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Revenue Laws Amendments 2007

Revenue Laws Amendments 2007. Portfolio Committee on Finance 18 September 2007. General Overview. Origin of Bill: Annual Process. Budget : Every year, the Minister releases his tax budget proposals in February: Chapter 4 of the Budget Review contains the main proposals; and

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Revenue Laws Amendments 2007

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  1. Revenue Laws Amendments 2007 Portfolio Committee on Finance 18 September 2007

  2. General Overview

  3. Origin of Bill: Annual Process • Budget: Every year, the Minister releases his tax budget proposals in February: • Chapter 4 of the Budget Review contains the main proposals; and • Annexure C of the Budget Review covers anomalies, technical corrections and other miscellaneous amendments • Both Chapter 4 and Annexure C serve as the basis for the annual tax legislation • Two Sets of Legislative Tax Amendments: • Taxation Laws Amendments (rates and thresholds) • Released for public comment in February 2007 • Formally tabled in Parliament in June 2007 • Revenue Laws Amendments (more complex policy proposals) • Released for public comment in September • To be formally tabled in Parliament in October 2007

  4. RLAB Process • Time for Public Comment: • Bill published on website on 11 September 2007 • Comments are due on 8 October 2007 • Informal Hearings: • Opening NT/SARS brief on 18 of September • Taxpayer hearings will probably occur the week of the 15th of October • The NT/SARS report back on the taxpayer hearings thereafter • Tabling: • Scheduled for 30 October 2007

  5. 2007/08 Tax Proposals • April 2007 – Taxation Laws Amendment Bill • PIT – adjustments to income tax brackets • RFT - Abolished • Taxation of lump sum benefits on retirement • PBOs (10% deductible donations, R100 000 exemptions of trading income) • Monetary thresholds (Estate duty, donation tax, CGT) • Stamp duties on short term leases • September 2007 – Revenue Laws Amendment Bill • Reduction of the STC rate from 12.5% to 10% & base broadening • Disposal of shares – three year rule (CGT) • Depreciation regime for commercial buildings, rail locomotives and environmental expenses • Definition of Customs Duty • Retirement tax & regulatory provisions – streamlined • Taxation of sport bodies (e.g. cricket) • Intellectual property

  6. Main RLAB Proposals: Business Tax Issues • Reform of the Secondary Tax on Companies: • Reducing the rate from 12,5% down to 10% • Immediate closing of loopholes in the base • Larger reform of the base (work ongoing) • Conversion of the tax from a company-level tax to a shareholder-level tax planned for 2008 (subject to tax treaty negotiation) • Capital Versus Ordinary Shares: • Shares held for at least 3 years are generally deemed to be capital • Shares held for less than 3 years continue to rely on case law • Effective date • Depreciation relief for: • Rolling stock (20% per annum), • Port infrastructure (5% per annum) • Commercial buildings (5% per annum) • Environmental manufacturing structures (40:20:20:20 or 5% per annum)

  7. Main RLAB Proposals: Other Issues • Work Death Benefits: • Employees currently receive tax exemption for work-related death and disability benefits provided under the Compensation for Occupational Injuries and Diseases Act • Employees will be tax exempt for up to another R300 000 of employer-provided work-related death benefits • Professional Sports Funding of Amateur Sports: • Professional sports bodies can now deduct funding of amateur sports (within the same entity) • Amateur sports are necessary for the long-term sustainability of professional sports (in terms of trainees and fans) • Co-operative Banks: • Co-operative banks will now be eligible for small business tax relief (R43 000 of exempt taxable income, a 10% rate up to a threshold of R300 000 with a 29% rate applying only above the R300 000 threshold)

  8. Merger of Indirect Taxes on Shares • Current Law: • The Uncertificated Securities Tax (“UST”) applies to listed shares • The Stamp Duty applies to unlisted shares • Proposal: • The two taxes are to be merged into a new Securities Transfer Tax, thereby simplifying administration and compliance • The new tax will essentially be the same as the UST with amendments to cater for unlisted shares • Not a New Tax; Merely a Merger • The new tax will have the same 0,25% rate and roughly the same base as both of the old taxes • Most changes merely reflect current unstated practice • Most exemptions are roughly the same

