When you change the structure of your business or company, certain tax consequences apply.
So with each transfer or merger you're liable for Capital Gains Tax, transfer duty and securities transfer tax.
Luckily SARS has provided you with some tax relief on these transactions.
But if you don't understand all the rules clearly, you could end up paying substantial tax amounts when you don't need to!
Read on as I show you three different ways you can restructure your company and the tax relief of each.
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Save thousands of Rands, and be in total control of your business taxes!
What's more, by understanding how SARS taxes and administers your business, you'll avoid penalties – saving your business even more money! And ensuring that your business has a squeaky clean record with SARS.
To learn more about Turnover Tax click here
Three transactions that qualify for tax relief
Unbundling transactions; and
Let's look at these in a little more detail:
An amalgamation transaction takes place where one company sells its assets to another company, in exchange for shares.
After the transaction the amalgamated company has 18 months to terminate its existence.
This is free from income tax, CGT
, transfer duty; securities transfer tax, STC and Vat. Just watch out for the anti-avoidance provisions!
An unbundling transaction takes place when a company wants its shareholders to get all the equity shares held by the company in another company.
There are no tax consequences for unbundling transactions
The distribution of the shares won't be subject to income tax, CGT
Liquidation, winding-up and deregistration:
A liquidation transaction is where a company distributes all its assets, to its shareholders in a liquidation, winding-up or deregistration.
The transaction qualifies for relief, if the shares held by the holding company in the liquidating company are disposed of in liquidation, winding-up or deregistration.
This section removes the tax liability such as DWT, CGT
, income tax and Vat.
But remember there's an anti-avoidance provision that requires that the assets transferred are held for at least 18 months.
31 different tax breaks you can implement today to save your business thousands of Rands!
We know that paying taxes is, well, taxing. And we know how you rely on tax breaks to shrink your tax bill legitimately and get the most of your business transactions. And that's precisely why we pressed our tax experts for all 31 breaks. And then we pressed them for the checklists and tips you'll need to qualify for the breaks.
And that's what makes this eReport - 31 Business Boosting Tax Breaks - so valuable! Not only does it list all the tax breaks, but it walks you through exactly what you need to do, to claim them all!
To find out more about the 31 Business Boosting Tax Breaks
There's no question that you can use the corporate rules effectively to restructure your business and transfer assets, without huge tax liabilities that normally apply to these types of transactions.
But there are four important points to remember
1. You must follow the rules properly for this relief to apply. If you don't, expect the SARS to request an interview!
2. The rules affect the transferring of assets into a company, transfers within companies, and unbundling transactions.
3. If you meet the conditions set by the rules, CGT
, income tax, securities transfer tax, transfer duty, Vat exemptions should apply.
4. If you focus on avoiding tax rather than making good business sense, SARS will be keen to investigate your true intentions.
There are 11 law changes from the Companies Act that directly affect financial managers. Do you know what they are? Not yet? Click here to know everything you should!