ARTICLE · 06 JUNE 2012

CFC Tax Implications For SA Shareholders

ENS

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A foreign company will therefore constitute a CFC if more than 50% of the total participation rights (shares) or more than 50% of the voting rights in that company are directly or indirectly held by one or more SA residents (other than headquarter companies).

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Bernard Du Plessis

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Originally published in LEGAL TIMES

In terms of section 9D(1) of the Income Tax Act, a controlled foreign company (CFC) is defined as:

"any foreign company where more than 50% of the total participation rights in that foreign company are directly or indirectly held, or more than 50% of the voting rights in that foreign company are directly or indirectly exercisable, by one or more persons that are residents other than persons that are headquarter companies ..."

A foreign company will therefore constitute a CFC if more than 50% of the total participation rights (shares) or more than 50% of the voting rights in that company are directly or indirectly held by one or more SA residents (other than headquarter companies).

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