  9. Detailed Clause Review

  10. Table of Contents: Main Amendments Income Tax • Basic STC proposals and related dividend tax Issues (slides 14 - 23) • Capital vs. ordinary Shares (slides 24 -28) • Intellectual property (slides 29 - 31) • Long-term insurers and foreign CISs (slides 32 - 33) • Depreciation relief (slides 34 - 39) • Co-operatives (slides 40 - 41) • Amalgamation of sports bodies (slides 42 – 43) • Top-up of occupational death benefits (slide 44) • Oil and gas fiscal stability (slide 45) • Company reorganisations and related restructuring (slides 46 – 57) Indirect Tax • Securities tax merger (slides 59 – 64) • Customs and Excise Duties: definitions (slides 65 – 66) • Customs and Excise Duties: control over counterfeit goods (slides 67 – 68)

  11. Table of Contents: Lesser Amendments Income Tax • Directors’ and employees’ equity instruments (slide 70) • Medical (slides 71 – 72) • Pension issues (slide 73) • Research and development (slide 74) • Foreign tax credits (slide 75) • Foreign currency hedging (slide 76) • Transfer pricing (slide 77) • Employment abroad (slide 78) • Accommodation and expatriate employees (slide 79) • Dissolution of branches of foreign PBOs (slide 80) • Miscellaneous (slides 81 – 82)

  12. Table of Contents: Lesser Amendments Indirect and Other Taxes • Dried maize (slide 84) • Foreign diplomats (slide 85) • Horse race winnings (slide 86) • Rental pools (slide 87) • ICC Twenty (slide 88) • Miscellaneous VAT (slide 89) • Miscellaneous Other (slide 90)

  13. Main Amendments(Chapter 4) Income Tax

  14. Basic STC Proposals: Background • Rate Reduction: • The proposed amendments decrease the STC rate from 12,5% to 10% (Clause 55: Section 64B) • Effective as of 1 October 2007 • Conceptual Base Broadening: • The STC does not apply to all company distributions, only those distributions qualifying as “dividends” • In order to have dividends, a company must make the distribution out of profits • Distributions of pure share capital (and share premium) are free from STC

  15. Basic STC Proposals: Provisions • Profits: The proposed amendments broaden the base by expanding the dividend definition to include: • All unrealised profits; and • All pre-1993 profits/all pre-2001 capital profits (Clauses 5 and 55; Sections 1 and 64B) • All Distributions to be Treated the Same: The proposed amendments remove the special rules for all share cancellations and reconstructions so all distribution types are governed by the same provisions (Clause 5; Section 1)

  16. Disguised Sales:Contributions/Distributions Seller Purchaser • Shareholders are seeking to avoid the tax on the sale of Target Company shares to independent purchasers by entering into two-step transactions • Step #1: The Contribution Leg: • The purchaser contributes cash to the Target Company in exchange for newly issued Target Company shares (no tax) • Step #2: The Distribution Leg: • The Target Company distributes roughly the same amount to the selling shareholder • No tax results because the parties ensure capital distribution treatment • The selling shareholders somehow forego their rights in the shares they continue to hold Cash (Step #1) Target Company Roughly same cash (Step #2)

  17. Capital Distributions: Current Law • Current Law: • Capital distributions (i.e. distributions not treated as dividends) in respect of a share do not trigger tax • Capital distribution proceeds are simply added to CGT proceeds when the share is sold • Example.Facts: Taxpayer owns Company X shares with a R100 value and R20 base cost. Company X makes a R45 capital distribution in respect of the share. Result: The distribution is free of STC, and R45 of proceeds is added to a subsequent sale of the shares • Problem: • The selling taxpayer has effectively cashed out tax-free even though the taxpayer still holds the shares • The tax-free nature of the capital distribution mechanism is essential to contribution/distribution avoidance scheme previously described

  18. Capital Distributions: Proposal • Proposal: • Each capital distribution will be treated as a part-disposal of the share (triggering immediate gain/loss) • Example: • Facts: Taxpayer has shares with a market value of R150 in Company X, and Taxpayer has a base cost of R75 in the shares. Company X makes a R100 capital distribution in respect of the shares. • Result: The R100 distribution is viewed as a part disposal. The distribution amounts to 2/3rds the total value (100/150), triggering 2/3rds of the share gain. In this case, the total possible gain is R75 with R50 triggered from the part–disposal. (Clauses 70 & 71; Paragraphs 76 & 76A of the 8th Schedule)

