Under South African corporate reorganisation rules, tax
consequences are deferred and do not crystalise at the time of the
transaction, but a carefully planned restructuring transaction may
result in hardship due to subsequent events. A recently proposed
amendment illustrates this risk.
Tax relief under the existing corporate reorganisation rules may
be neutralised if assets acquired in terms of these rules are
disposed of within 18 months.
However, the consequences of a sale of capital assets within
that period are often not severe. Other than disposals that result
in an equity holding below certain key levels (such as de-grouping)
and in the absence of tax losses, the normal tax treatment
generally applies to gains or losses on such a disposal, based on
the cost that was rolled-over in terms of the corporate rules. The
distinguishing feature of a disposal within 18 months, is usually
that any capital gain or loss that would have arisen had the asset
not been
