Thesis (MComm)--Stellenbosch University, 2001. / ENGLISH ABSTRACT: In this study, the income tax implications of the acquisition of a debenture at a
discount is investigated. The purpose of this study is determine whether the
proceeds from the redemption or disposal of the above-mentioned debenture
are of a revenue or capital nature.
It is customary for companies to issue debentures in order to obtain long term
finance. These debentures may be issued at a discount. There exists a
general uncertainty in the academic literature regarding the income tax
implications of the acquisition of a debenture at a discount to the face value
thereof.
Section 24J of the Income Tax Act includes a discount in the definition of
"interest". There is no general definition of the words "interest" and "discount" in
the Income Tax Act. The lack of a statutory definition of these words
contributes to the uncertainty regarding the income tax treatment of the sale or
redemption of a debenture.
The following aspects are discussed:
(a) the revenue or capital nature of the proceeds on redemption and transfer of
a debenture;
(b) the provisions of section 24J of the Income Tax Act; and
(c) the provisions of capital gains tax.
In order to determine the revenue or capital nature of the proceeds on
redemption or transfer of a debenture, the following aspects are discussed:
• The attributes of a debenture from an economic and legal perspective. The
factors that determine the value of the discount of a debenture are
considered from an economic viewpoint.
• The guidelines that apply in general to determine the revenue or capital
nature of accruals are considered with specific reference to the guidelines
laid down by the South African courts. A distinction is drawn between the
guidelines that consider the intention of the taxpayer and those guidelines
that operate independently of the intention of the taxpayer.
• The general guidelines are then applied to the proceeds on redemption or
transfer of a debenture. The ordinary meaning of interest and the meaning of
the interest in the Income Tax Act are considered. The relation between a
discount and interest is examined. Case law from England, Australia and
Canada are also considered.
The writer comes to the conclusion that a discount that realises on redemption
of a debenture is in the nature of interest. The discount is revenue derived from
capital productively employed and therefore not of a capital nature. The
proceeds from the transfer of a debenture is not of a capital nature if it is a gain
made by an operation of business in carrying out a scheme for profit making.
The writer is of the opinion that section 24J influences the application of the
general principles. The writer is of the opinion that the objective test should be
applied to determine the nature of the accrual amount in terms of section 24J.
The accrual amount will include a proportional amount of the discount. The
objective test should be applied irrespective of whether the debenture is held
until redemption or transferred before redemption.
The provisions of section 24J should be applied before the capital gain or
capital loss is determined in terms of the Eight Schedule to the Income Tax Act.
The proceeds from disposal must be reduced by any amount of the proceeds
that was included in gross income or taken into account in determining the
taxable income of a person. The base cost of a debenture acquired at a
premium must be reduced by the amount of the premium that was allowed as a
deduction in determining the taxable income of the holder of a debenture. / AFRIKAANSE OPSOMMING: In hierdie studie word die inkomstebelastinggevolge van die verkryging van 'n
skuldbrief teen 'n diskonto ondersoek. Die doel van hierdie studie is am te
bepaal of die opbrengs met die aflossing en verkoop van sodanige skuldbrief
van 'n inkomste- of kapitale aard is.
Een van die gebruiklikste metodes vir 'n maatskappy am
langtermynleningsfondse te bekom, is deur die uitreiking van skuldbriewe.
Skuldbriewe kan teen 'n diskonto uitgereik word. Daar bestaan "n algemene
onsekerheid in die beskikbare literatuur met betrekking tot die
inkomstebelastinggevolge van "n skuldbrief wat teen "n diskonto verkry is.
Artikel 24J van die Inkomstebelastingwet sluit spesifiek 'n diskonto by die
omskrywing van "rente" in. Die Inkomstebe/astingwet bevat egter nie 'n
algemene omskrywing van die woorde "rente" en "diskonto" nie. Die gebrek
aan 'n statutere omskrywing van bogenoemde woorde dra by tot die
onsekerheid van die inkomstebelastinggevolge van die aflossing of verkoop van
'n skuldbrief.
Die skrywer oorweeg die volgende:
(a) die inkomste- of kapitale aard van die opbrengs met aflossing en verkoop
van "n skuldbrief;
(b) die bepalings van artikel 24J van die Inkomstebelastingwet; en
(c) die bepalings van die kapitaalwinsbelasting-wetgewing.
Ten einde die inkomste- of kapitale aard van die opbrengs met aflossing en
verkoop van 'n skuldbrief te bepaal, word die volgende aspekte bespreek:
• Die eienskappe van 'n skuldbrief vanuit "n ekonomiese- en regsoogpunt. Die
faktore wat die waarde van die diskonto van "n skuldbrief be'invloed, word
vanuit In ekonomiese oogpunt oorweeg.
• Die riglyne wat algemeen ter sprake is by die bepaling van die inkomste- of
kapitale aard van toevallings. Daar word spesifiek na die riglyne soos deur
die Suid-Afrikaanse geregshowe neergele, verwys. In Onderskeid word
kortliks getref tussen die riglyne wat vereis dat In belastingpligtige se doel
met betrekking tot In bate vasgestel word en daardie riglyne wat onafhanklik
van In belastingpligtige se doel toegepas word,
• Die algemene riglyne word op die opbrengs met aflossing en verkoop van In
skuldbrief toegepas. Die gewone betekenis van rente asook die betekenis
van rente ingevolge die Inkomstebelastingwet word oorweeg. Die verband
tussen In diskonto en rente word ondersoek. Engelse, Australiese en
Kanadese regspraak word oorweeg.
Die skrywer kom tot die gevolgtrekking dat In diskonto wat met die aflossing van
In skuldbrief realiseer, rente van aard is. In Diskonto wat met aflossing realiseer
is In bedrag voortgebring deur kapitaal produktief aan te wend en dus nie van In
kapitale aard nie. In Opbrengs met die oordrag van In skuldbrief is nie van In
kapitale aard nie indien dit verkry is uit die beoefening van In
besigheidshandeling in die uitvoering van In skema van winsbejag.
Die skrywer is van mening dat artikel 24J die toepassing van die algemene
riglyne be'invloed. Die skrywer is van mening dat die objektiewe riglyn toegepas
moet word am die aard van toevallingsbedrae soos ingevolge. artikel 24J
bereken vas te stel. In Toevallingsbedrag sluit In proporsionele gedeelte van In
diskonto in. Die objektiewe riglyn moet toegepas word ongeag of 'n skuldbrief
tot op die aflosdatum gehou word of daarvoor oorgedra word.
Die bepalings van artikel 24J moet toegepas word voordat die kapitaalwins of -
verlies ingevolge die Agtste Bylae bereken word. Die opbrengs moet verminder
word met enige bedrag wat by bruto inkomste ingesluit word of in ag geneem
word by die vasstelling van belasbare inkomste. Die basiskoste van 'n
skuldbrief wat teen 'n premie verkry is moet aangepas word met die bedrag van
die premie wat reeds in ag geneem is am die belasbare inkomste van die houer
van 'n skuldbrief te bepaal.
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:sun/oai:scholar.sun.ac.za:10019.1/20429 |
| Date | 12 1900 |
| Creators | De Villiers, Deon Bernard Malan |
| Contributors | Van Schalkwyk, C. J., Stellenbosch University. Faculty of Economic and Management Sciences. Dept. of Accountancy., Davids, Ricardo |
| Publisher | Stellenbosch : Stellenbosch University |
| Source Sets | South African National ETD Portal |
| Language | en_ZA |
| Detected Language | Unknown |
| Type | Thesis |
| Format | 111 p. |
| Rights | Stellenbosch University |
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