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2 More ways to reorganise your business and save your company without triggering immediate capital gains tax

by , 12 March 2013
On the 13th of February 2013 in Tax Matters we gave you one way to reorganise your business without triggering immediate capital gains tax bill. There are another two. Let's have a look at them.

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How to make yourself invisible to SARS

Did you know that SARS plans to conduct more than 72,926 audits this year? It's added hundreds of new collectors to its payroll and each one has his own collection targets to meet. All of which means two things:

1.    If you're not compliant, your chances of an audit this year has just doubled, and
2.    You will pay more in penalties.

Click here to make yourself invisible to SARS

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2 more ways to reorganise your business and save your company money

1.    Use a share swap to  restructure your business

A share swap is done where you introduce a holding company. For example you own 100% of the equity shares of company A, the target company. You then transfer these shares to company B, the acquiring company, in exchange for 100% of the equity shares in company B.

After the transaction you must own at least 20% of the shares of the acquiring company (B). Importantly, the market value of the shares that you receive in B should be equal to the market value of the shares in A that you are disposing of to avoid Donation Tax.

You and the acquiring company can't dispose of the acquired or target shares within 18 months after the share swap, otherwise you'll be regarded as having disposed of the shares at the market value of the shares at the time of the share swap and will pay capital gains tax.

The roll-over relief is similar to company formation where you roll-over the base cost of the shares to the transferee.

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3 Instances where you don't have to pay Capital Gains Tax…

Giving a huge percentage of your profits to SARS can feel like stabbing yourself in the eye…

But here's some good news for every bewildered CGT taxpayer…

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2.    Transfer your assets tax free though amalgamations

If you use an amalgamation, your company (amalgamated company) disposes of all its assets to another company (resultant company) through an amalgamation, conversion or merger and as a result your company ceases to exist.

Roll-over relief will only apply to the extent that you acquire more than 20% shares in the resultant company. Specified steps to liquidate, or terminate, the corporate existence of the amalgamated company must be taken within 18 months of the transfer of assets.

You can then transfer your assets tax-free so the base cost of the assets you transfer is rolled-over from your company to the resultant company.

For example, Mr A holds 100% of the shareholding in both companies B and C. Mr A wants to amalgamate companies B and C by getting rid of company B. All the assets of company are therefore transferred to company C, at base cost, in exchange for shares in company C. Company C then declares the shareholding in company C as liquidation/ deregistration dividend to Mr A. Mr A then still holds 100% of all the share in company C, but all the assets of company B is now within company C. The specified steps to liquidate/ deregister company B must be taken within 18 months.

There is so much more to Capital Gains Tax which is covered in detail in Capital Gains Tax 101: Your ultimate guide to slashing Capital Gains Tax. Get your copy of it today!



Until next time




Natalie Cousens
Managing Editor: Capital Gains Tax 101: Your ultimate guide to slashing Capital Gains Tax

Ps. Find out how to save on Capital Gains Tax today!


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