Amendments to the taxation of debt restructures
Broadly speaking, prior to the recent amendments brought about by the Taxation Laws Amendment Act, 2017 (the “TLAA”) detailed below, section 19 and paragraph 12A provided for the taxation of the “reduction amount”, which is the amount by which a debt is reduced less any consideration given by the debtor for the reduction (depending on how the funds raised by way of the debt was initially applied). Generally, section 19 applies to debts used directly or indirectly to fund expenditure in respect of which a deduction or allowance was granted in terms of the Act, with paragraph 12A being the capital gains tax equivalent.
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