SARS Binding Public Rulings Insights
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A Binding Private Ruling (BPR) is a formal response from SARS to a taxpayer’s request for clarity on how tax laws will apply to a specific transaction. While BPRs are binding only between SARS and the applicant, they provide valuable insight into SARS’s interpretation of tax legislation, making them a useful reference for practitioners advising clients in similar circumstances.
Below are four recent BPRs that highlight key tax considerations in transactions involving distributions, business restructuring, and preference share funding.
BPR 417 – Distributing Unclaimed Funds to Member Organisations
A registered bargaining council had, under an expired agreement, continued to receive levy payments from non-affiliated parties. The council now seeks to distribute these unclaimed funds to its affiliated trade unions and employer organisations. The council wanted to know if it could legally distribute unclaimed levy payments (received from non-affiliated employers and employees after an agreement had expired) to its member trade unions and employer organisations, without triggering donations tax or violating its SARS-approved status as a tax-exempt entity.
They sought clarity on:
Whether such a distribution would be seen as a “donation” under the Income Tax Act
Whether it would breach the conditions of section 30B (which governs tax-exempt entities like bargaining councils).
SARS ruling
The distribution of these funds is considered to be in line with the council’s constitutional objectives and is therefore not treated as a donation.
As a result, no donations tax applies, and the distribution is tax-compliant.
BPR 418 – Transfer of Farming Assets to a Close Corporation
A sole proprietor engaged in timber farming plans to transfer all business assets, including land and equipment, to a close corporation (CC) in which he holds full membership. The goal is to consolidate the famer’s timber farming operations by transferring assets he personally owned into his close corporation. He asked SARS whether this transfer:
Qualified as an “asset-for-share” transaction under section 42 (and could be done tax-free)
Would attract VAT or transfer duty
Would trigger any donations tax or capital gains implications
He also wanted to ensure:
The correct base cost would carry over
The transfer of income-earning assets would be recognised as a going concern.
SARS ruling
✅ The transaction qualifies as an asset-for-share transfer under section 42 of the Income Tax Act.
✅ No capital gains tax, VAT (except on residential property), or transfer duty is triggered.
✅ The tax base of the transferred assets is preserved within the CC.
BPR 419 – Restructuring Fails to Qualify as an Amalgamation
A company group planned to simplify its group structure by transferring shares to a subsidiary and then winding up. They asked SARS whether this would qualify as an “amalgamation transaction” under section 44—allowing the transfer to be tax-free.
The goal was to confirm:
That the transfer met SARS’s definition of a qualifying amalgamation
That tax relief provisions could be applied in the restructure.
SARS ruling
❌ The transaction does not meet the requirements of an “amalgamation transaction” under section 44.
❌ The shares being transferred are extinguished (not merged), and therefore no tax exemption applies.
BPR 420 – Continued Tax Relief on Preference Share Dividends Post-Restructure
An investment holding company used preference share funding to acquire shares in operating companies. After an internal restructure, it still held those shares—but indirectly. They asked SARS if, after the restructure:
Section 8EA(3) (which provides tax relief for preference share dividends used for qualifying investments) would still apply
Whether the dividends would remain tax-efficient despite the change in ownership structure
They also sought clarity on:
Whether the guarantee structure involving a trust would still meet the conditions for enforcement rights
If the restructure would trigger anti-avoidance provisions
SARS ruling
✅ The restructure does not affect the application of section 8EA(3).
✅ Preference share dividends continue to receive favourable tax treatment, provided the investment remains linked to qualifying operating companies.
Takeaway for Practitioners
These rulings reinforce the importance of understanding both the technical requirements and commercial substance of a transaction. Whether advising on fund distributions, asset restructuring, or financial instruments, BPRs serve as practical guidance for maintaining compliance and avoiding unintended tax consequences.