  19. Capital Distributions: Effective Date • The proposed part-sale rule for capital distributions will be effective as of 1 July 2008 • The main issue will be the “proceeds” outstanding under the old law • In order to prevent a permanent grandfathering, all “proceeds” outstanding will be deemed distributed as a capital distribution on 1 July 2008 (i.e. all prior capital distributions will trigger a deemed part sale on 1 July 2008)

  20. Ceiling on Share Capital Allocations • Current Law: • It appears that share capital (and share premium) can freely be allocated to any class of shares on distribution • Problem: • Taxpayers are using this free allocation so that selling shareholders can cash-out wholly free of the STC • Proposal: • Share capital allocated to any share may not exceed the pro rata value of that share in relation to the total value of the company. • Example. If share classes A & B are valued at R100 and R50 respectively and the total share capital is R120, only R40 share capital can be allocated to the B shares (R50/R150 x R120 = R40) (Clause 5; Section 1)

  21. Simplifying Intra-Group Relief • Current Law: • No STC applies for dividends (or deemed dividends) between companies within the same group (if the parties elect) • STC applies when those same profits leave the group (essentially the relief amounts to deferral) • Proposal: • All dividends (and deemed dividends) will be eligible for intra-group relief even if the dividends relate to pre-group profits (Clause 55; Sections 64B and 64C) • However, intra-group relief will no longer apply if the company receiving the dividend does not add the dividends to profits (thereby turning deferral into exemption) (Clause 55; Section 64B) • The group definition will also be narrowed (see slide in “Company Reorganisations: Intra-Group Definition”)

  22. Extraordinary Dividend Stripping: Current Remedy Dividend (Step #1) • Facts: • Taxpayer owns shares of Target Company. Target Company has a value of R100, and Taxpayer has a R75 base cost in Target Company shares. • The parties plan to generate a loss by having a R60 dividend, followed by a sale of the shares for R40 (R40 proceeds less R75 cost equals a R35 loss; but note that taxpayer has a R25 of economic profit between the combined sale and dividend) • Current Law: • The tax system may deny the loss in certain limited circumstances (if the dividend occurred within 2 years after Taxpayer’s purchase and the dividend was not exempt) Target Company (Sale of Devalued shares (Step #2)

  23. Extraordinary DividendStripping: Proposed Remedy • The proposal limits the narrow restrictions pertaining to the current anti-dividend stripping rule • Conditions: • The revised rule applies to all dividends occurring within 2 years before disposal • All dividends will be tainted (i.e. the exclusion for exempt dividends will be removed) • The dividends must still be extraordinary (exceed 15% of sale proceeds) • Impact: • Disposal proceeds will be increased for the dividend • In effect, the new rule increases gain (as well as denying loss) (Clause 63; Paragraph 19 of the 8th Schedule)

  24. Capital vs. Ordinary Shares:Background • Current law • Ordinary revenue is taxed at higher rates than capital gain • The difference in treatment of proceeds received on disposal is based on case law focus on intent as to whether the shares are held for sale or investment • However, a 5-year election allows taxpayers to treat all 5-year listed shares as capital gain (section 9B) • Problem • Case law is uncertain • Informal practices give certain industries a hidden presumption in favour of capital

  25. Capital vs. Ordinary Shares:General Proposal • Basic rule: • Automatic capital gain treatment for shares held for at least 3 years • Effective date: shares sold on or after 1 October 2007 • Old 5-year of election (section 9B) no longer applies • Shares covered: • Listed shares (all domestic and foreign shares on the JSE) • Unlisted shares (domestic only) • Member’s interests in close corporations • Units in collective investment schemes (Clause 12; Section 9C)

  26. Capital vs. Ordinary Shares:Anti-Avoidance Rule • Concerns: • Taxpayers will utilise (unlisted) old shelf companies to disguise the sale of short-term non-share assets • Taxpayer will misuse certain reorganisation rules to do the same • Proposal (Clause 12; Section 9C(3)): • No presumption for shares if 50%+ of value of a company is derived from: • Immovable property purchased within 3-year period • Assets where a 3rd party is receiving lease or license payments (i.e. bare dominium structures) • Ignore 3-year financial instruments from total calculation • Test generally applies only to shareholders with 20%+ interest in the company • No rollover relief for sec. 42 asset-for-share transfers or sec. 46 unbundlings

