Tax Considerations Disposing of a Business and/or Shares

Overview

This webinar will focus on the South African legislative environment where the business is a tax resident of South Africa. We will, however, also address scenarios where the seller and/or the buyer is a non-resident.

Whilst the webinar is not intended to be a comprehensive analysis of the law, it will serve as a valuable “tax-checklist” for any seller or buyer of a business.

Webinar content

The following important considerations will be discussed at the hand of practical examples:

• Selling a business vs selling shares or membership in a close corporation (CC).
• Sale of shareholder loan accounts.
• Important considerations for the seller of a business, including:
  • How to prepare for and manage a due diligence.
  • Tax implications arising from sale of shares/member’s interest in a CC.
  • Tax implications of sale of assets:
    • Fixed assets.
    • Trade debtors (including doubtful debts).
    • Goodwill.
    • Prepayments.
  • Tax implications from the transfer of liabilities to the buyer:
    • Trade creditors and loan accounts.
    • Contingent liabilities transferred, such as provisions for leave pay, bonuses, warranties etc. [We will discuss Interpretation Note 94 (IN 94) as well as the Ackermans case].
    • Finance lease liabilities and IFRS 16 assets/liabilities.
  • Income tax and VAT implications arising from transactional costs.
• Important considerations for the buyer of a business, including:
  • Managing tax risks by performing a due diligence and obtaining tax warranties in the purchase agreement. Johan will provide practical examples of risks and opportunities identified in his 30 years’ experience in doing tax due diligences.
  • What the automatic application of corporate relief procedures will mean for the purchaser of the business.
  • How to manage contingent liabilities acquired as part of the acquisition of the business.
  • Financing the purchase:
    • Managing the deductibility of interest incurred on loans to acquire shares/business (Sections 23M, 23N, 24O).
    • Tax implications of raising fees, commitment fees and guarantee fees.
  • How to manage a disconnect between accounting and tax:
    • Valuation rules with specific reference to IFRS 3.
    • Effective date of the transaction.
• Important legislation will be highlighted including but not limited to the following:
  • Capital gains tax:
    • Time of disposal (Par 13 of the 8^th Schedule to the Income Tax Act).
    • Deemed value of disposals (Par 38 of the 8^th Schedule).
    • Clogged losses (Par 39 of the 8^th Schedule).
    • Disposal for unaccrued amounts (par 39A of the 8^th Schedule).
    • Par 43A deemed proceeds on extraordinary dividends received.
  • Income tax:
    • Corporate rules (S41 to S47 of the Income Tax Act).
    • Section 8(4)(a) and 8(4)(k) recoupments.
    • Section 11(o) sale of asset allowances.
    • Interest deductibility rules (Sections 23M, 23N, 24O).
  • Value-added tax
    • Section 11(1)(e) – sale of going concern.
    • Change in use adjustment and Section 18A.
    • VAT incurred on transactional costs (raising fees, legal fees, etc.).
    • VAT on imported services (S7(1)(c)).
• Basic principles if the seller or buyer of the business is a non-resident.

Who should attend?

Tax managers/consultants, heads of tax, financial directors, accountants.

Presenter

Johan Heydenrych CA(SA)

Johan has specialised in taxation since 1991. He was a tax partner in KPMG from 1997 to 2020 and is currently a partner in the Kreston SA network specialising in taxation. He provides a wide range of tax services to various clients across industries. These include, but are not limited to, the following:

• Advice on tax risk management and tax governance.
• Tax compliance services including but not limited to ITR14 and IT14SD.
• Dealing with tax disputes including representing clients at alternative dispute resolution (ADR) hearings.
• Submission of documentation and revised returns under the voluntary disclosure programme.
• Issuing of tax technical opinions on income tax, value-added tax (VAT) and PAYE. This includes preparing briefs to senior counsel and submissions of requests for binding opinions from SARS.
• Audit support services including normal tax and deferred tax disclosure and disclosure of uncertain tax positions.
• Assistance with implementation of tax reporting for new accounting standards such as IFRIC 23, IFRS 9, IFRS 15 and IFRS 16.
• Facilitation of tax diagnostic sessions with existing and prospective clients.
• Advice on mergers, acquisitions, and reorganizations.
• Tax due diligences
• Advice on tax implications of recapitalization transactions, debt restructures, liquidations, and de-registrations.

Johan has been a regular presenter for The Tax Faculty over the past five years. In 2020, he presented webinars on tax risk management, Covid-19 relief, ITR14 preparation, dispute resolution, value-added tax and tax and business rescue. He also prepared several practical case studies for the Professional Certificate in Tax Opinion and Dispute Writing course presented by the Tax Faculty.

Education and qualifications

• BCom (Accounting), Cum Laude.
• BCom (Accounting Hons), Cum Laude (Award: Best student in Audit 700).
• Certificate in the Theory of Accounting.
• MCom (Taxation), Cum Laude, (Award: Best MCom [Tax] student).
• Chartered Accountant (specialising in taxation).
• Member of SAICA.
• Registered tax practitioner.

CPD

This event and successful completion of the online assessment will secure 2 hours verifiable output Tax CPD points..

Event Investment

100% discount for all 2021 Tax Practitioner and Tax Accountant CPD subscribers.

Other member: R475.00

Company price (five attendees maximum): R950.00

Payments and cancellations

• All payments must be made by EFT or by credit card, at least 3 working days before commencement of an event.
• Kindly note that should payment not been received 2 days after the event, legal action will be taken
• Proof of payment will be requested at registration if payment at that point in time has not been reflected on the Tax Faculty's bank account.
• Only written notice of cancellation will be recognised.
• Cancellation conditions:
  • If the cancellation occurs more than 4 working days prior to the event no cancellation fee will be charged.
  • If the cancellation occurs less than 4 working days prior to the event a 100% cancellation fee will apply.
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• SAIT's liability in the case of an event being cancelled will be limited to a refund or credit of the event fee.
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