Groups of companies often wish to restructure or rationalise
their operations. This generally involves a transfer of companies
and/or assets between various entities. There are many commercial
drivers for such transactions.
There are also a variety of ways in which the group can achieve
its commercial goals. Depending on how the transactions are
structured, the tax effects will be very different. There will be
tax-efficient ways in which to achieve the group's commercial
goals and there will be tax-inefficient options which achieve the
same commercial result.
Against this background, it is then necessary to apply South
Africa's anti-tax-avoidance provisions. In simple terms, there
are two sets of rules which need to be considered. First, the
statutory anti-tax-avoidance provisions contained in section 80Al
of the Income Tax Act; and second, the common law provisions
relating to simulated transactions.
