquiring’ company?

Monday, 02 March 2015   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

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.



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