Offshore Asset-For-Share Transactions

The aim of the corporate rules contained in Part III of the Income Tax Act, 58 of 1962 ("the Act") is to facilitate transactions between groups of companies or between companies and shareholders by ensuring that the transactions inherent in any restructuring occur on a tax neutral basis in South Africa.

Until recently, the corporate rules aimed to promote only onshore restructurings, as the tax relief in terms of the corporate rules only applied to the reorganisation of South Africa resident companies. However, with effect from 1 January 2012, the corporate rules facilitate, to a limited extent, offshore restructurings as well by applying to the reorganisation of non-South African resident companies. The corporate rules override the normal provisions of the Act and we set out below a summary of the relevant corporate rules contained in section 42 of the Act, dealing with 'offshore' asset-for-share transactions.