Corporate Tax
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Tax Considerations Disposing a Business and/or Shares

CPD Hours: 2

Price: R495.00


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Tax Considerations Disposing 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 8th Schedule to the Income Tax Act).
      • Deemed value of disposals (Par 38 of the 8th Schedule).
      • Clogged losses (Par 39 of the 8th Schedule).
      • Disposal for unaccrued amounts (par 39A of the 8th 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.

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