EXEMPTION FROM TAX ON PROPERTY TRANSFERS (SET-OFF OF TAX ARREARS) RULES (set-offoftaxarrears)

(SET-OFF OF TAX ARREARS)

SUBSIDIARY LEGISLATION 123.202

EXEMPTION FROM TAX ON PROPERTY

TRANSFERS (SET-OFF OF TAX ARREARS) RULES

5th November, 2021

LEGAL NOTICE 419 of 2021, as amended by Legal Notices 311 of

2022 and 9 of 2023.

The title of these rules is Exemption from Tax on

Property Transfers (Set-off of Tax Arrears) Rules.

In these rules, unless the context otherwise requires –

"gross tax" means the tax chargeable on a transfer in accordance

with article 5A of the Income Tax Act before the exemption allowed

under these rules;

"gross transfer value" means the transfer value determined in

accordance with article 5A of the Income Tax Act; and when a person,

by means of the same deed, makes more than one transfer of property

to which these rules apply, it means the total transfer value, determined

as aforesaid, of those transfers;

"net transfer value" means the gross transfer value reduced by

the gross tax;

"qualifying payment" means a payment that satisfies the

conditions of sub-rule (1) of rule 5 but not exceeding the amount that

is to be taken into account for the purpose of these rules in accordance

with sub-rules (2) and (3) of that rule;

"relevant tax arrears" means any unpaid amount of

(a)

income tax and tax on capital gains due and

payable in terms of articles 4 and 5 of the Income Tax Act for

the year of assessment 2020 or any previous year of

assessment;

(b)

tax deducted at source or that should have been

deducted at source in accordance with article 23 of the Income

Tax Management Act that was due to be remitted to the

Commissioner on or before 31 January 2021;

(c)

social security contributions due and payable by

an employer in respect of employed persons in accordance with

article 9 of the Social Security Act that was due to be remitted

to the Commissioner on or before 31 January 2021;

(d)

value added tax due and payable in terms of

article 21(1) of the Value Added Tax Act in respect of any tax

period, as defined in that Act, that ended on or before the 31

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December 2020 and value added tax due and payable in terms of

article 21(2) or (3) of that Act that became chargeable on or

before the said date;

(e)

interest, additional tax and administrative penalties

due and payable in terms of the provisions of the Income Tax

Acts, the Social Security Act and the Value Added Tax Act in

respect of any arrears mentioned in the preceding paragraphs.

These rules apply to any transfer on which tax is

chargeable in terms of article 5A of the Income Tax Act that is made by

means of a public deed not later than 31 December 2022 by a person

who had acquired that property on or before the 31 March 2021 and

who owes relevant tax arrears.

(1)

The relevant tax arrears of a person who makes a

transfer to which these rules apply are those relevant tax arrears that are

shown in the records of the Commissioner for the purposes of the law

in terms of which they became due as a liability incurred directly by

that person and outstanding as on the date on which a qualifying

payment is made and shall not include any amount of tax arrears of

another person even though the first-mentioned person may be liable

for the payment of that amount by reason of his being a director,

manager or other principal officer, or a shareholder, partner, member,

agent or a representative in whatever capacity of that other person.

(2)

Notwithstanding the provisions of sub-rule (1)

(a)

when a person, hereinafter in this paragraph referred

to also as "the transferor", makes a transfer to which

these rules apply, relevant tax arrears of another

person, hereinafter in this rule referred to also as

"the other party" may, at the option made jointly by

the transferor and the other party, be treated for the

purpose of these rules as if they were relevant tax

arrears of the transferor in the case that

(i)

the transferor is a company, and the other

party is an individual who, throughout the

period from the 31st March 2021 to the date

of the transfer, has owned, directly or

indirectly, at least ninety-nine per cent (99%)

of the issued share capital and voting rights

of that company;

(ii)

the other party is a company, and the

transferor is an individual who, throughout

the period from the 31st March 2021 to the

date of the transfer, has owned, directly or

indirectly, at least ninety-nine per cent (99%)

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of the issued share capital and voting rights

of that company; or

(iii)

the transferor and the other party are both

companies and, throughout the period from

the 31st March 2021 to the date of the

transfer, the individual direct or indirect

beneficial owners of the two companies were

the same and each such individual held,

directly or indirectly, the same percentage

interest in the nominal share capital and

voting rights in each of the said companies;

(b)

relevant tax arrears incurred by a deceased person shall

be treated as relevant tax arrears of the heirs

proportionate to their respective share of the inheritance.

