section 6(4) of South african income tax
Section 6(4) of the South African Income Tax Act deals with the taxation of deemed receipts or accruals by a shareholder or a connected person from a company in which the shareholder has an interest. This section is aimed at preventing tax avoidance by shareholders who receive economic benefits from a company in which they have an interest, but do not receive them in the form of dividends or other taxable income.
Under this section, if a company makes a payment or passes on a benefit to a shareholder or a connected person for no consideration, that payment or benefit will be deemed to be a taxable receipt or accrual for the recipient. The amount of the deemed receipt or accrual will be the actual value of the payment or benefit received.
Section 6(4) also applies to situations where a company disposes of an asset to a shareholder or connected person for less than its market value, or where a company grants a loan or provides security to a shareholder or connected person. In these cases, the difference between the actual value of the asset or benefit and the consideration paid by the shareholder will be deemed to be a taxable receipt or benefit for the recipient.
Overall, the purpose of Section 6(4) is to ensure that shareholders and connected persons do not receive economic benefits from a company without paying tax on them, and to prevent tax avoidance through the manipulation of transactions between related parties.