Print Page
News & Press: Technical & tax law questions

Small Business Corporation - where shareholder holds an interest in another (dormant) company

Monday, 09 March 2015   (0 Comments)
Posted by: Author: SAIT Technical
Share |

Author: SAIT Technical

Q: We have a new client (a natural person) who holds 100% members interest in a CC (e.g. "ABC CC”). During the year ending 28 February 2010 he acquired a 50% interest in another CC (e.g. "XYZ CC”).

This newly acquired CC never did any business and was always dormant. The newly acquired CC was subsequently de-registered during 2011.

Our client’s previous accountants submitted the tax return for ABC CC and informed SARS that the CC was a small business corporation and thus qualified for tax relief.

SARS did not agree as all requirements were met except that the member of ABC CC held 50% interest in XYZ CC as well.

We are of the opinion that his interest in the dormant CC should disqualify ABC CC from being deemed a small business corporation.

A: Where shares or any interest are held by a shareholder of the "small business corporation” in any other dormant or shelf company, that shareholding will not disqualify a "small business corporation” from being classified as such in terms of section 12E(4)(a)(ii)(hh) provided that:

  • That company or close corporation has during the year of assessment not carried on any trade, and
  • Has not during the year of assessment owned assets, the total market value of which exceeds R5,000.

The above mentioned exclusion is effective for years of assessment ending on or after 1 January 2010.

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.

  • Tax Practitioner Registration Requirements & FAQ's
  • Rate Our Service

    Membership Management Software Powered by YourMembership  ::  Legal