SARS issued a binding private ruling (BPR 253) which deals with the donations tax implications in a situation whereby a new Black shareholder has entered into a BEE transaction with a Group of companies in order to benefit all the subsidiary companies within the group in respect of their BEE scorecard ratings and increase profitability.
SARS had to decide whether the disposal of a seller’s shares in the BEE measured entity at a discounted price and the subsequent acquisition of seller’s shares by the new Black Shareholder at a nominal subscription price, in order to introduce the acquiring company into seller’s existing group structure for BEE purposes, constitutes a donation in terms of the Income Tax Act, No 58 of 1962 (specifically sections 55(1), 58(1) and 57). Section 55 of the Act defines a donation as any gratuitous disposal of property including any gratuitous waiver or renunciation of a right.
It is also important to note that SARS ruled that the ruling is subject to the additional condition and assumption that the seller and the Black shareholder are independent parties dealing at arm’s length.
For further information, contact
Thato Malebane, Marketing & Communications Manager
Tel: (+27) 011 259 4018