Tax Professional (SA) Practice Questions - SAIT EISA Tax Professional Board Examination Exam

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Under South African Income Tax Act Section 42 (Asset-for-Share Transactions), what tax relief is provided when a person transfers an asset to a company in exchange for qualifying equity shares?

Tax roll-over relief: deferral of capital gains tax and recoupment, with the company inheriting the transferor's tax base and holding period Immediate taxation of full market value as normal dividend 100% tax rebate of all prior corporate income tax Mandatory 15% VAT levy on share issue

Correct Answer:

Tax roll-over relief: deferral of capital gains tax and recoupment, with the company inheriting the transferor's tax base and holding period

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