  27. Capital vs. Ordinary Shares:Recoupments • Concern: • What happens if the taxpayer treats the shares as trading stock but sells after 3 years? • Issue #1: What to do about claimed interest deductions for borrowings used to acquire the shares? • Issue #2: What happens when the ordinary classification turns to capital (the conversion normally triggers a deemed sale as ordinary revenue)? • Proposal (Clause 12(5)): • Interest deductions on borrowed funds (in respect of former trading stock shares) must be recouped when sold • The conversion from ordinary to capital will essentially be neutralised

  28. Capital vs. Ordinary Shares:Private Equity Deals • Potential Concern: • Private equity management is often paid for services through share schemes • The tax benefit of these schemes allows ordinary income (for services) to be replaced with capital gain when the “management” shares are sold • Review: • Potential arbitrage currently investigated • Management carried interests may have to be excluded from the 3-year rule (at a later date)

  29. Intellectual Property Arbitrage: Nature of the Problem • Taxpayer holds intellectual property in SA. • Taxpayer transfers the property to another party (usually associated with Taxpayer) located within a low (or no) tax jurisdiction • Little or no tax arises out of this transfer. • Taxpayer then pays the other party royalties for the right to use the intellectual property • The royalties paid by Taxpayer are deductible but the receipts are subject to low (or no) tax. • The royalty receipts are then returned tax-free to Taxpayer (usually as dividends)

  30. Intellectual Property Arbitrage: Proposal • General Rule: The payor cannot take any deductions when paying for the use of intellectual property if that property— • Was previously owned by a resident; • Was developed by payor or any closely related (i.e. connected) person; or • The payor or any closely related (i.e. connected) person claimed a deduction in respect of that property (such as R&D or depreciation). • Limit: The deduction is denied only to the extent the recipient of the payment is not subject to SA taxes. (Clause 34; Section 23I)

  31. Cross-Border Intellectual Property: Transfer Pricing • Current Law: • SARS has the power to adjust the price of cross-border royalties if: • The royalty does not reflect an arm’s length charge: and • The parties are connected persons • Problem: • South African taxpayers defeat this arm’s length requirement by entering into transactions with a foreign company with shares that are more than 50% held by another independent party • However, indirect control is retained through side agreements • Result: • The proposed connected person threshold will be reduced to 20% (even if independent parties own more than 50% of the foreign taxpayer). • In terms of the avoidance structures at issue, even the most aggressive South African taxpayers will rarely, if ever, hold less than 20% of the relevant party (Clause 40; Section 31)

  32. Long-Term Insurers and Foreign Collective Investment Schemes (CISs): Background • Problem: • A clash exists between the long-term insurer “four fund” approach” and the CFC rules • Four funds approach: • Long-term insurers are taxed on policyholder funds under the trustee principle (instead of the policyholders) • CFC rules: • More than 50% control of a foreign company (including a foreign CIS) trigger CFC status • 10% owners have potential section 9D income from their ownership (but the participation exemption does not apply to foreign CIS dividends) • Combination: • Long-term insurer investment into a foreign CIS often triggers CFC status and section 9D income (because all policyholder fund assets are viewed as technically owned by the insurer)

  33. Long-Term Insurers and Foreign Collective Investment Schemes (CISs): Proposal • The proposal is to ignore long-term insurer legal held in foreign CIS investments that are attributed to investment policies (linked market and smooth bonus) • The CIS is still a CFC (because the tax system views the CIS as a company, and it is more than 50% South African owned) • However, no section 9D income results from the investments • Avoidance concerns doubtful: • It is administratively difficult and unlikely that any one policyholder will have 10% or greater interest in CIS • However, If the new rule is misused to disguise significant policyholder interests, no relief will apply (Clause 13; Section 9D(1))

  34. Rolling Stock Depreciation • Current Law: • Rolling stock (trains and carriages) are only entitled to a tax depreciation write-off over 14-15 years • Problem: • Depreciation write-offs exist for transport such as trucks, aircraft and ships but not for rolling stock (except in limited mining situations) • South Africa’s transportation infrastructure is key to South Africa’s economic growth (due to the cost productivity impact) • Proposal: • Rolling stock (and improvements) will receive a tax write-off over 5 years at a straight-line rate (i.e., 20% per annum) • The rolling stock (and improvements) must be new or unused • Note: Railways are currently depreciable at 5% per annum over 20 years. The proposal extends this regime to railway refurbishments (Clause 22; Section 12DA)

