STACK ’EM HIGH
applied to SARS for a ruling. First, in respect of securities transfer tax, the issue of shares is specifically excluded from the definition of “transfer” in s1 of the Securities Transfer Tax Act. Second, there is no question of a waiver of the capital or interest on the intercompany loans as these would be settled in cash.
Perhaps the taxpayer was looking for a ruling from SARS to the effect that the scheme as a whole, that is, the subscription for shares with the settlement of the loans did not constitute impermissible tax avoidance under the general anti-avoidance rules in part IIA of the Income Tax Act. However, SARS specifically included a note in the ruling stating that it did not consider the application of the general anti-avoidance rules on the proposed transaction.