Binding private ruling 365: De-grouping claw-back provision in section 45(4)(b)
This ruling determines whether there is a de-grouping charge in terms of section 45(4)(b) when a group of companies who previously implemented a section 45 transaction is transferred to form part of another group of companies which group is ultimately held by the same controlling group company. It also considered the security transfer tax (“STT”) consequences.
The parties to the proposed transaction are as follows:
- The applicant: A resident company;
- Company A: A resident company that holds all of the shares in the applicant and 81% of the shares in company B;
- Company B: A resident company;
- Company C: A resident company that holds 100% of the shares in company A;
- Company D: A resident company that holds 100% of the shares in company C;
- Company E: A resident listed company that holds 100% of the shares in company D; and
- Company F: A resident company that is wholly-owned by company E.
In 2018 the applicant acquired the assets and business division of Company B in terms of section 45. Section 45 is subject to a de-grouping claw-back which in essence means that the applicant (i.e. the transferee company) and Company B (i.e. the transferor company) must remain part of the same group of companies for 6 years.
It is proposed that the shares in Company A be transferred to Company F. This transfer will occur outside any corporate roll-over provisions and will occur within 6 years of the section 45 transaction.
SARS ruled that:
- the disposal by Company C of the Company A shares to Company F will not lead to a de-grouping as the applicant will remain part of the same group of companies as Company E, the controlling company in relation to Company B; and
- no STT is payable.
Find a copy of BPR 365 here.
02/07/2021