Duty on Documents and Transfers (Amendment) Rules, 2010

L.N. 310 of 2010

DUTY ON DOCUMENTS AND TRANSFERS ACT

(CAP. 364)

Duty on Documents and Transfers (Amendment) Rules, 2010

IN exercise of the powers conferred by articles 22 and 42(4) of

the Duty on Documents and Transfers Act, the Minister of Finance,

the Economy and Investment has made the following rules:-

(1)

The title of these rules is the Duty on Documents Title and

and Transfers (Amendment) Rules, 2010, and they shall be read and commencement.

construed as one with the Duty on Documents and Transfers Rules,

hereinafter referred to as "the principal rules".

(2) These rules shall be deemed to have come into force on the

16 th April, 2010.

Immediately after rule 10 of the principal rules, there shall Adds new rules

11 and 12 to the

be added the following new rules

principal rules.

(1)

Subject to the provisions of

" Transfer of

company

article 42(2)(c) of the Act, the provisions of

shares.

rules 5(6) and (7) of the Capital Gains Rules,

1993 shall apply mutatis mutandis for the

purpose of determining the real value of a

company and the real value of shares in a

company referred to in article 42(3) of the Act

and references in the said sub-rules to "market

value" shall be construed as references to "real

value".

(2) Notwithstanding the provisions of

sub-rule (1), the real value of marketable

securities consisting of shares which do not

participate in any way in the profits of a

company other than by way of a fixed rate of

return, shall be the book value of such shares as

resulting from the company’s financial

statements or such other value as the

commissioner may determine in accordance

with article 10 of the Act.

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(3) The transferee in any transfer of

shares, other than a transfer of shares referred to

in sub-rule (2), shall submit to the

Commissioner a statement prepared by a

certified public accountant holding a practicing

certificate in auditing made on the form

prescribed in the Sixth Schedule including a

computation of the real value of the shares as

required by sub-rule (1), and shall be

accompanied, where applicable, by an

architect’s valuation of the real value of the

immovable property taken into account in

determining the value of the shares.

(4) The statement referred to in sub-rule

(3) shall be delivered in triplicate to the

Commissioner together with the payment of

duty due on the transfer and the Commissioner

shall stamp one of the copies in

acknowledgement of the receipt of same and

return it to the person who submitted it. The

Commissioner shall not consider that delivery or

the notice of the transfer required in accordance

with the Act as valid unless payment is made as

aforesaid.

(1)

(i) Where as a result of a

Transfer of

value.

change in the issued share capital of a company

or a change in voting rights attached to such

shares, (herein after referred to as the "change"),

a transfer of value as provided for in article 42B

of the Act is deemed to have taken place, the

value transferred to the transferee, shall be

determined in accordance with the following

formula

Y = ( (A – B) + C – D ) x - 1

Where –

(a)

"Y" represents the amount to

be determined;

(b)

"A" is the real value of the

shares held by the transferee in the

company immediately before the change;

(c)

"B" is the real value of the

shares held by the transferee in the

company immediately after the change;

(d)

"C" is the consideration paid

by the transferee for the acquisition of

shares or additional shares issued by the

company, where the change consists of an

issue of share capital for consideration.

(e)

"D" is the amount paid by the

company in respect of a cancellation of

shares held by the transferee, where the

change consists of a reduction of share

capital

Provided that where the result

of the formula is a negative amount the

value of "Y" shall be taken to be zero

Provided further that where

the transferee does not hold any shares in

the company immediately before or after

the change, the value of "A" or "B" in the

said formula, as the case may be, shall be

taken as zero

Provided also that, where the

change in the issued share capital consists

of a conversion of securities, for the

purpose of paragraphs (b) and (c) the real

value of shares, which do not participate in

any way in the profits of a company other

than by way of a fixed rate of return, shall

be taken as zero.

(ii) The

amount

determined

in

accordance with the said formula shall be

deemed for the purpose of article 42B of the

Act, to be the value transferred by the transferor

to the transferee and such value shall be deemed

to have passed into shares in or rights over the

company held by the transferee on which duty is

chargeable in accordance with the provisions of

article 42 of the Act.

(2)

For the purpose of sub-rule (1)

(i) the real value of shares

held in a company is a percentage of

the real value of the said company

corresponding to the percentage of

the issued share capital represented

by the nominal value of those shares;

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(ii) where the issued share

capital of the company is made up of

different classes of shares (whether

before or after the change in the

issued share capital) or where the

change consists of an alteration of

voting rights, the real value of shares

held in the company shall,

notwithstanding paragraph (i), be the

percentage of the real value of the

said company corresponding to the

percentage of the total voting rights

in the company represented by the

total voting rights attached to those

shares;

(iii) notwithstanding

paragraph (ii), where the value of "Y"

as determined by the application of

sub-paragraph (i) is higher than the

value of "Y" as determined by the

application of sub-paragraph (ii), the

value of "Y" is to be determined by

the application of sub-paragraph (i).

(3) The real value of a company shall, for

the purpose of sub-rule (2), be determined in

accordance with rules 5(6) and (7) of the Capital

Gains Rules, and references in the said sub-rules

to "market value" shall be construed as

references to "real value"

Provided that in determining the real

value of the company, the total net asset value

referred to in rule 5(6) of the said rules shall be

that resulting from an accounting statement

prepared by a certified public accountant

holding a practicing certificate in auditing, to be

drawn up as at the date of the deemed transfer of

value. The accounting statement shall consist of

two balance sheets showing the position of the

company immediately before and after the

change and shall be drawn up using the same

methods and the same layout as used for its

financial statements for the financial year

preceding that in which the change takes place.

(4) On a subsequent transfer of the shares

held by the transferee immediately after the

change, made before the end of the financial

year in which the change took place, the real

value taken into account in determining the

amount

chargeable

to

duty

shall,

notwithstanding the provisions of rule 11(1), not

be lower than the value of "B" referred to in sub-

rule (1)(i)(c) of this rule, being the value taken

into account in determining the value

transferred.

(5) The transferee in any transfer of

value referred to in this rule shall submit to the

Commissioner a computation of the real value of

the shares, made on the form prescribed in the

Fifth Schedule, accompanied by the accounting

statement referred to in sub-rule (3) and by an

architect’s valuation of the real value of the

immovable property taken into account in

determining the value of the company.

(6) The form referred to in sub-rule (5)

shall be delivered in triplicate to the

Commissioner and the transferee shall, together

with the delivery, pay to the Commissioner the

amount of duty due on the transfer in accordance

with article 49(2) of the Act.

(7) The Commissioner shall stamp one of

the copies of the form submitted in accordance

with sub-rule (5) in acknowledgement of the

receipt of same and return it to the person who

submitted it.

(8) Where a transfer of value is exempt

from duty by virtue of the proviso to article 42B

of the Act, other than sub-paragraph (iv) of the

said proviso, the transferee shall submit to the

Commissioner a statement made on the form

prescribed in the Seventh Schedule.

(9) For the purposes of this rule, the term

"shares" or "share capital" shall exclude shares,

which do not participate in any way in the

profits of a company other than by way of a

fixed rate of return.".

3. Immediately after the Fourth Schedule to the principal Adds new

schedules to the

rules there shall be added the following new Schedules

principal rules.

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