(1)

Subject to the other provisions of these rules, a

person who makes a transfer to which these rules apply shall be

entitled to an exemption from tax in accordance with these rules if a

payment is made against his relevant tax arrears when all the following

conditions are satisfied

(a)

that person has submitted all returns that he was

required to submit in terms of article 10 of the Income Tax

Management Act, rules 20, 21 and 22 of the Final Settlement

System (FSS) Rules and articles 27 and 30 of the Value Added

Tax Act;

(b)

the gross tax and the duty on documents and

transfers chargeable in respect of that transfer have been

remitted to the Commissioner as required by the Income Tax

Act and the Duty on Documents and Transfers Act;

(c)

that person gives notice to the Commissioner of

his claim for an exemption under these rules, which notice

(i)

shall be given to the Commissioner by not

later than fifteen (15) months after the date of the said

transfer but not later than 31st March 2023;

(ii)

shall be given on such form and in such

manner as the Commissioner may approve and contain

all the information and particulars required by that form;

(d)

that person provides such further information and

produces such documents and evidence as the Commissioner

may consider necessary for the proper application of these

rules;

(e)

the payment against relevant tax arrears is made

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on or after the date of that transfer and, when the Commissioner

issues a request for payment for the purpose of these rules, not

later than the time allowed in that request

Provided that the time for payment that may be

allowed in such a request shall not be less than thirty days.

(2)

The payment that shall be taken into account for the

purpose of these rules shall not exceed the net transfer value.

(3)

When the gross transfer value exceeds the relevant tax

arrears of the transferor, the payment that shall be taken into account

for the purpose of these rules shall not exceed that part of the net

transfer value which, when added to the amount of the exemption

allowed under these rules, is equivalent to the relevant tax arrears,

which part shall be calculated as follows

net transfer value x relevant tax arrears/gross transfer value.

The exemption from income tax allowed under these rules

shall be an exemption from the gross tax, or part thereof, in an amount

corresponding to the qualifying payment and shall be calculated as

follows

gross tax x qualifying payment/net transfer value.

(1)

The total of a qualifying payment and of the

amount of the respective exemption allowed under these rules shall

constitute a payment by the person who makes the transfer in question

which shall be set off against the relevant tax arrears of that person.

(2)

When the amount to be set off in accordance with sub-

rule (1) is less than the relevant tax arrears, it shall be set off against

such categories of the relevant tax arrears as the Commissioner may, in

his discretion, decide, and the set-off shall be without prejudice to the

powers of the Commissioner to take action in accordance with the

relevant provisions of the Income Tax Acts, the Social Security Act and

the Value Added Tax Act for the collection of the balance of the

relevant tax arrears still outstanding after the said set-off.

(3)

An exemption allowed under these rules shall not give

rise to any refund, credit or other right except for the set-off mentioned

in this rule.

(4)

Notwithstanding anything to the contrary contained in the

Income Tax Acts, the Social Security Act and the Value Added Tax

Act, a payment by means of a set-off in accordance with this rule shall

extinguish any dispute that may be outstanding in respect of the amount

of the arrears that is so paid, and no objection or other challenge shall

be admissible in respect of that amount after the set-off has been made.

(SET-OFF OF TAX ARREARS)

These rules are without prejudice to the provisions of

article 51 of the Income Tax Act and of regulation 6 of the European

Union Anti-Tax Avoidance Directives Implementation Regulations.