Determining to what extent the 'money-lender test needs to be satisfied in the context of South African investment holding companies, focusing on the requirements of section 11(a) and 24J(2) of the Income Tax Act No. 58 of 1962

[摘要] ENGLISH ABSTRACT: The requirements of section 11(a) and section 24J(2) were considered in this research assignment, from both a money-lender's and an investment holding company's perspective, to determine whether interest, losses on irrecoverable loans and raising fees were tax deductible. It was determined, that if the trade requirement is satisfied by the money-lender, then the above-mentioned expenses are fully tax deductible. However, if the trade requirement is satisfied by the investment holding company then only the interest is fully tax deductible.It is further submitted however in this research assignment that it cannot be said that the money-lender alternative is better than the investment holding company alternative – both alternatives are of equal value in the current tax system. What is important though is that taxpayers who will fit the mould of an investment holding company will now be able to use the principles set out in this research assignment to prove that it is in fact carrying on a trade for tax purposes, something that taxpayers are generally reluctant to pursue. If this is pursued, taxpayers may have the added tax benefit of tax deductible interest expenditure (in full) in cases where this was not previously the norm (and an investment holding company will not have to satisfy any of the guidelines of the 'money-lender test when it seeks to deduct its interest expense in full).However, if an investment holding company seeks to deduct losses on irrecoverable loans and raising fees for tax purposes, it will not have to satisfy all the guidelines of the 'money-lender test, but it will have to satisfy one guideline, that being the 'system or plan and 'frequent turnover of capital guideline. It will be very difficult for an investment holding company to prove this on the facts of the case – it will arguably take a special set of facts to accomplish this mean feat.

[发布机构] Stellenbosch University