  35. Port Infrastructure Depreciation • Current Law • Port infrastructure is not entitled to any tax depreciation • Problem • Aircraft receive a 20% per annum tax write off, and airport infrastructure receives a 5% per annum tax write off • Ships receive a 20% per annum tax write off, but port infrastructure receives no tax write offs • Proposal • Port infrastructure (new and unused) will be eligible for a 5% per annum write off (Clause 24: Section 12F)

  36. Commercial Building Depreciation • Current Law • Commercial buildings (e.g. retail, restaurants, financial) are not entitled to any tax depreciation • Problem • Depreciation relief exists for manufacturing, mining, hotels and certain residential buildings • No reason exists to exclude commercial buildings • Proposal: • Commercial buildings (new and unused) as well as improvements will be eligible for a 5% per annum write off • This rate is roughly comparable to the rate for other buildings (Clause 26: Section 13quin)

  37. Depreciation of Environmental Manufacturing Fixed Assets: Background • Current Law: • Unlike manufacturing plant or machinery, environmental manufacturing fixed assets are sometimes eligible for 40:20:20:20 depreciation only by happenstance • Problem • Environmental manufacturing fixed assets should be given the same status as other manufacturing fixed assets • Unfortunately, these assets are often not viewed technically as part of the plant or directly part of the process of manufacture • Basic Proposal • Environmental manufacturing fixed assets will be eligible for the 40:20:20:20 rate or a 5% per annum rate • All of these assets must be new and unused • Improvements receive similar coverage

  38. Depreciation of Environmental Manufacturing Fixed Assets: Two Regimes • Two types of environmental fixed assets: • Environmental production assets • Environmental post-production assets • Note that both sets of assets must be: • permanent structures • used in a manner that is ancillary to manufacturing • Required to fulfill legal environmental obligations • Environmental production assets: • These assets are used concurrently with the manufacturing process (e.g. waste treatment and recycling facilities) • The depreciation rate is 40:20:20:20 (like manufacturing plant) • Environmental post-production assets: • These assets are used to clean-up the immediate aftermath (e.g. waste dumps and dams) • The depreciation rate is 5% per annum (like manufacturing buildings) (Clause 43; Section 37B(1) through (5))

  39. Post-Trade Environmental Clean-Up • Current Law: • After a manufacturing business closes down, the law requires decommissioning, remediation and restoration to clean-up environmental damage • However, the Income Tax Act does not generally allow for the deduction of post-trade expenditures • Problem • The lack of environmental deductions after cessation of a trade is anomalous because the activity relates to a legal liability stemming from the trade • Proposal • Environmental decommissioning, remediation and restoration expenses (and depreciation) will remain deductible as if the former trade continues (Clause 43; Section 37B(6))

  40. Co-operative Banks: Background • Co-operative banks are community based financial services co-operatives • These co-operatives come in two forms: • Financial services co-operative based on geographical membership (i.e. for a specific rural area); and • Savings and Credit co-operatives (Credit Unions) whose members have a common bond (working for the same employer, belonging to the same labour union, church, social fraternity or living or working in the same community) • Services are only available to members • Their main objectives are to provide accessible banking facilities or affordable banking services, not to generate shareholder profit • The Co-operatives Banks Act seeks to formalise and regulate these banks in order to provide customers with a greater level of confidence

  41. Co-operative Banks: Taxation • Current treatment: • Co-operative banks are taxed at the corporate flat rate of 29% without relief • They possibly cannot access the small business relief because: • Of their high investment income percentage (i.e. the bulk of their income stems from interest); and/or • Their members may own interests in other companies or co-ops • Proposal: • Co-operative Banks will be eligible for small business relief (i.e. their first R43 000 of income will be exempt and up to R300 000 will be taxable at a 10% rate) • Their large interest earnings will not prevent small business relief (because interest is an active form of income to a co-operative bank) • Members may have limited cross-shareholdings (Clause 23; Section 12E)

  42. Amalgamation of Sporting Bodies: Background • Current Law: • Following the tax reform of PBOs in 2000, several sporting associations split their amateur and professional arms into separate bodies so that the amateur arms could enjoy tax exempt status • Problem: • A professional body’s sponsorships and other sources of income are fully taxable • However, that same body cannot claim a tax deduction for the development and promotion of amateur sport that will serve as its feeder for future fans and professional players

