Faculty of Commerce, Law and Management (ETDs)

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    A critical analysis of section 45 of the income tax act 58 of 1962
    (University of the Witwatersrand, Johannesburg, 2023) Nyoka, Rejoice Nombulelo; Blumentha, Roy
    The introduction of CGT in SA resulted in the birth of the corporate restructuring rollover tax relief to avoid tax on the transfer of assets within the same economic unit. Section 45 of the Act specifically provides a deferral tax rollover relief for the transfer of assets within the same group of companies. The built-in anti-avoidance rules in section 45 of the Act did not prevent taxpayers from abusing this tax rollover relief, instead it gave birth to innovative tax-free exit from investments and debt-push down schemes. Lawmakers mitigated the tax relief abuse by implementing burdensome rule-based anti-avoidance rules. This study aims to critically analyse the intended purpose of section 45 of the Act and how the rule-based anti-avoidance rules in section 45 of the Act unduly hamper the efficacy of this tax relief.
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    The tax implications of crypto assets as per the income tax act 58 of 1962 from a South African perspective
    (University of the Witwatersrand, Johannesburg, 2022) Marek, Andrzej
    Crypto assets have characteristics akin to those of virtual and financial products. They are currently utilised in payment transactions, financial instruments, investments, and corporate coupon bonds1 (The World Bank, 2017; HM Treasury et al., 2018; FCA 2021). These types of assets can be thought of as intangible digital assets whose creation, sale, or transfer are controlled by cryptographic technology and are shared electronically via a distributed ledger (Bartolucci & Kirilenko, 2020). Crypto assets are purchased for different reasons, such as speculative investing (a perceived increased future value), as a medium of exchange in facilitating transactions for goods and/or services, or for access to specific products, services, and utilities (Intergovernmental Fintech Working Group, 2021). Guidance on crypto assets issued by the Financial Conduct Authority of the United Kingdom (Financial Conduct Authority of the United Kingdom, 2019) categorises crypto assets into three different classes, namely Utility, Security and Exchange Tokens. The report aims to gain a comprehensive understanding of the commercial and economic substance of crypto assets and use this as a guide on how crypto assets should be taxed from a South African perspective. Further to this, the report analyses the separate classes of crypto assets available to taxpayers, namely, asset backed tokens, utility tokens and security tokens, and provides insight into the tax treatment of these specific classes. South Africa has adopted a stance in which the tax implications are dependent on the intention of the taxpayer. If the taxpayer regularly sells crypto assets, the presumption is that the taxpayer’s intention is to make a trading profit and taxable as a revenue profit (Haupt, 2022), whereas, if the taxpayer neither sells, exchanges nor spends the crypto asset, the indication is that taxpayer is holding it as a store of value and therefore as a capital asset (Haupt, 2022) and this is subject to Capital Gains Tax
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    A critical analysis of the corporate restructuring rules
    (University of the Witwatersrand, Johannesburg, 2023-01) Botha, Petrus Hendrik; Rudd, Reinhard
    As a result of Covid-19, there is likely to be an increase in company restructuring in South Africa. The Income Tax Act 58 of 1962 contains group relief measures, also commonly referred to as the “corporate rules”. The purpose of the corporate rules, considering the policy objectives of competitiveness, was twofold, firstly, to encourage domestic restructuring of South African companies to promote growth and, secondly, to alleviate unintended hardships caused by the introduction of capital gains tax, which was introduced at the same time. The corporate rules provide relief from capital gains tax and normal tax consequences. In addition, the corporate rules defer the payment of dividends tax, transfer duty, donations tax, securities transfer tax and value-added tax. In this report the corporate rules contained in the Income Tax Act are critically analysed to ascertain whether the rules are economically and administratively efficient and whether the purpose and needs for which they were introduced, are met. In the current study, where the corporate rules are found to be inefficient, suitable recommendations are made. In analysing the corporate rules, the recommendations made during March 2018 by the Davis Tax Committee in its report to the Minister of Finance, are considered. In addition, this research investigates whether successive transactions utilising the corporate rules could be implemented, as well as whether the general anti-avoidance rules contained in the Income Tax Act could apply to corporate rule transactions. A group company taxation regime, as an alternative to the corporate rules, is also briefly discussed. The report concludes that the corporate rules currently achieve the purpose for which the rules were implemented, that is, to alleviate unforeseen hardship caused by the enactment of capital gains tax in 2001, as well as normal tax and to encourage domestic restructuring of South African groups of companies to promote growth. Ultimately, the shortcomings of the corporate rules, such as the mechanical nature of the rules due to the rules being rules based, possible double taxation and the various complex anti- avoidance provisions should be considered further by the legislature.