S.L. 123.189 Art. 5Leaving a fiscal unit.

(1) Where a company (hereinafter "the exiting company") is a transparent subsidiary and forms part of a fiscal unit (hereinafter "the old fiscal unit") and the exiting company no longer remains a ninety-five per cent (95%) subsidiary or no longer has its accounting period beginning and ending on the same dates as the principal taxpayer of the fiscal unit it forms part of, it and any of its transparent subsidiaries, if any, shall be deemed to no longer form part of the old fiscal unit with effect from the basis year in which that company no longer remains a ninety-five per cent (95%) subsidiary or no longer has its accounting period beginning and ending on the same dates as the principal taxpayer of the said fiscal unit.

(2) If the exiting company is the parent company of one or more transparent subsidiaries, the exiting company and such transparent subsidiaries shall be considered to form a separate fiscal unit (hereinafter "the resulting fiscal unit") if registered as such and, if so registered, the exiting company shall be considered to be the principal taxpayer of that fiscal unit with effect from the start of the basis year in which the exiting company no longer forms part of the old fiscal unit:

Provided that this sub-rule shall not apply where the exiting company becomes a ninety-five per cent (95%) subsidiary of another company (hereinafter "the new parent company") and the new parent company makes an election in respect of the exiting company in terms of rule 3, in which case the exiting company and its transparent subsidiaries shall become part of such fiscal unit.

(3) Where an election is revoked in terms of rule 3(7), the transparent subsidiary whose parent company has revoked the election shall be deemed an exiting company and the provisions of this rule shall apply mutatis mutandis to such transparent subsidiary.

(4) Where an exiting company ceases to remain part of the old fiscal unit or where a fiscal unit ceases to exist:

(a) the balance of any trading loss, unabsorbed deductions for wear and tear, except for those unabsorbed deductions resulting from assets referred to in paragraph (b), losses claimed under the group relief provisions and any other loss, allowance or otherwise, and the balance of any profits allocated to the tax accounts, that are considered in terms of these rules to be balances pertaining to the principal taxpayer, shall continue, for all intents and purposes of the Act, to pertain to the company being the principal taxpayer of the fiscal unit and the relevant provisions of the Act shall accordingly apply to such losses, unabsorbed deductions for wear and tear or such other loss, allowance or otherwise;

(b) (i) the cost of any assets owned by the exiting company or the resulting fiscal unit, as the case may be, (hereinafter "the relevant assets") shall be deducted from the cost of the assets attributable to the principal taxpayer of the old fiscal unit;

(ii) where the relevant assets consist of or include assets in respect of which a deduction in terms of article 14 of the Act has been claimed by the principal taxpayer or any company forming part of the old fiscal unit prior to joining such old fiscal unit, the exiting company, or the resulting fiscal unit, as the case may be, shall be entitled to continue claiming a deduction in respect of the relevant assets in the same manner and on the same basis as would have been claimed by the principal taxpayer had the exiting company or the resulting fiscal unit continued to form part of the old fiscal unit:

Provided that such deduction may only be claimed by the exiting company or the resulting fiscal unit where the conditions required to claim that deduction in terms of the Act are satisfied by the exiting company or the resulting fiscal unit;

(c) upon the occurrence of any of the events referred to in articles 5A(12B) or 24(1) of the Act in respect of any relevant asset, the exiting company or the resulting fiscal unit, as the case may be, shall prepare a balancing statement and for this purpose it shall be deemed that:

(i) the asset had been acquired by the exiting company or the principal taxpayer, as the case may be, for a cost equal to the original cost at which such property had been acquired by a company forming part of the old fiscal unit, and

(ii) the deductions claimed by the exiting company under paragraphs (f) and (j) of article 14(1) of the Act shall equal the total of any such deductions claimed in respect of the property by it, the principal taxpayer of the old fiscal unit and any other company forming part of the old fiscal unit irrespective of whether or not such company still forms part of the old fiscal unit or otherwise.