  43. Amalgamation of Sporting Bodies: Proposal • As a first step, the professional and amateur sports arms can be recombined tax-free (like any other amalgamation) (Clause 139) • The unified body will be taxable, but the proposal creates a special deduction to make it clear that the unified body may deduct from its income: • Expenditure not of a capital nature • on the development and promotion of qualifying amateur sport • directly incurred by it • in respect of amateur sport under the same code of sport as its professional sport (Clause 18; section 11E) • Payments to other entities do not qualify for the special deduction

  44. Exemption of “Top-Up” Occupational Death Benefits • Current Law: • “Compensation for Occupational Injury and Death Act” (COIDA) payments are tax-exempt • However, additional “top-up” benefits based on the same event are taxable • Problem: • Taxation of the “top-up” benefits is seemingly unfair because the families receiving these benefits are never made whole (not even in terms of future salary streams) • Proposal: • Up to R300 000 of “top-up” benefits will be exempt – • if the benefit is due to occupational death; and • If the benefit is over and above COIDA (Clause 14; Section 10(1)(gB))

  45. Oil and Gas Fiscal Stability • Current Law: • The 10th Schedule (enacted in 2006) renews tax incentives for oil and gas in order to encourage exploration and extraction • The 10th Schedule provides the Minister of Finance with the power to offer a fiscal guarantee that the regime will remain in effect for most of life cycle of the investment • Problem: • Oil and gas companies will not invest unless they obtain the fiscal guarantee • Certain technical details in the negotiation process reveal that minor changes are required for the guarantee • Proposal: • Minister can now enter into a conditional agreement in anticipation of an exploration or production right • In terms of exploration rights, taxpayers can freely assign fiscal stability benefits • In terms of production rights, taxpayer can freely assign fiscal stability benefits to members of the same group, and these benefits will remain in effect even if taxpayer’s proportional interest in a right changes • The new regime contains a remedy clause for breach (Clause 74; Paragraph 8 of the Tenth Schedule)

  46. Company Reorganisations:Repeal of Financial Instrument Limits • Current Law: • Prohibits reorganisations that mainly rely on financial instruments or financial instrument companies • This prohibition ensures only active companies are given relief • Problem: • Taxpayers view compliance with this prohibition as overly burdensome • The prohibition erves little benefit in deterring tax avoidance • Proposal: • Repeal all financial instrument limits from all domestic reorganisation provisions (Part III) • Retain for foreign-related tax rules (Clauses 47 - 54; Sections 41 - 47)

  47. Company Reorganisations:Repeal of Share-for-Share Relief • Current Law • Non-share assets transferred for acquiring company shares receive rollover benefits (under section 42) • Share transfers of active target companies for acquiring company shares receive rollover benefits (under section 43) • Problem • Both regimes achieve the same benefits • The main reason for section 43 (versus section 42) was to prevent financial instrument company transfers • Proposal • Repeal section 43 • Section 42 rollovers include all asset transfers (including share transfers) • [Probable effective date – years of assessment ending on or after date of tabling, 2007; to be added] (Clause 50; Section 43)

  48. Company Reorganisations:Intra-Group Definition • Current Law: • All (section 1) companies can be part of a group • 70% of shares must be group held • Group relief allows for greater freedom from tax when moving assets or funds among group members • Problem: • Not all companies are subject to a 29% rate on all worldwide income • Some shares in the group are not held for long-term investment • Proposal: • Only domestic companies and corporations fully subject to tax are part of a group • Trading stock shares (or shares subject to a right of acquisition by outsiders) don’t count towards 70% ownership (Clause 52; Section 45)

  49. Company Reorganisations:De-Grouping Charge • Current Law: • The de-grouping charge applies if: • Group company members previously received the benefit of intra-group rollover relief when transferring assets to one another; and • One of the company members later leaves the group • Problem: • The de-grouping charge has no time limit • The de-grouping charge often triggers double tax • Proposal: • The de-grouping charge will apply only if the de-grouping occurs within 6-years of the intra-group rollover (similar to the U.K. rule) • The double tax elements of the charge will be removed (see “connected person depreciable sales”) (Clause 52; Section 45(4))

  50. Company Reorganisations: Intra-Group Effective Date • The new intra-group rules will be effective as of 1 July 2008 • The main issue is the “deemed de-grouping charge” triggered on that date for group separations caused by the new “narrower” group definition • The rule prevents permanent grandfathering, but the members have some time to reconfigure along the narrowed group definition (thereby retaining their group status)

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