Debt reduction: Indicative factors in classification as a donation for income tax purposes
Journal of Economic and Financial Sciences
| Field | Value | |
| Title | Debt reduction: Indicative factors in classification as a donation for income tax purposes | |
| Creator | Nel, Rudie Herron, Andrea | |
| Description | Debt reduction in business is recognised for the economic relief afforded to the debtor involved. The new debt reduction regime was introduced in the Income Tax Act (section 19 and paragraph 12A of the Eighth Schedule) with the aim of minimising the tax impact so as not to negate the economic benefit. The new regime introduced an exclusion for debt reduced by way of a donation and uncertainty exists on instances where this exclusion would apply. This article considered four broad categories of factors indicative in the classification of a debt reduction as a donation (inadequate consideration; gratuitous waiver; intent and motive; classification as connected persons) and concluded with the formulation of such factors. The classification as connected persons is regarded as the most indicative of a debt reduction being classified as a donation, which could result in tax arbitrage if the creditor and debtor are taxed at different rates on the taxable income result of the debt reduction. | |
| Publisher | AOSIS | |
| Date | 2016-08-11 | |
| Identifier | 10.4102/jef.v9i2.56 | |
| Source | Journal of Economic and Financial Sciences; Vol 9, No 2 (2016); 517-528 2312-2803 1995-7076 | |
| Language | eng | |
| Relation |
The following web links (URLs) may trigger a file download or direct you to an alternative webpage to gain access to a publication file format of the published article:
https://jefjournal.org.za/index.php/jef/article/view/56/53
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